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                                                                   EXHIBIT 10.11

                                KONA GRILL, INC.

                              2005 STOCK AWARD PLAN

      1. Purpose. The purpose of this 2005 Stock Award Plan (the "Plan") is to
assist Kona Grill, Inc., a Delaware corporation (the "Company") and its Related
Entities in attracting, motivating, retaining, and rewarding high-quality
Employees, officers, Directors, and Consultants by enabling such persons to
acquire or increase a proprietary interest in the Company in order to strengthen
the mutuality of interests between such persons and the Company's stockholders,
and providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of stockholder value. The Plan is
intended to qualify certain compensation awarded under the Plan for tax
deductibility under Section 162(m) of the Code (as hereafter defined) to the
extent deemed appropriate by the Committee (or any successor committee) of the
Board.

      2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

            (a) "2002 Plan" means the Company's 2002 Stock Plan.

            (b) "Applicable Laws" means the requirements relating to the
administration of equity compensation plans under U.S. state corporate laws,
U.S. federal and state securities laws, the Code, the rules and regulations of
any stock exchange upon which the Common Stock is listed, and the applicable
laws of any foreign country or jurisdiction where Awards are granted under the
Plan.

            (c) "Award" means any award granted pursuant to the terms of this
Plan including, an Option, Stock Appreciation Right, Restricted Stock, Stock
Units, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award, or Performance Award, together with any
other right or interest, granted to a Participant under the Plan.

            (d) "Beneficiary" means the person, persons, trust, or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust, or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

            (e) "Beneficial Owner," "Beneficially Owning," and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.

            (f) "Board" means the Company's Board of Directors.

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            (g) "Cause" shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as "cause" or "for cause") set forth in
any employment agreement between the Participant and the Company or a Related
Entity or, in the absence of any such agreement, such term shall mean (i) the
failure by the Participant to perform his or her duties as assigned by the
Company (or a Related Entity) in a reasonable manner, (ii) any violation or
breach by the Participant of his or her employment agreement with the Company
(or a Related Entity), if any, (iii) any violation or breach by the Participant
of his or her confidential information and invention assignment agreement with
the Company (or a Related Entity), if any, (iv) any act by the Participant of
dishonesty or bad faith with respect to the Company (or a Related Entity), (v)
any material violation or breach by the Participant of the Company's or a
Related Entity's policy for employee conduct, if any, (vi) any act by the
Participant of dishonesty or bad faith with respect to the Company (or a Related
Entity), (vii) use of alcohol, drugs, or other similar substances affecting the
Participant's work performance, or (viii) the commission by the Participant of
any act, misdemeanor, or crime reflecting unfavorably upon the Participant or
the Company. The good faith determination by the Committee of whether the
Participant's Continuous Service was terminated by the Company for "Cause" shall
be final and binding for all purposes hereunder.

            (h) "Change in Control" means and shall be deemed to have occurred
on the earliest of the following dates:

                  (i) the date on which any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) obtains "beneficial ownership" (as
defined in Rule 13d-3 of the Exchange Act) or a pecuniary interest in more than
fifty percent (50%) of the combined voting power of the Company's then
outstanding securities ("Voting Stock");

                  (ii) the consummation of a merger, consolidation,
reorganization, or similar transaction other than a transaction: (1) (a) in
which substantially all of the holders of Company's Voting Stock hold or receive
directly or indirectly fifty percent (50%) or more of the voting stock of the
resulting entity or a parent company thereof, in substantially the same
proportions as their ownership of the Company immediately prior to the
transaction; or (2) in which the holders of Company's capital stock immediately
before such transaction will, immediately after such transaction, hold as a
group on a fully diluted basis the ability to elect at least a majority of the
directors of the surviving corporation (or a parent company);

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

                  (iv) individuals who, on the date this Plan is adopted by the
Board, are Directors (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Directors; provided, however, that if the appointment
or election (or nomination for election) of any new Director was approved or
recommended by a majority vote of the members of the

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Incumbent Board then still in office, such new member shall, for purposes of
this Plan, be considered as a member of the Incumbent Board.

      For purposes of determining whether a Change in Control has occurred, a
transaction includes all transactions in a series of related transactions, and
terms used in this definition but not defined are used as defined in the Plan.
The term Change in Control shall not include a sale of assets, merger, or other
transaction effected exclusively for the purpose of changing the domicile of the
Company.

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

            (i) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.

            (j) "Committee" means a committee designated by the Board to
administer the Plan with respect to at least a group of Employees, Directors, or
Consultants.

            (k) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

            (l) "Continuous Service" means uninterrupted provision of services
to the Company as an Employee, a Director, or a Consultant. Continuous Service
shall not be considered to be interrupted in the case of (i) any approved leave
of absence, (ii) transfers among the Company, any Related Entities, or any
successor entities, as either an Employee, a Director, or a Consultant, or (iii)
any change in status as long as the individual remains in the service of the
Company or a Related Entity as either an Employee, a Director, or a Consultant
(except as otherwise provided in the Option Agreement). An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave.

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

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

                  (ii) a sale or other disposition of more than twenty percent
(20%) of the outstanding securities of the Company; or

                  (iii) a merger, consolidation, reorganization, or similar
transaction, whether or not the Company is the surviving corporation.

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            (n) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 7(d) of the Plan.

            (o) "Director" means a member of the Board or the board of directors
of any Related Entity.

            (p) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.

            (q) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards, or other
property equal in value to dividends paid with respect to a specified number of
Shares, or other periodic payments.

            (r) "Effective Date" means the effective date of this Plan, which
shall be the date this Plan is adopted by the Board, subject to the approval of
the stockholders of the Company.

            (s) "Eligible Person" means all Employees (including officers),
Directors, and Consultants of the Company or of any Related Entity. The
foregoing notwithstanding, only employees of the Company, the Parent, or any
Subsidiary shall be Eligible Persons for purposes of receiving any Incentive
Stock Options. An Employee on leave of absence may be considered as still in the
employ of the Company or a Related Entity for purposes of eligibility for
participation in the Plan.

            (t) "Employee" means any person, including an officer or Director,
who is an employee of the Company or any Related Entity. The Payment of a
director's fee by the Company or a Related Entity shall not be sufficient to
constitute "employment" by the Company.

            (u) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.

            (v) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.

            (w) "Fair Market Value" means the fair market value of Stock,
Awards, or other property as determined by the Plan Administrator, or under
procedures established by the Plan Administrator. Unless otherwise determined by
the Plan Administrator, the Fair Market Value of Stock as of any given date,
after which the Stock is publicly traded on a stock exchange or market, shall be
the closing sale price per share reported on a consolidated basis for stock
listed on the principal stock exchange or market on which Stock is traded on the
date as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported.

            (x) "Incentive Stock Option" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.

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            (y) "Non-Employee Director" means a Director of the Company who is
not an Employee.

            (z) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.

            (aa) "Other Stock-Based Awards" means Awards granted to a
Participant pursuant to Section 6(h) hereof.

            (bb) "Parent" means any corporation (other than the Company),
whether now or hereafter existing, in an unbroken chain of corporations ending
with the Company, if each of the corporations in the chain (other than the
Company) owns stock possessing 50 percent or more of the combined voting power
of all classes of stock in one of the other corporations in the chain.

            (cc) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.

