NOVATEL WIRELESS INC, S-1/A, EX-10.2, 2000-09-14

NOVATEL WIRELESS INC
S-1/A, EX-10.2, 2000-09-14
COMPUTER PROGRAMMING, DATA PROCESSING, ETC.

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EXHIBIT 10.2

NOVATEL WIRELESS, INC.

2000 STOCK INCENTIVE PLAN

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TABLE OF CONTENTS

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SECTION 1. INTRODUCTION....................................................................1

SECTION 2. DEFINITIONS.....................................................................1

(a) "Affiliate"...........................................................1

(b) "Award"...............................................................1

(d) "Change In Control"...................................................2

(e) "Code"................................................................2

(f) "Committee"...........................................................2

(g) "Common Stock"........................................................2

(h) "Company".............................................................3

(i) "Consultant"..........................................................3

(j) "Director"............................................................3

(k) "Disability"..........................................................3

(l) "Employee"............................................................3

(m) "Exchange Act"........................................................3

(n) "Exercise Price"......................................................3

(o) "Fair Market Value"...................................................3

(p) "Grant"...............................................................4

(q) "Incentive Stock Option" or "ISO".....................................4

(r) "Key Employee"........................................................4

(s) "Non-Employee Director"...............................................4

(t) "Nonstatutory Stock Option" or "NSO"..................................4

(u) "Option"..............................................................4

(v) "Optionee"............................................................4

(w) "Parent"..............................................................4

(x) "Participant".........................................................4

(y) "Plan"................................................................4

(z) "Restricted Stock"....................................................4

(aa) "Restricted Stock Agreement"..........................................4

(bb) "SAR Agreement".......................................................4

(cc) "Securities Act"......................................................4

(dd) "Service".............................................................4
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(ee) "Share"...............................................................4

(ff) "Stock Appreciation Right" or "SAR"...................................4

(gg) "Stock Option Agreement"..............................................4

(hh) "Stock Unit"..........................................................5

(ii) "Stock Unit Agreement"................................................5

(jj) "Subsidiary"..........................................................5

(kk) "10-Percent Shareholder"..............................................5

SECTION 3. ADMINISTRATION..................................................................5

(a) Committee Composition.................................................5

(b) Authority of the Committee............................................6

SECTION 4. ELIGIBILITY.....................................................................6

(a) General Rules.........................................................6

(b) Incentive Stock Options...............................................6

SECTION 5. SHARES SUBJECT TO PLAN..........................................................7

(a) Basic Limitation......................................................7

(b) Annual Addition.......................................................7

(d) Dividend Equivalents..................................................8

(e) Limits on Options and SARs............................................8

(f) Limits on Restricted Stock and Stock Units............................8

SECTION 6. TERMS AND CONDITIONS OF OPTIONS.................................................8

(a) Stock Option Agreement................................................8

(b) Number of Shares......................................................8

(d) Exercisability and Term...............................................8

(e) Modifications or Assumption of Options................................9

(f) Transferability of Options............................................9

(g) No Rights as Stockholder..............................................9

(h) Restrictions on Transfer..............................................9
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SECTION 7. PAYMENT FOR OPTION SHARES.......................................................9

(a) General Rule..........................................................9

(b) Surrender of Stock...................................................10

(d) Other Forms of Payment...............................................10

SECTION 8. TERMS AND CONDITIONS FOR AWARDS OF RESTRICTED STOCK
AND STOCK UNITS..............................................................10

(a) Time, Amount and Form of Awards......................................10

(b) Agreements...........................................................10

(d) Form and Time of Settlement of Stock Units...........................10

(e) Vesting Conditions...................................................11

(f) Assignment or Transfer of Restricted Stock or Stock Units............11

(g) Death of Stock Units Recipient.......................................11

(h) Trusts...............................................................11

(i) Voting and Dividend Rights...........................................11

(j) Stock Unit Voting and Dividend Rights................................12

(k) Creditors' Rights....................................................12

SECTION 9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS............................12