            (dd) "Performance Award" means a right, granted to an Eligible
Person under Section 7 hereof, to receive Awards based upon performance criteria
specified by the Plan Administrator.

            (ee) "Person" has the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a "group" as defined in Section 12(d) thereof.

            (ff) "Plan Administrator" means the Board or any Committee delegated
by the Board to administer the Plan.

            (gg) "Related Entity" means any Parent, Subsidiary, and any
business, corporation, partnership, limited liability company, or other entity
in which the Company, a Parent, or a Subsidiary, directly or indirectly, holds a
substantial ownership interest.

            (hh) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.

            (ii) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

            (jj) "Shares" means the shares of the Company's Common Stock, and
the shares of such other securities as may be substituted (or resubstituted) for
Stock pursuant to Section 10(c) hereof.

            (kk) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for the Company's Common
Stock pursuant to Section 10(c) hereof.

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            (ll) "Stock Appreciation Right" means a right granted to a
Participant pursuant to Section 6(c) hereof.

            (mm) "Stock Unit" means a right, granted to a Participant pursuant
to Section 6(e) hereof, to receive Shares, cash or a combination thereof at the
end of a specified period of time.

            (nn) "Subsidiary" means any corporation (other than the Company),
whether now or hereafter existing, in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.

      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 Section 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 Awards; when and how each Award shall
be granted; what type or combination of types of Award shall be granted; the
provisions of each Award granted (which need not be identical), including the
time or times when a person shall be permitted to receive Shares pursuant to an
Award; and the number of Shares with respect to which an Award shall be granted
to each such person.

                  (ii) To construe and interpret the Plan and 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 an Award as provided in Section
10(e).

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

                  (v) To effect, at any time and from time to time, with the
consent of any adversely affected Participant, (1) the reduction of the exercise
price of any outstanding Award under the Plan, if any, (2) the cancellation of
any outstanding Award and the grant in substitution therefor of (A) a new Award
under the Plan or another equity plan of the Company covering the same or a
different number of Shares, (B) cash and/or (C) other valuable consideration (as
determined by the Board, in its sole discretion), or (3) any other action that
is treated as a repricing under generally accepted accounting principles.

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

            (c) Delegation to Committee.

                  (i) General. The Board may delegate administration of the Plan
to a Committee or Committees of two (2) 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) Section 162(m) and Rule 16b-3 Compliance. In the
discretion of the Board, the 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.
In addition, the Board or the Committee may delegate to a committee of two or
more members of the Board the authority to grant Awards to eligible persons who
are either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Award, (b)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code, or (c) not then subject to Section 16 of the Exchange Act.

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

            (e) Arbitration. Any dispute or claim concerning any Award granted
(or not granted) pursuant to the Plan or any disputes or claims relating to or
arising out of the Plan shall be fully, finally, and exclusively resolved by
binding and confidential arbitration conducted pursuant to the rules of Judicial
Arbitration and Mediation Services, Inc. ("JAMS") in Phoenix, Arizona. The
Company shall pay all arbitration fees. In addition to any other relief, the
arbitrator may award to the prevailing party recovery of its attorneys' fees and
costs. By accepting an Award, the Participant and the Company waive their
respective rights to have any such disputes or claims tried by a judge or jury.

            (f) Limitation of Liability. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any officer or Employee, the
Company's independent auditors, Consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or Employee acting at the direction or on behalf of the Plan
Administrator, shall not be personally liable for any action or determination
taken or made

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in good faith with respect to the Plan, and shall, to the extent permitted by
law, be fully indemnified and protected by the Company with respect to any such
action or determination.

      4. Stock Subject to Plan.

            (a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
Shares reserved and available for delivery in connection with Awards under the
Plan shall be 1,250,000 Shares. In addition, as of the date this Plan is first
approved by the stockholders, any shares available in the reserve of the 2002
Plan shall be added to the Plan share reserve and be available for issuance
under the Plan. Any Shares delivered under the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury shares.

            (b) Availability of Shares Not Delivered under Awards.

                  (i) If any Shares subject to an Award or subject to an award
under the 2002 Plan are forfeited, expire or otherwise terminate without
issuance of such Shares, or any Award is settled for cash or otherwise does not
result in the issuance of all or a portion of the Shares subject to such Award,
the Shares shall, to the extent of such forfeiture, expiration, termination,
cash settlement or non-issuance, again be available for Awards under the Plan,
subject to Section 4(b)(iv) below.

                  (ii) If any Shares issued pursuant to an Award or an award
under the 2002 Plan are forfeited back to or repurchased by the Company,
including, but not limited to, any repurchase or forfeiture caused by the
failure to meet a contingency or condition required for the vesting of such
shares, then such forfeited or repurchased Shares shall revert to and again
become available for issuance under the Plan, subject to Section 4(b)(iv) below.

                  (iii) In the event that any Option or other Award granted
hereunder or under the 2002 Plan is exercised through the tendering of Shares
(either actually or by attestation) or by the withholding of Shares by the
Company, or withholding tax liabilities arising from such Option, other Award or
other award are satisfied by the tendering of Shares (either actually or by
attestation) or by the withholding of Shares by the Company, then only the net
number of Shares actually issued to the Participant shall be counted as issued
for purposes of determining the maximum number of Shares available for grant
under the Plan, subject to Section 4(b)(iv) below.

                  (iv) Notwithstanding anything in this Section 4(b) to the
contrary and solely for purposes of determining whether Shares are available for
the grant of Incentive Stock Options, the maximum aggregate number of shares
that may be granted under this Plan shall be determined without regard to any
Shares restored pursuant to this Section 4(b) that, if taken into account, would
cause the Plan, for purposes of the grant of Incentive Stock Options, to fail
the requirement under Code Section 422 that the Plan designate a maximum
aggregate number of shares that may be issued.

            (c) Application of Limitations . The limitation contained in this
Section 4 shall apply not only to Awards that are settled by the delivery of
Shares but also to Awards relating to Shares but settled only in cash (such as
cash-only Stock Appreciation Rights). The

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Plan Administrator may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments if the number of Shares
actually delivered differs from the number of shares previously counted in
connection with an Award.

      5.    Eligibility. Awards may be granted under the Plan only to Eligible
Persons.

      6.    Terms of Awards.

            (a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Plan Administrator may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Plan Administrator shall determine, including
terms requiring forfeiture of Awards in the event of termination of Continuous
Service by the Participant and terms permitting a Participant to make elections
relating to his or her Award. The Plan Administrator shall retain full power and
discretion to accelerate, waive, or modify, at any time, any term or condition
of an Award that is not mandatory under the Plan.

            (b) Options. The Plan Administrator is authorized to grant Options
to Participants on the following terms and conditions:

                  (i) Stock Option Agreement. Each grant of an Option shall be
evidenced by a Stock Option Agreement. Such Stock Option Agreement shall be
subject to all applicable terms and conditions of the Plan and may be subject to
any other terms and conditions which are not inconsistent with the Plan and
which the Plan Administrator deems appropriate for inclusion in a Stock Option
Agreement. The provisions of the various Stock Option Agreements entered into
under the Plan need not be identical.