(a) SAR Agreement........................................................12

(b) Number of Shares.....................................................12

(d) Exercisability and Term..............................................12

(e) Exercise of SARs.....................................................12

(f) Modification or Assumption of SARs...................................13

SECTION 10. PROTECTION AGAINST DILUTION....................................................13

(a) Adjustments..........................................................13

(b) Participant Rights...................................................13

SECTION 11. EFFECT OF A CHANGE IN CONTROL..................................................13

(a) Merger or Reorganization.............................................13

(b) Acceleration.........................................................14

SECTION 12. LIMITATIONS ON RIGHTS..........................................................14

(a) Retention Rights.....................................................14
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(b) Stockholders' Rights.................................................14

SECTION 13. WITHHOLDING TAXES..............................................................14

(a) General..............................................................14

(b) Share Withholding....................................................14

SECTION 14. DURATION AND AMENDMENTS........................................................15

(a) Term of the Plan.....................................................15

(b) Right to Amend or Terminate the Plan.................................15

SECTION 15. EXECUTION......................................................................15
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NOVATEL WIRELESS, INC.

2000 STOCK INCENTIVE PLAN

EFFECTIVE AS OF ________________, 2000

SECTION 1. INTRODUCTION.

The Company's Board of Directors adopted the Novatel Wireless, Inc. 2000
Stock Incentive Plan on July 24, 2000 (the "Adoption Date"), and the
Company's stockholders approved the Plan on ___________. 2000. The Plan
is effective on the date of our initial public offering.

The purpose of the Plan is to promote the long-term success of the
Company and the creation of shareholder value by offering Key Employees
an opportunity to acquire a proprietary interest in the success of the
Company, or to increase such interest, and to encourage such selected
persons to continue to provide services to the Company and to attract
new individuals with outstanding qualifications.

The Plan seeks to achieve this purpose by providing for Awards in the
form of Restricted Stock, Stock Units, Stock Appreciation Rights and
Options (which may be Incentive Stock Options or Nonstatutory Stock
Options).

The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware (except its choice-of-law provisions).
Capitalized terms shall have the meaning provided in Section 2 unless
otherwise provided in this Plan or the applicable Stock Option
Agreement, SAR Agreement, Stock Unit Agreement or Restricted Stock
Agreement.

SECTION 2. DEFINITIONS.

(a) "AFFILIATE" means any entity other than a Subsidiary, if the Company
and/or one or more Subsidiaries own not less than 50% of such entity.
For purposes of determining an individual's "Service," this definition
shall include any entity other than a Subsidiary, if the Company, a
Parent and/or one or more Subsidiaries own not less than 50% of such
entity.

(b) "AWARD" means any award of an Option, SAR, Stock Unit or Restricted
Stock under the Plan.

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(d) "CHANGE IN CONTROL" except as may otherwise be provided in a Stock
Option Agreement, SAR Agreement, Stock Unit Agreement or Restricted
Stock Agreement, means the occurrence of any of the following:

(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of
the continuing or surviving entity's securities outstanding
immediately after such merger, consolidation or other
reorganization is owned by persons who were not stockholders of
the Company immediately prior to such merger, consolidation or
other reorganization;

(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets;

(iii) A change in the composition of the Board, as a
result of which fewer that one-half of the incumbent directors
are directors who either (i) had been directors of the Company on
the date 24 months prior to the date of the event that may
constitute a Change in Control (the "original directors") or (ii)
were elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the aggregate of the
original directors who were still in office at the time of the
election or nomination and the directors whose election or
nomination was previously so approved;

(iv) Any transaction as a result of which any person
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing at least 20% of the total voting power
represented by the Company's then outstanding voting securities.
For purposes of this Paragraph (iii), the term "person" shall
have the same meaning as when used in sections 13(d) and 14(d) of
the Exchange Act but shall exclude:

(A) A trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a
subsidiary of the Company;

(B) A corporation owned directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of the common stock of the
Company; and

(v) A complete liquidation or dissolution of the Company.

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

(f) "COMMITTEE" means a committee consisting of one or more members of
the Board that is appointed by the Board (as described in Section 3) to
administer the Plan.

(g) "COMMON STOCK" means the Company's common stock.

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(h) "COMPANY" means Novatel Wireless, Inc., a Delaware corporation.

(i) "CONSULTANT" means an individual who performs bona fide services to
the Company, a Parent, a Subsidiary or an Affiliate other than as an
Employee or Director or Non-Employee Director.

(j) "DIRECTOR" means a member of the Board who is also an Employee.