                  (ii) Number of Shares. Each Stock Option Agreement shall
specify the number of Shares that are subject to the Option and shall provide
for the adjustment of such number in accordance with Section 10(c) hereof. The
Stock Option Agreement shall also specify whether the Stock Option is an
Incentive Stock Option or a Non-Qualified Stock Option.

                  (iii) Exercise Price.

                        (A) In General. Each Stock Option Agreement shall state
the price at which Shares subject to the Option may be purchased (the "Exercise
Price"), which shall be, with respect to Incentive Stock Options, not less than
100% of the Fair Market Value of the Stock on the date of grant. In the case of
Non-Qualified Stock Options, the Exercise Price shall be determined in the sole
discretion of the Plan Administrator.

                        (B) Ten Percent Stockholder. If a Participant owns or is
deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Related Entity, any Incentive Stock Option granted
to such Participant must have an Exercise Price per share of at least 110% of
the Fair Market Value of a share of Stock on the date of grant.

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                  (iv) Time and Method of Exercise. The Plan Administrator shall
determine the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements). The Plan Administrator
may also determine the time or times at which Options shall cease to be or
become exercisable following termination of Continuous Service or upon other
conditions. The Board or the Committee may determine the methods by which such
exercise price may be paid or deemed to be paid (including, in the discretion of
the Plan Administrator, a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other Awards or awards
granted under other plans of the Company or a Related Entity, or other property
(including notes or other contractual obligations of Participants to make
payment on a deferred basis), and the methods by or forms in which Stock will be
delivered or deemed to be delivered to Participants.

                  (v) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the provisions
of Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options
(including any Stock Appreciation Rights in tandem therewith) shall be
interpreted, amended, or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has
consented in writing to the change that will result in such disqualification. If
and to the extent required to comply with Section 422 of the Code, Options
granted as Incentive Stock Options shall be subject to the following special
terms and conditions:

                        (1) the Option shall not be exercisable more than ten
years after the date such Incentive Stock Option is granted; provided, however,
that if a Participant owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent Corporation and the
Incentive Stock Option is granted to such Participant, the term of the Incentive
Stock Option shall be (to the extent required by the Code at the time of the
grant) for no more than five years from the date of grant; and

                        (2) If the aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the Shares with respect to
which Incentive Stock Options granted under the Plan and all other option plans
of the Company, its Parent or any Subsidiary are exercisable for the first time
by a Participant during any calendar year exceeds $100,000, then such
Participant's Incentive Stock Option(s) or portions thereof that exceed such
$100,000 limit shall be treated as Nonstatutory Stock Options (in the reverse
order in which they were granted, so that the last Incentive Stock Option will
be the first treated as a Nonstatutory Stock Option). This paragraph shall only
apply to the extent such limitation is applicable under the Code at the time of
the grant.

                  (vi) Repurchase Rights. The Committee and the Board shall have
the discretion to grant Options that are exercisable for unvested shares of
Common Stock. Should the Participant's Continuous Service cease while holding
such unvested shares, the Company shall have the right to repurchase any or all
of those unvested shares, at either (a) the exercise price paid per share, (b)
the fair market value, or (c) the lower of the exercise price paid per share and
the fair market value. The terms upon which such repurchase right shall be
exercisable

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(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.

            (c) Stock Appreciation Rights. The Plan Administrator is authorized
to grant Stock Appreciation Rights to Participants on the following terms and
conditions:

                  (i) Right to Payment. A Stock Appreciation Right shall confer
on the Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of stock on the
date of exercise over (B) the grant price of the Stock Appreciation Right as
determined by the Plan Administrator.

                  (ii) Other Terms. The Plan Administrator shall determine at
the date of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which Stock Appreciation Rights
shall cease to be or become exercisable following termination of Continuous
Service or upon other conditions, the method of exercise, method of settlement,
form of consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or not a
Stock Appreciation Right shall be in tandem or in combination with any other
Award, and any other terms and conditions of any Stock Appreciation Right. Stock
Appreciation Rights may be either freestanding or in tandem with other Awards.

            (d) Restricted Stock. The Plan Administrator is authorized to grant
Restricted Stock to Participants on the following terms and conditions:

                  (i) Grant and Restrictions. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture, and other
restrictions, if any, as the Plan Administrator may impose, or as otherwise
provided in this Plan. The restrictions may lapse separately or in combination
at such times, under such circumstances (including based on achievement of
performance goals and/or future service requirements), in such installments or
otherwise, as the Plan Administrator may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder, including the
right to vote the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the Plan
Administrator). During the restricted period applicable to the Restricted Stock,
subject to Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined, or otherwise encumbered by the
Participant.

                  (ii) Forfeiture. Except as otherwise determined by the Plan
Administrator at the time of the Award, upon termination of a Participant's
Continuous Service during the applicable restriction period, the Participant's
Restricted Stock that is at that time subject to restrictions shall be forfeited
and reacquired by the Company; provided that the Plan Administrator may provide,
by rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock shall

                                       11

<PAGE>

be waived in whole or in part in the event of terminations resulting from
specified causes, and the Plan Administrator may in other cases waive in whole
or in part the forfeiture of Restricted Stock.

                  (iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Plan Administrator shall
determine. If certificates representing Restricted Stock are registered in the
name of the Participant, the Plan Administrator may require that such
certificates bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, that the Company retain
physical possession of the certificates, that the certificates be kept with an
escrow agent and that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.

                  (iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Plan Administrator may require that any cash
dividends paid on a share of Restricted Stock be automatically reinvested in
additional shares of Restricted Stock or applied to the purchase of additional
Awards under the Plan. Unless otherwise determined by the Plan Administrator,
Stock distributed in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Stock with respect to which
such Stock or other property has been distributed.

            (e) Stock Units. The Plan Administrator is authorized to grant Stock
Units to Participants, which are rights to receive Stock, cash, or a combination
thereof at the end of a specified time period, subject to the following terms
and conditions:

                  (i) Award and Restrictions. Satisfaction of an Award of Stock
Units shall occur upon expiration of the time period specified for such Stock
Units by the Plan Administrator (or, if permitted by the Plan Administrator, as
elected by the Participant). In addition, Stock Units shall be subject to such
restrictions (which may include a risk of forfeiture) as the Plan Administrator
may impose, if any, which restrictions may lapse at the expiration of the time
period or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Plan Administrator may
determine. Stock Units may be satisfied by delivery of Stock, cash equal to the
Fair Market Value of the specified number of Shares covered by the Stock Units,
or a combination thereof, as determined by the Plan Administrator at the date of
grant or thereafter. Prior to satisfaction of an Award of Stock Units, an Award
of Stock Units carries no voting or dividend or other rights associated with
share ownership.

                  (ii) Forfeiture. Except as otherwise determined by the Plan
Administrator, upon termination of a Participant's Continuous Service during the
applicable time period thereof to which forfeiture conditions apply (as provided
in the Award agreement evidencing the Stock Units), the Participant's Stock
Units (other than those Stock Units subject to deferral at the election of the
Participant) shall be forfeited; provided that the Plan Administrator may
provide, by rule or regulation or in any Award agreement, or may determine in
any individual case, that restrictions or forfeiture conditions relating to
Stock Units shall be

                                       12

<PAGE>

waived in whole or in part in the event of terminations resulting from specified
causes, and the Plan Administrator may in other cases waive in whole or in part
the forfeiture of Stock Units.

                  (iii) Dividend Equivalents. Unless otherwise determined by the
Plan Administrator at date of grant, any Dividend Equivalents that are granted
with respect to any Award of Stock Units shall be either (A) paid with respect
to such Stock Units at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Stock Units and the amount or
value thereof automatically deemed reinvested in additional Stock Units, other
Awards or other investment vehicles, as the Plan Administrator shall determine
or permit the Participant to elect.

            (f) Bonus Stock and Awards in Lieu of Obligations. The Plan
Administrator is authorized to grant Stock as a bonus, or to grant Stock or
other Awards in lieu of Company obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Participants subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of the Committee to
the extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Plan Administrator.

            (g) Dividend Equivalents. The Plan Administrator is authorized to
grant Dividend Equivalents to a Participant entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends paid
with respect to a specified number of Shares, or other periodic payments.
Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award. The Plan Administrator may provide that Dividend Equivalents
shall be paid or distributed when accrued or shall be deemed to have been
reinvested in additional Stock, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Plan Administrator may specify.

            (h) Other Stock-Based Awards. The Plan Administrator is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, as deemed by the Plan
Administrator to be consistent with the purposes of the Plan, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock, Awards with
value and payment contingent upon performance of the Company or any other
factors designated by the Plan Administrator, and Awards valued by reference to
the book value of Stock or the value of securities of or the performance of
specified Related Entities or business units. The Plan Administrator shall
determine the terms and conditions of such Awards. Stock delivered pursuant to
an Award in the nature of a purchase right granted under this Section 6(h) shall
be purchased for such consideration (including without limitation loans from the
Company or a Related Entity), paid for at such times, by such methods, and in
such forms, including, without limitation, cash, Stock, other Awards or other
property, as the Plan Administrator shall determine. The Plan Administrator
shall have the discretion to grant such other Awards which are exercisable for
unvested shares of Common Stock. Should the Participant's Continuous Service
cease while holding such unvested shares, the Company shall have the right to
repurchase, at a price determined by the Administrator at the time of grant, any
or all of those

                                       13

<PAGE>

unvested shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
Cash awards, as an element of or supplement to any other Award under the Plan,
may also be granted pursuant to this Section 6(h).

      7.    Performance Awards.

            (a) Performance Conditions. The right of a Participant to exercise
or receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Plan
Administrator. The Plan Administrator may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Section 7(b) hereof in the case of a Performance Award intended to qualify
under Code Section 162(m). If and to the extent required under Code Section
162(m), any power or authority relating to a Performance Award intended to
qualify under Code Section 162(m), shall be exercised by the Committee as the
Plan Administrator and not the Board.

            (b) Performance Awards Granted to Designated Covered Employees. If
and to the extent that the Committee determines that a Performance Award to be
granted to an Eligible Person who is designated by the Committee as likely to be
a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise, and/or settlement of such
Performance Award shall be contingent upon achievement of pre-established
performance goals and other terms set forth in this Section 7(b).

                  (i) Performance Goals Generally. The performance goals for
such Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such criteria,
as specified by the Committee consistent with this Section 7(b). Performance
goals shall be objective and shall otherwise meet the requirements of Code
Section 162(m) and regulations thereunder including the requirement that the
level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The Committee
may determine that such Performance Awards shall be granted, exercised, and/or
settled upon achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise, and/or
settlement of such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different Participants.

                  (ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified Related
Entities or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used exclusively
by the Committee in establishing performance goals for such Performance Awards:
(1) total stockholder return; (2) such total stockholder return as compared to
total return (on a comparable basis) of a publicly available index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense, taxes,
depreciation, and amortization; (6) pretax operating earnings [after interest
expense and before bonuses and extraordinary or special items]; (7) operating
margin; (8) earnings per share; (9) return on equity; (10) return on capital;

                                       14

<PAGE>

(11) return on investment; (12) operating earnings; (13) cash flow from
operations; and (14) ratio of debt to stockholders' equity.

                  (iii) Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to ten (10) years, as
specified by the Committee. Performance goals shall be established not later
than ninety (90) days after the beginning of any performance period applicable
to such Performance Awards, or at such other date as may be required or
permitted for "performance-based compensation" under Code Section 162(m).

                  (iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Performance Awards. The amount
of such Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria set
forth in Section 7(b)(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section 7(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a percentage
of any of such business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly mathematical
relationship to such business criteria.

                  (v) Settlement of Performance Awards; Other Terms. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance Awards. The Committee shall specify the circumstances in
which such Performance Awards shall be paid or forfeited in the event of
termination of Continuous Service by the Participant prior to the end of a
performance period or settlement of Performance Awards.

            (c) Written Determinations. All determinations by the Committee as
to the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 7(b), shall be
made in writing in the case of any Award intended to qualify under Code Section
162(m). The Committee may not delegate any responsibility relating to such
Performance Awards if and to the extent required to comply with Code Section
162(m).

            (d) Status of Performance Awards Under Code Section 162(m). It is
the intent of the Company that Performance Awards under this Section 7 hereof
granted to persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Code Section 162(m) and regulations thereunder
shall, if so designated by the Committee, constitute "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder. Accordingly, the terms of Sections 7(b), (c) and (d),
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by

                                       15

<PAGE>

the Committee, at the time of grant of Performance Awards, as likely to be a
Covered Employee with respect to that fiscal year. If any provision of the Plan
or any agreement relating to such Performance Awards does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.

      8.    Certain Provisions Applicable to Awards or Sales.

            (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Plan Administrator, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Related Entity, or any business entity to be acquired by the
Company or a Related Entity, or any other right of a Participant to receive
payment from the Company or any Related Entity. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Plan Administrator
shall require the surrender of such other Award or award in consideration for
the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company or any Related Entity.

            (b) Form and Timing of Payment Under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be made by
the Company or a Related Entity upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Plan Administrator shall
determine, including, without limitation, cash, other Awards or other property,
and may be made in a single payment or transfer, in installments, or on a
deferred basis. The settlement of any Award may be accelerated, and cash paid in
lieu of Stock in connection with such settlement, in the discretion of the Plan
Administrator or upon occurrence of one or more specified events (in addition to
a Change in Control). Installment or deferred payments may be required by the
Plan Administrator (subject to Section 10(g) of the Plan) or permitted at the
election of the Participant on terms and conditions established by the Plan
Administrator. Payments may include, without limitation, provisions for the
payment or crediting of a reasonable interest rate on installment or deferred
payments or the grant or crediting of Dividend Equivalents or other amounts in
respect of installment or deferred payments denominated in Stock.

            (c) Exemptions from Section 16(b) Liability. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of Rule
16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither the
grant of any Awards to nor other transaction by a Participant who is subject to
Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b).

                                       16

<PAGE>

      9.    Change in Control; Corporate Transaction.

            (a) Change in Control.

                  (i) The Plan Administrator may, in its discretion, accelerate
the vesting, exercisability, lapsing of restrictions, or expiration of deferral
of any Award, including upon the occurrence of a Change in Control. In addition,
the Plan Administrator may provide in an Award agreement that the performance
goals relating to any Performance Award will be deemed to have been met upon the
occurrence of any Change in Control.