(k) "DISABILITY" means that the Key Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than 12 months.

(l) "EMPLOYEE" means any individual who is a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate.

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

(n) "EXERCISE PRICE" means, in the case of an Option, the amount for
which a Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in
the case of a SAR, means an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of a Share in
determining the amount payable upon exercise of such SAR.

(o) "FAIR MARKET VALUE" means the market price of Shares, determined by
the Committee as follows:

(i) If the Shares were traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the last trading
price reported by the applicable composite transactions report for such
date;

(ii) If the Shares were traded over-the-counter on the date in
question and were classified as a national market issue, then the Fair
Market Value shall be equal to the last trading price quoted by the
NASDAQ system for such date;

(iii) If the Shares were traded over-the-counter on the date in
question but were not classified as a national market issue, then the
Fair Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for such
date; and

(iv) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on
such basis as it deems appropriate.

Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Wall Street
Journal. Such determination shall be conclusive and binding on all
persons.

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(p) "GRANT" means any grant of an Award under the Plan.

(q) "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
described in Code section 422(b).

(r) "KEY EMPLOYEE" means an Employee, Director, Non-Employee Director or
Consultant who has been selected by the Committee to receive an Award
under the Plan.

(s) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee.

(t) "NONSTATUTORY STOCK OPTION" or "NSO" means a stock option that is
not an ISO.

(u) "OPTION" means an ISO or NSO granted under the Plan entitling the
Optionee to purchase Shares.

(v) "OPTIONEE" means an individual, estate or other entity that holds an
Option.

(w) "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. A corporation that
attains the status of a Parent on a date after the adoption of the Plan
shall be considered a Parent commencing as of such date.

(x) "PARTICIPANT" means an individual or estate or other entity that
holds an Award.

(y) "PLAN" means this Novatel Wireless, Inc. 2000 Stock Incentive Plan
as it may be amended from time to time.

(z) "RESTRICTED STOCK" means a Share awarded under the Plan.

(aa) "RESTRICTED STOCK AGREEMENT" means the agreement described in
Section 8 evidencing each Award of Restricted Stock.

(bb) "SAR AGREEMENT" means the agreement described in Section 9
evidencing each Award of a Stock Appreciation Right.

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

(dd) "SERVICE" means service as an Employee, Director, Non-Employee
Director or Consultant.

(ee) "SHARE" means one share of Common Stock.

(ff) "STOCK APPRECIATION RIGHT" OR "SAR" means a stock appreciation
right awarded under the Plan.

(gg) "STOCK OPTION AGREEMENT" means the agreement described in Section 6
evidencing each Grant of an Option.

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(hh) "STOCK UNIT" means a bookkeeping entry representing the equivalent
of a Share, as awarded under the Plan.

(ii) "STOCK UNIT AGREEMENT" means the agreement described in Section 8
evidencing each Award of Stock Units.

(jj) "SUBSIDIARY" means any corporation (other than the Company) 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 fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain. A corporation that attains the status of a Subsidiary on a
date after the adoption of the Plan shall be considered a Subsidiary
commencing as of such date.

(kk) "10-PERCENT SHAREHOLDER" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company, its Parent or any of its subsidiaries.
In determining stock ownership, the attribution rules of section 424(d)
of the Code shall be applied.

SECTION 3. ADMINISTRATION.

(a) COMMITTEE COMPOSITION. A Committee appointed by the Board shall
administer the Plan. The Board shall designate one of the members of the
Committee as chairperson. If no Committee has been approved, the entire
Board shall constitute the Committee. Members of the Committee shall
serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time. The Board may also at any
time terminate the functions of the Committee and reassume all powers
and authority previously delegated to the Committee.

With respect to officers or directors subject to Section 16 of the
Exchange Act, the Committee shall consist of those individuals who shall
satisfy the requirements of Rule 16b-3 (or its successor) under the
Exchange Act with respect to Awards granted to persons who are officers
or directors of the Company under Section 16 of the Exchange Act.
Notwithstanding the previous sentence, failure of the Committee to
satisfy the requirements of Rule 16b-3 shall not invalidate any Awards
granted by such Committee.