                  (ii) In addition to the terms of Section 9(a)(i) above, the
effect of a "Change in Control," may be provided (1) in an employment,
compensation, or severance agreement, if any, between the Company or any Related
Entity and the Participant, relating to the Participant's employment,
compensation, or severance with or from the Company or such Related Entity, or
(2) in the agreement evidencing the Award.

            (b) Corporate Transactions. In the event of a Corporate Transaction,
any surviving corporation or acquiring corporation may either (i) assume or
continue any or all Awards outstanding under the Plan, or (ii) substitute
similar stock awards for outstanding Awards (it being understood that similar
awards include, but are not limited to, awards to acquire the same consideration
paid to the stockholders or the Company, as the case may be, pursuant to the
Corporate Transaction). In the event that any surviving corporation or acquiring
corporation does not assume or continue any or all such outstanding Awards or
substitute similar stock awards for such outstanding Awards, then with respect
to Awards that have been not assumed, continued, or substituted, then such
Awards shall terminate if not exercised (if applicable) at or prior to such
effective time (contingent upon the effectiveness of the Corporate Transaction).
The Administrator, in its discretion and without the consent of any Participant,
may (but is not obligated to) either (i) accelerate the vesting of all Awards
(and, if applicable, the time at which such Awards may be exercised) in full or
as to some percentage of the Award to a date prior to the effective time of such
Corporate Transaction as the Administrator shall determine (contingent upon the
effectiveness of each Corporate Transaction) or (ii) provide for a cash payment
in exchange for the termination of an Award or any portion thereof where such
cash payment is equal to the Fair Market Value of the Shares that the
Participant would receive if the Award were fully vested and exercised (if
applicable) as of such date (less any applicable exercise price). The
Administrator, in its sole discretion, shall determine whether each Award is
assumed, continued, substituted, or terminated.

                  With respect to Restricted Stock and any other Award granted
under the Plan that the Company has any reacquisition or repurchase rights, the
reacquisition or repurchase rights for such Awards may be assigned by the
Company to the successor of the Company (or the successor's parent company) in
connection with such Corporate Transaction. In addition, the Administrator, in
its discretion, may (but is not obligated to) provide that any reacquisition or
repurchase rights held by the Company with respect to such Awards shall lapse in
whole or in part (contingent upon the effectiveness of the Corporate
Transaction).

            (c) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Awards shall terminate
immediately prior to the completion

                                       17

<PAGE>

of such dissolution or liquidation, and shares of Common Stock subject to the
Company's repurchase option may be repurchased by the Company notwithstanding
the fact that the holder of such stock is still in Continuous Service.

      10.   General Provisions.

            (a) Compliance With Legal and Other Requirements. The Company may,
to the extent deemed necessary or advisable by the Plan Administrator, postpone
the issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or other
required action under any federal or state law, rule, or regulation, listing or
other required action with respect to any stock exchange or automated quotation
system upon which the Stock or other Company securities are listed or quoted, or
compliance with any other obligation of the Company, as the Plan Administrator,
may consider appropriate, and may require any Participant to make such
representations, furnish such information, and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery,
or payment, to the extent that such postponement or other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.

            (b) Limits on Transferability; Beneficiaries.

                  (i) General. Except as provided in the Award agreement, a
Participant may not assign, sell, transfer, or otherwise encumber or subject to
any lien any Award or other right or interest granted under this Plan, in whole
or in part, other than by will or by operation of the laws of descent and
distribution, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his
or her guardian or legal representative.

                  (ii) Permitted Transfer of Option. The Plan Administrator, in
its sole discretion, may permit the transfer of an Option (but not an Incentive
Stock Option, or any other right to purchase Stock other than an Option) as
follows: (A) by gift to a member of the Participant's Immediate Family or (B) by
transfer by instrument to a trust providing that the Option is to be passed to
beneficiaries upon death of the Participant. For purposes of this Section
10(b)(ii), "Immediate Family" shall mean the Participant's spouse (including a
former spouse subject to terms of a domestic relations order); child, stepchild,
grandchild, child-in-law; parent, stepparent, grandparent, parent-in-law;
sibling and sibling-in-law, and shall include adoptive relationships. If a
determination is made by counsel for the Company that the restrictions contained
in this Section 10(b)(ii) are not required by applicable federal or state
securities laws under the circumstances, then the Committee or Board, in its
sole discretion, may permit the transfer of Awards (other than Incentive Stock
Options and Stock Appreciation Rights in tandem therewith) to one or more
Beneficiaries or other transferees during the lifetime of the

                                       18

<PAGE>

Participant, which may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent permitted by the Plan
Administrator pursuant to the express terms of an Award agreement (subject to
any terms and conditions which the Plan Administrator may impose thereon, and
further subject to any prohibitions and restrictions on such transfers pursuant
to Rule 16b-3). A Beneficiary, transferee, or other person claiming any rights
under the Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Plan Administrator, and to any additional
terms and conditions deemed necessary or appropriate by the Plan Administrator.

             (c)   Adjustments.

                  (i) Adjustments to Awards. In the event that any dividend or
other distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution, or other similar corporate transaction or event affects the Stock
and/or such other securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the Plan Administrator to
be appropriate, then the Plan Administrator shall, in such manner as it may deem
equitable, substitute, exchange, or adjust any or all of (A) the number and kind
of Shares which may be delivered in connection with Awards granted thereafter,
(B) the number and kind of Shares by which annual per-person Award limitations
are measured under Section 5 hereof, (C) the number and kind of Shares subject
to or deliverable in respect of outstanding Awards, (D) the exercise price,
grant price, or purchase price relating to any Award and/or make provision for
payment of cash or other property in respect of any outstanding Award, and (E)
any other aspect of any Award that the Plan Administrator determines to be
appropriate.

                  (ii) Other Adjustments. The Committee (and the Board if and
only to the extent such authority is not required to be exercised by the
Committee to comply with Code Section 162(m)) is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals and performance goals relating thereto)
in recognition of unusual or nonrecurring events (including, without limitation,
acquisitions and dispositions of businesses and assets) affecting the Company,
any Related Entity or any business unit, or the financial statements of the
Company or any Related Entity, or in response to changes in applicable laws,
regulations, accounting principles, tax rates, and regulations or business
conditions or in view of the Committee's assessment of the business strategy of
the Company, any Related Entity or business unit thereof, performance of
comparable organizations, economic and business conditions, personal performance
of a Participant, and any other circumstances deemed relevant; provided that no
such adjustment shall be authorized or made if and to the extent that such
authority or the making of such adjustment would cause Options, Stock
Appreciation Rights, Performance Awards granted under Section 7(b) hereof to
Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.

                                       19

<PAGE>

            (d) Taxes. The Company and any Related Entity are authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Plan Administrator may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

            (e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue, or terminate the Plan, or the Committee's authority to
grant Awards under the Plan, without the consent of stockholders or
Participants. Any amendment or alteration to the Plan shall be subject to the
approval of the Company's stockholders if such stockholder approval is deemed
necessary and advisable by the Board. However, without the consent of an
affected Participant, no such amendment, alteration, suspension, discontinuance,
or termination of the Plan may materially and adversely affect the rights of
such Participant under any previously granted and outstanding Award. The Plan
Administrator may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate any Award theretofore granted and any Award
agreement relating thereto, except as otherwise provided in the Plan; provided
that, without the consent of an affected Participant, no such action may
materially and adversely affect the rights of such Participant under such Award.