The Board may also appoint one or more separate committees of the Board,
each composed of one or more directors of the Company who need not
qualify under Rule 16b-3, who may administer the Plan with respect to
Key Employees who are not considered officers or directors of the
Company under Section 16 of the Exchange Act, may grant Awards under the
Plan to such Key Employees and may determine all terms of such Awards.

Notwithstanding the foregoing, the Board shall constitute the Committee
and shall administer the Plan with respect to all Awards granted to
Non-Employee Directors.

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(b) AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take any
actions it deems necessary or advisable for the administration of the
Plan. Such actions shall include:

(i) selecting Key Employees who are to receive Awards under
the Plan;

(ii) determining the type, number, vesting requirements and
other features and conditions of such Awards;

(iii) interpreting the Plan; and

(iv) making all other decisions relating to the operation of
the Plan.

The Committee may adopt such rules or guidelines, as it deems
appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.

(c) INDEMNIFICATION. Each member of the Committee, or of the Board,
shall be indemnified and held harmless by the Company against and from
(i) any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party
or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Stock Option Agreement, SAR
Agreement, Stock Unit Agreement or Restricted Stock Agreement, and (ii)
from any and all amounts paid by him or her in settlement thereof, with
the Company's approval, or paid by him or her in satisfaction of any
judgment in any such claim, action, suit, or proceeding against him or
her, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes
to handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the
Company's Certificate of Incorporation or Bylaws, by contract, as a
matter of law, or otherwise, or under any power that the Company may
have to indemnify them or hold them harmless.

SECTION 4. ELIGIBILITY.

(a) GENERAL RULES. Only Employees, Directors, Non-Employee Directors and
Consultants shall be eligible for designation as Key Employees by the
Committee.

(b) INCENTIVE STOCK OPTIONS. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for
the grant of ISOs. In addition, a Key Employee who is a 10-Percent
Shareholder shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(5) of the Code are satisfied.

(c) NON-EMPLOYEE DIRECTOR OPTIONS. Non-Employee Directors shall also be
eligible to receive Options as described in this Section 4(c) from and
after the date the Board has determined to implement this provision.

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(i) Each eligible Non-Employee Director elected or appointed
after the effective date of the Company's initial public offering shall
automatically be granted an NSO to purchase 20,000 Shares (subject to
adjustment under Section 9) as a result of his or her initial election
or appointment as a Non-Employee Director. Upon the conclusion of each
regular annual meeting of the Company's stockholders following his or
her initial appointment, each eligible Non-Employee Director who will
continue serving as a member of the Board and who received an initial
grant thereafter shall receive an NSO to purchase 5,000 Shares (subject
to adjustment under Section 9). All NSOs granted pursuant to this
Section 4 shall vest and become exercisable provided the individual is
serving as a director of the Company as of the vesting date as follows:
25% one year from the date of grant, then in 36 equal monthly
installments commencing on the date one month and one year after the
date of grant.

(ii) All NSOs granted to Non-Employee Directors under this
Section 4(c) shall become exercisable in full in the event of Change in
Control with respect to the Company.

(iii) The Exercise Price under all NSOs granted to a Non-Employee
Director under this Section 4(c) shall be equal to one hundred percent
(100%) of the Fair Market Value of a Share of Common Stock on the date
of grant, payable in one of the forms described in Section 7.

(iv) All NSOs granted to a Non-Employee Director under this
Section 4(c) shall terminate on the earlier of:

(1) The 10th anniversary of the date of grant; or

(2) The date ninety (90) days after the termination of
such Non-Employee Director's service for any reason.

SECTION 5. SHARES SUBJECT TO PLAN.

(a) BASIC LIMITATION. The stock issuable under the Plan shall be
authorized but unissued Shares or treasury Shares. The aggregate number
of Shares reserved for Awards under the Plan shall not exceed
16,500,000.

(b) ANNUAL ADDITION. Beginning with the first fiscal year of the Company
beginning after the Effective Date, on the first day of each fiscal
year, Shares will be added to the Plan equal to the lesser of (i)
1,500,000 Shares, (ii) three percent (3%) of the outstanding shares in
the last day of the prior fiscal year, or (iii) such lesser number of
Shares as may be determined by the Board in its sole discretion.

(c) ADDITIONAL SHARES. If Awards are forfeited or terminate for any
other reason before being exercised, then the Shares underlying such
Awards shall again become available for Awards under the Plan. If SARs
are exercised, then only the number of Shares (if any) actually issued
in settlement of such SARs shall reduce the number

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available under Section 5(a) and the balance shall again become
available for Awards under the Plan.

(d) DIVIDEND EQUIVALENTS. Any dividend equivalents distributed under the
Plan shall not be applied against the number of Shares available for
Awards whether or not such dividend equivalents are converted into Stock
Units.

(e) LIMITS ON OPTIONS AND SARS. No Key Employee shall receive Options to
purchase Shares and/or SARs during any fiscal year covering in excess of
1,000,000 Shares, or 2,000,000 Shares in the first fiscal year of a Key
Employee's employment with Company.

(f) LIMITS ON RESTRICTED STOCK AND STOCK UNITS. No Key Employee shall
receive Award(s) of Restricted Stock and/or Stock Units during any
fiscal year covering in excess of 500,000 Shares, or 1,000,000 Shares in
the first fiscal year of a Key Employee's employment with Company.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

(a) STOCK OPTION AGREEMENT. Each Grant under the Plan shall be evidenced
by a Stock Option Agreement between the Optionee and the Company. Such
Option shall be subject to all applicable terms and conditions of the
Plan and may be subject to any other terms and conditions that are not
inconsistent with the Plan and that the Committee 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. A Stock Option Agreement may provide that new Options will be
granted automatically to the Optionee when he or she exercises the prior
Options. The Stock Option Agreement shall also specify whether the
Option is an ISO or an NSO.

(b) 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 9.

(c) EXERCISE PRICE. An Option's Exercise Price shall be established by
the Committee and set forth in a Stock Option Agreement. To the extent
required by applicable law the Exercise Price of an ISO shall not be
less than 100% of the Fair Market Value (110% for 10-Percent
Shareholders) of a Share on the date of Grant. In the case of an NSO, a
Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding.

(d) EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of
the Option; provided that the term of an ISO shall in no event exceed
ten (10) years from the date of Grant. An ISO that is granted to a
10-Percent Shareholder shall have a maximum term of five (5) years. No
Option can be exercised after the expiration date provided in the
applicable Stock Option Agreement. A Stock Option Agreement may provide
for accelerated exercisability in the event of the

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Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. A Stock Option Agreement may
permit an Optionee to exercise an Option before it is vested, subject to
the Company's right of repurchase over any Shares acquired under the
unvested portion of the Option (an "early exercise"), which right of
repurchase shall lapse at the same rate the Option would have vested had
there been no early exercise. In no event shall the Company be required
to issue fractional Shares upon the exercise of an Option.

(e) MODIFICATIONS OR ASSUMPTION OF OPTIONS. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options
or may accept the cancellation of outstanding options (whether granted
by the Company or by another issuer) in return for the grant of new
Options for the same or a different number of Shares and at the same or
a different Exercise Price. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee,
alter or impair his or her rights or obligations under such Option.

(f) TRANSFERABILITY OF OPTIONS. Except as otherwise provided in the
applicable Stock Option Agreement and then only to the extent permitted
by applicable law, no Option shall be transferable by the Optionee other
than by will or by the laws of descent and distribution. Except as
otherwise provided in the applicable Stock Option Agreement, an Option
may be exercised during the lifetime of the Optionee only or by the
guardian or legal representative of the Optionee. No Option or interest
therein may be assigned, pledged or hypothecated by the Optionee during
his lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.

(g) NO RIGHTS AS STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any
Common Stock covered by an Option until such person becomes entitled to
receive such Common Stock by filing a notice of exercise and paying the
Exercise Price pursuant to the terms of such Option.

(h) RESTRICTIONS ON TRANSFER. Any Shares issued upon exercise of an
Option shall be subject to such rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may determine.
Such restrictions shall apply in addition to any restrictions that may
apply to holders of Shares generally and shall also comply to the extent
necessary with applicable law.

SECTION 7. PAYMENT FOR OPTION SHARES.

(a) GENERAL RULE. The entire Exercise Price of Shares issued upon
exercise of Options shall be payable in cash at the time when such
Shares are purchased, except as follows:

(i) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment
may be made in any form(s) described in this Section 7.