            (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a Related Entity; (ii) interfering in any way with
the right of the Company or a Related Entity to terminate any Eligible Person's
or Participant's Continuous Service at any time, (iii) giving an Eligible Person
or Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and Employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred Shares in accordance with the
terms of an Award.

            (g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligations to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Plan Administrator may
specify and in accordance with applicable law.

                                       20

<PAGE>

            (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Code Section 162(m).

            (i) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Plan Administrator shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

            (j) Governing Law. The validity, construction, and effect of the
Plan, any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the state of Delaware without giving
effect to principles of conflicts of laws, and applicable federal law.

            (k) Plan Effective Date and Stockholder Approval; Termination of
Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within twelve (12) months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable Nasdaq
requirements, and other laws, regulations, and obligations of the Company
applicable to the Plan. Awards may be granted subject to stockholder approval,
but may not be exercised or otherwise settled in the event stockholder approval
is not obtained. The Plan shall terminate no later than ten (10) years from the
date of the later of (x) the Effective Date and (y) the date an increase in the
number of shares reserved for issuance under the Plan is approved by the Board
(so long as such increase is also approved by the stockholders).

                                       21<PAGE>

                                                                   EXHIBIT 10.12
                                 KONA GRILL, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

                              ADOPTED JUNE 29, 2005

1.    PURPOSE.

      (a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Related Corporations may be given an
opportunity to purchase shares of the Common Stock of the Company.

      (b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Related Corporations.

      (c) The Company intends that the Purchase Rights be considered options
issued under an Employee Stock Purchase Plan.

2.    DEFINITIONS.

      (a) "BOARD" means the Board of Directors of the Company.

      (b) "CODE" means the Internal Revenue Code of 1986, as amended.

      (c) "COMMITTEE" means a committee appointed by the Board in accordance
with Section 3(c) of the Plan.

      (d) "COMMON STOCK" means the common stock of the Company.

      (e) "COMPANY" means Kona Grill, Inc., a Delaware corporation.

      (f) "CONTRIBUTIONS" means the payroll deductions and other additional
payments that a Participant contributes to fund the exercise of a Purchase
Right. A Participant may make payments not through payroll deductions only if
specifically provided for in the Offering, and then only if the Participant has
not already had the maximum permitted amount withheld through payroll deductions
during the Offering.

      (g) "CORPORATE TRANSACTION" means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the following
events:

            (i) a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company;

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

                                       1.

<PAGE>

            (iii) a merger, consolidation or similar transaction whether or not
the Company is the surviving corporation.

      (h) "DIRECTOR" means a member of the Board.

      (i) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering, provided
that such Employee also meets the requirements for eligibility to participate
set forth in the Plan.

      (j) "EMPLOYEE" means any person, including Officers and Directors, who is
employed for purposes of Section 423(b)(4) of the Code by the Company or a
Related Corporation. Neither service as a Director nor payment of a director's
fee shall be sufficient to make an individual an Employee of the Company or a
Related Corporation.

      (k) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants Purchase
Rights intended to be options issued under an "employee stock purchase plan," as
that term is defined in Section 423(b) of the Code.

      (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      (m) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of the security, unless otherwise determined by the Board,
shall be the closing sales price (rounded up where necessary to the nearest
whole cent) for such security (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 relevant security of the Company) on the Trading Day
prior to the relevant determination date, as reported in The Wall Street Journal
or such other source as the Board deems reliable.

      (n) "OFFERING" means the grant of Purchase Rights to purchase shares of
Common Stock under the Plan to Eligible Employees.

      (o) "OFFERING DATE" means a date selected by the Board for an Offering to
commence.

      (p) "OFFICER" means 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.

      (q) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Purchase Right granted pursuant to the Plan.

      (r) "PLAN" means this Kona Grill, Inc. Employee Stock Purchase Plan.

      (s) "PURCHASE DATE" means one or more dates during an Offering established
by the Board on which Purchase Rights shall be exercised and as of which
purchases of shares of Common Stock shall be carried out in accordance with such
Offering.

                                       2.

<PAGE>

      (t) "PURCHASE PERIOD" means a period of time specified within an Offering
beginning on the Offering Date or on the next day following a Purchase Date
within an Offering and ending on a Purchase Date. An Offering may consist of one
or more Purchase Periods.

      (u) "PURCHASE RIGHT" means an option to purchase shares of Common Stock
granted pursuant to the Plan.

      (v) "RELATED CORPORATION" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

      (w) "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (x) "TRADING DAY" means any day on which the exchange(s) or market(s) on
which shares of Common Stock are listed, whether it be an established stock
exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or otherwise,
is open for trading.

3.    ADMINISTRATION.

      (a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in Section 3(c). Whether or
not the Board has delegated administration, the Board shall have the final power
to determine all questions of policy and expediency that may arise in the
administration of the Plan.

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

            (i) To determine when and how Purchase Rights to purchase shares of
Common Stock shall be granted and the provisions of each Offering of such
Purchase Rights (which need not be identical).

            (ii) To designate from time to time which Related Corporations of
the Company shall be eligible to participate in the Plan.

            (iii) To construe and interpret the Plan and Purchase Rights, and to
establish, amend and revoke rules and regulations for the administration of the
Plan. The Board, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

            (iv) To amend the Plan as provided in Section 15.

            (v) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Related Corporations and to carry out the intent that the Plan be treated as
an Employee Stock Purchase Plan.

      (c) The Board may delegate administration of the Plan to a Committee of
the Board composed of one (1) or more members of the Board. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the

                                       3.

<PAGE>

powers theretofore possessed by the Board, 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. If administration is
delegated to a Committee, references to the Board in this Plan and in the
Offering document shall thereafter be deemed to be to the Board or the
Committee, as the case may be.

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

4.    SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

      Subject to the provisions of Section 14 relating to adjustments upon
changes in securities, the shares of Common Stock that may be sold pursuant to
Purchase Rights shall not exceed in the aggregate 625,000 shares of Common
Stock, plus an annual increase to be added on the first day of the fiscal year
of the Company for a period of ten (10) years, commencing on the first day of
the fiscal year that begins on January 1, 2006 and ending on (and including) the
first day of the fiscal year that begins on January 1, 2015 (each such day, a
"Calculation Date"), equal to the lesser of (i) one and one-half percent (1.5%)
of the shares of Common Stock outstanding on each such Calculation Date (rounded
down to the nearest whole share); or (ii) 500,000 shares of Common Stock.
Notwithstanding the foregoing, the Board may act, prior to the first day of any
fiscal year of the Company, to increase the share reserve by such number of
shares of Common Stock as the Board shall determine, which number shall be less
than each of (i) and (ii). If any Purchase Right granted under the Plan shall
for any reason terminate without having been exercised, the shares of Common
Stock not purchased under such Purchase Right shall again become available for
issuance under the Plan.

5.    GRANT OF PURCHASE RIGHTS; OFFERING.

      (a) The Board may from time to time grant or provide for the grant of
Purchase Rights to purchase shares of Common Stock under the Plan to Eligible
Employees in an Offering (consisting of one or more Purchase Periods) on an
Offering Date or Offering Dates selected by the Board. Each Offering shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate, which shall comply with the requirement of Section 423(b)(5) of the
Code that all Employees granted Purchase Rights shall have the same rights and
privileges. The terms and conditions of an Offering shall be incorporated by
reference into the Plan and treated as part of the Plan. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in Sections 6 through 9, inclusive.

      (b) If a Participant has more than one Purchase Right outstanding under
the Plan, unless he or she otherwise indicates in agreements or notices
delivered hereunder: (i) each agreement or notice delivered by that Participant
shall be deemed to apply to all of his or her Purchase Rights under the Plan,
and (ii) a Purchase Right with a lower exercise price (or an

                                       4.

<PAGE>

earlier-granted Purchase Right, if different Purchase Rights have identical
exercise prices) shall be exercised to the fullest possible extent before a
Purchase Right with a higher exercise price (or a later-granted Purchase Right
if different Purchase Rights have identical exercise prices) shall be exercised.

6.    ELIGIBILITY.

      (a) Purchase Rights may be granted only to Employees of the Company or, as
the Board may designate as provided in Section 3(b), to Employees of a Related
Corporation. Except as provided in Section 6(b), an Employee shall not be
eligible to be granted Purchase Rights under the Plan unless, on the Offering
Date, such Employee has been in the employ of the Company or the Related
Corporation, as the case may be, for such continuous period preceding such
Offering Date as the Board may require, but in no event shall the required
period of continuous employment be greater than two (2) years. In addition, the
Board may provide that no Employee shall be eligible to be granted Purchase
Rights under the Plan unless, on the Offering Date, such Employee's customary
employment with the Company or the Related Corporation is more than twenty (20)
hours per week and/or more than five (5) months per calendar year.

      (b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee shall, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Purchase Right under
that Offering, which Purchase Right shall thereafter be deemed to be a part of
that Offering. Such Purchase Right shall have the same characteristics as any
Purchase Rights originally granted under that Offering, as described herein,
except that:

            (i) the date on which such Purchase Right is granted shall be the
"Offering Date" of such Purchase Right for all purposes, including determination
of the exercise price of such Purchase Right;

            (ii) the period of the Offering with respect to such Purchase Right
shall begin on its Offering Date and end coincident with the end of such
Offering; and

            (iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she shall not receive any Purchase Right under that Offering.

      (c) No Employee shall be eligible for the grant of any Purchase Rights
under the Plan if, immediately after any such Purchase Rights are granted, such
Employee owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any Related
Corporation. For purposes of this Section 6(c), the rules of Section 424(d) of
the Code shall apply in determining the stock ownership of any Employee, and
stock which such Employee may purchase under all outstanding Purchase Rights and
options shall be treated as stock owned by such Employee.

      (d) As specified by Section 423(b)(8) of the Code, an Eligible Employee
may be granted Purchase Rights under the Plan only if such Purchase Rights,
together with any other rights granted under all Employee Stock Purchase Plans
of the Company and any Related

                                       5.

<PAGE>

Corporations, do not permit such Eligible Employee's rights to purchase stock of
the Company or any Related Corporation to accrue at a rate which exceeds twenty
five thousand dollars ($25,000) of Fair Market Value of such stock (determined
at the time such rights are granted, and which, with respect to the Plan, shall
be determined as of their respective Offering Dates) for each calendar year in
which such rights are outstanding at any time.

      (e) Officers of the Company and any designated Related Corporation, if
they are otherwise Eligible Employees, shall be eligible to participate in
Offerings under the Plan. Notwithstanding the foregoing, the Board may provide
in an Offering that Employees who are highly compensated Employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be eligible to
participate.

7.    PURCHASE RIGHTS; PURCHASE PRICE.

      (a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted a Purchase Right to purchase up to that
number of shares of Common Stock purchasable either with a percentage or with a
maximum dollar amount, as designated by the Board, but in either case not
exceeding fifteen percent (15%), of such Employee's Earnings (as defined by the
Board in each Offering) during the period that begins on the Offering Date (or
such later date as the Board determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering.

      (b) The Board shall establish one (1) or more Purchase Dates during an
Offering as of which Purchase Rights granted pursuant to that Offering shall be
exercised and purchases of shares of Common Stock shall be carried out in
accordance with such Offering.

      (c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of Common Stock that may be purchased by any
Participant on any Purchase Date during such Offering. In connection with each
Offering made under the Plan, the Board may specify a maximum aggregate number
of shares of Common Stock that may be purchased by all Participants pursuant to
such Offering. In addition, in connection with each Offering that contains more
than one Purchase Date, the Board may specify a maximum aggregate number of
shares of Common Stock that may be purchased by all Participants on any Purchase
Date under the Offering. If the aggregate purchase of shares of Common Stock
issuable upon exercise of Purchase Rights granted under the Offering would
exceed any such maximum aggregate number, then, in the absence of any Board
action otherwise, a pro rata allocation of the shares of Common Stock available
shall be made in as nearly a uniform manner as shall be practicable and
equitable.

      (d) The purchase price of shares of Common Stock acquired pursuant to
Purchase Rights shall be not less than the lesser of:

            (i) an amount equal to eighty-five percent (85%) of the Fair Market
Value of the shares of Common Stock on the Offering Date; or

            (ii) an amount equal to eighty-five percent (85%) of the Fair Market
Value of the shares of Common Stock on the applicable Purchase Date.

                                       6.

<PAGE>

8.    PARTICIPATION; WITHDRAWAL; TERMINATION.

      (a) A Participant may elect to authorize payroll deductions pursuant to an
Offering under the Plan by completing and delivering to the Company, within the
time specified in the Offering, an enrollment form (in such form as the Company
may provide). Each such enrollment form shall authorize an amount of
Contributions expressed as a percentage of the submitting Participant's Earnings
(as defined in each Offering) during the Offering (not to exceed the maximum
percentage specified by the Board). Each Participant's Contributions shall
remain the property of the Participant at all times prior to the purchase of
Common Stock, but such Contributions may be commingled with the assets of the
Company and used for general corporate purposes except where applicable law
requires that Contributions be deposited with an independent third party. To the
extent provided in the Offering, a Participant may begin making Contributions
after the beginning of the Offering. To the extent provided in the Offering, a
Participant may thereafter reduce (including to zero) or increase his or her
Contributions. To the extent specifically provided in the Offering, in addition
to making Contributions by payroll deductions, a Participant may make
Contributions through the payment by cash or check prior to each Purchase Date
of the Offering.

      (b) During an Offering, a Participant may cease making Contributions and
withdraw from the Offering by delivering to the Company a notice of withdrawal
in such form as the Company may provide. Such withdrawal may be elected at any
time prior to the end of the Offering, except as provided otherwise in the
Offering. Upon such withdrawal from the Offering by a Participant, the Company
shall distribute to such Participant all of his or her accumulated Contributions
(reduced to the extent, if any, such Contributions have been used to acquire
shares of Common Stock for the Participant) under the Offering, and such
Participant's Purchase Right in that Offering shall thereupon terminate. A
Participant's withdrawal from an Offering shall have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan,
but such Participant shall be required to deliver a new enrollment form in order
to participate in subsequent Offerings.

      (c) Purchase Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon a Participant ceasing to be an Employee for any
reason or for no reason (subject to any post-employment participation period
required by law) or other lack of eligibility. The Company shall distribute to
such terminated or otherwise ineligible Employee all of his or her accumulated
Contributions (reduced to the extent, if any, such Contributions have been used
to acquire shares of Common Stock for the terminated or otherwise ineligible
Employee) under the Offering.

      (d) Purchase Rights shall not be transferable by a Participant otherwise
than by will, the laws of descent and distribution, or a beneficiary designation
as provided in Section 13. During a Participant's lifetime, Purchase Rights
shall be exercisable only by such Participant.

      (e) Unless otherwise specified in an Offering, the Company shall have no
obligation to pay interest on Contributions.

                                       7.

<PAGE>

9.    EXERCISE.

      (a) On each Purchase Date during an Offering, each Participant's
accumulated Contributions shall be applied to the purchase of shares of Common
Stock up to the maximum number of shares of Common Stock permitted pursuant to
the terms of the Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued upon the
exercise of Purchase Rights unless specifically provided for in the Offering.

      (b) If any amount of accumulated Contributions remains in a Participant's
account after the purchase of shares of Common Stock and such remaining amount
is less than the amount required to purchase one share of Common Stock on the
final Purchase Date of an Offering, then such remaining amount shall be held in
such Participant's account for the purchase of shares of Common Stock under the
next Offering under the Plan, unless such Participant withdraws from such next
Offering, as provided in Section 8(b), or is not eligible to participate in such
Offering, as provided in Section 6, in which case such amount shall be
distributed to such Participant after the final Purchase Date, without interest.
If the amount of Contributions remaining in a Participant's account after the
purchase of shares of Common Stock is at least equal to the amount required to
purchase one (1) whole share of Common Stock on the final Purchase Date of the
Offering, then such remaining amount shall be distributed in full to such
Participant at the end of the Offering.

      (c) No Purchase Rights may be exercised to any extent unless the shares of
Common Stock to be issued upon such exercise under the Plan are covered by an
effective registration statement pursuant to the Securities Act and the Plan is
in material compliance with all laws applicable to the Plan. If on a Purchase
Date during any Offering hereunder the shares of Common Stock are not so
registered or the Plan is not in such compliance, no Purchase Rights or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the shares of Common Stock are subject to such an effective
registration statement and the Plan is in such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If, on the Purchase Date under any Offering hereunder, as delayed to the
maximum extent permissible, the shares of Common Stock are not registered and
the Plan is not in such compliance, no Purchase Rights or any Offering shall be
exercised and all Contributions accumulated during the Offering (reduced to the
extent, if any, such Contributions have been used to acquire shares of Common
Stock) shall be distributed to the Participants.

10.   COVENANTS OF THE COMPANY.

      The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of Common Stock upon
exercise of the Purchase Rights. If, after commercially reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the lawful issuance
and sale of shares of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell shares of Common Stock upon
exercise of such Purchase Rights unless and until such authority is obtained.

                                       8.

<PAGE>

11.   USE OF PROCEEDS FROM SHARES OF COMMON STOCK.

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

12.   RIGHTS AS A STOCKHOLDER.

      A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, shares of Common Stock subject to
Purchase Rights unless and until the Participant's shares of Common Stock
acquired upon exercise of Purchase Rights are recorded in the books of the
Company (or its transfer agent).

13.   DESIGNATION OF BENEFICIARY.

      (a) A Participant may file a written designation of a beneficiary who is
to receive any shares of Common Stock and/or cash, if any, from the
Participant's account under the Plan in the event of such Participant's death
subsequent to the end of an Offering but prior to delivery to the Participant of
such shares of Common Stock or cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of such Participant's death
during an Offering. Any such designation shall be on a form provided by or
otherwise acceptable to the Company.

      (b) The Participant may change such designation of beneficiary at any time
by written notice to the Company. In the event of the death of a Participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such Participant's death, the Company shall deliver such shares
of Common Stock and/or cash to the executor or administrator of the estate of
the Participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its sole discretion, may deliver
such shares of Common Stock and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.

14.   ADJUSTMENTS UPON CHANGES IN SECURITIES; CORPORATE TRANSACTIONS.

      (a) If any change is made in the shares of Common Stock, subject to the
Plan, or subject to any Purchase Right, 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 shall be appropriately adjusted in the
type(s), class(es) and maximum number of shares of Common Stock subject to the
Plan pursuant to Section 4(a), and the outstanding Purchase Rights shall be
appropriately adjusted in the type(s), class(es), number of shares and purchase
limits of such outstanding Purchase Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company.")

                                       9.

<PAGE>

      (b) In the event of a Corporate Transaction, then: (i) any surviving or
acquiring corporation may continue or assume Purchase Rights outstanding under
the Plan or may substitute similar rights (including a right to acquire the same
consideration paid to stockholders in the Corporate Transaction) for those
outstanding under the Plan, or (ii) if any surviving or acquiring corporation
does not continue or assume such Purchase Rights or does not substitute similar
rights for Purchase Rights outstanding under the Plan, then, the Participants'
accumulated Contributions shall be used to purchase shares of Common Stock
within twenty (20) business days prior to the Corporate Transaction under the
ongoing Offering, and the Participants' Purchase Rights under the ongoing
Offering shall terminate immediately after such purchase.

15.   AMENDMENT OF THE PLAN.

      (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 relating to adjustments upon changes
in securities and except as to amendments solely to benefit the administration
of the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Related Corporation, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary for the Plan to satisfy the requirements of Section 423 of the Code
or other applicable laws or regulations.

      (b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
or to bring the Plan and/or Purchase Rights into compliance therewith.

      (c) The rights and obligations under any Purchase Rights granted before
amendment of the Plan shall not be impaired by any amendment of the Plan except:
(i) with the consent of the person to whom such Purchase Rights were granted, or
(ii) as necessary to comply with any laws or governmental regulations
(including, without limitation, the provisions of the Code and the regulations
promulgated thereunder relating to Employee Stock Purchase Plans).

16.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares of Common Stock reserved for issuance under the Plan, as increased
and/or adjusted from time to time, have been issued under the terms of the Plan.
No Purchase Rights may be granted under the Plan while the Plan is suspended or
after it is terminated.

      (b) Any benefits, privileges, entitlements and obligations under any
Purchase Rights while the Plan is in effect shall not be impaired by suspension
or termination of the Plan except (i) as expressly provided in the Plan or with
the consent of the person to whom such Purchase Rights were granted, (ii) as
necessary to comply with any laws, regulations, or listing requirements, or
(iii) as necessary to ensure that the Plan and/or Purchase Rights comply with
the requirements of Section 423 of the Code.

                                      10.

<PAGE>

17.   EFFECTIVE DATE OF PLAN.

            The Plan shall become effective as determined by the Board, but no
Purchase Rights shall be exercised unless and until the Plan has been approved
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted by the Board.

18.   MISCELLANEOUS PROVISIONS.

      (a) The Plan and Offering do not constitute an employment contract.
Nothing in the Plan or in the Offering shall in any way alter the at will nature
of a Participant's employment or be deemed to create in any way whatsoever any
obligation on the part of any Participant to continue in the employ of the
Company or a Related Corporation, or on the part of the Company or a Related
Corporation to continue the employment of a Participant.

      (b) The provisions of the Plan shall be governed by the laws of the State
of Arizona without resort to that state's conflicts of laws rules.

                                      11.

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