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(ii) In the case of an NSO granted under the Plan, the Committee
may in its discretion, at any time accept payment in any form(s)
described in this Section 7.

(b) SURRENDER OF STOCK. To the extent that this Section 7(b) is
applicable, payment for all or any part of the Exercise Price may be
made with Shares which have already been owned by the Optionee for such
duration as shall be specified by the Committee. Such Shares shall be
valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.

(c) PROMISSORY NOTE. To the extent that this Section 7(c) is applicable,
payment for all or any part of the Exercise Price may be made with a
full-recourse promissory note.

(d) OTHER FORMS OF PAYMENT. To the extent that this Section 7(d) is
applicable, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.

SECTION 8. TERMS AND CONDITIONS FOR AWARDS OF RESTRICTED STOCK AND STOCK UNITS.

(a) TIME, AMOUNT AND FORM OF AWARDS. Awards under this Section 8 may be
granted in the form of Restricted Stock in the form of Stock Units, or
in any combination of both. Restricted Stock or Stock Units may also be
awarded in combination with NSOs or SARs, and such an Award may provide
that the Restricted Stock or Stock Units will be forfeited in the event
that the related NSOs or SARs are exercised.

(b) AGREEMENTS. Each Award of Restricted Stock or Stock Units under the
Plan shall be evidenced by a Restricted Stock Agreement or Stock Unit
Agreement between the Participant and the Company. Such Awards shall be
subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions that are not inconsistent with
the Plan and that the Committee deems appropriate for inclusion in the
applicable Agreement. The provisions of the various Agreements entered
into under the Plan need not be identical.

(c) PAYMENT FOR RESTRICTED STOCK OR STOCK UNIT AWARDS. Restricted Stock
or Stock Units may be issued with or without cash consideration under
the Plan.

(d) FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (i) cash, (ii) Shares or (iii)
any combination of both. The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the
original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a
method based on the average Fair Market Value of Shares over a series of
trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have
lapsed, or it may be deferred to any later date. The amount of a
deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an

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<PAGE> 16

Award of Stock Units is settled, the number of such Stock Units shall be
subject to adjustment pursuant to Section 10.

(e) VESTING CONDITIONS. Each Award of Restricted Stock or Stock Units
shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the applicable Agreement. An Agreement may
provide for accelerated vesting in the event of the Participant's death,
Disability or retirement or other events.

(f) ASSIGNMENT OR TRANSFER OF RESTRICTED STOCK OR STOCK UNITS. Except as
provided in Section 13, or in a Restricted Stock Agreement or Stock Unit
Agreement, or as required by applicable law, a Restricted Stock or Stock
Unit Award granted under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation
of law. Any act in violation of this Section 8(f) shall be void.
However, this Section 8(f) shall not preclude a Participant from
designating a beneficiary who will receive any outstanding Restricted
Stock or Stock Unit Awards in the event of the Participant's death, nor
shall it preclude a transfer of Restricted Stock or Stock Unit Awards by
will or by the laws of descent and distribution.

(g) DEATH OF STOCK UNITS RECIPIENT. Any Stock Unit Award that becomes
payable after the Award recipient's death shall be distributed to the
recipient's beneficiary or beneficiaries. Each recipient of a Stock Unit
Award under the Plan shall designate one or more beneficiaries for this
purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the
Company at any time before the recipient's death. If no beneficiary was
designated or if no designated beneficiary survives the recipient, then
any Stock Unit Award that becomes payable after the recipient's death
shall be distributed to the recipient's estate.

(h) TRUSTS. Neither this Section 8 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted
Stock to (a) the trustee of a trust that is revocable by such
Participant alone, both at the time of the transfer or assignment and at
all times thereafter prior to such Participant's death, or (b) the
trustee of any other trust to the extent approved in advance by the
Committee in writing. A transfer or assignment of Restricted Stock from
such trustee to any person other than such Participant shall be
permitted only to the extent approved in advance by the Committee in
writing, and Restricted Stock held by such trustee shall be subject to
all of the conditions and restrictions set forth in the Plan and in the
applicable Restricted Stock Agreement, as if such trustee were a party
to such Agreement.

(i) VOTING AND DIVIDEND RIGHTS. The holders of Restricted Stock awarded
under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Stock Agreement, however,
may require that the holders of Restricted Stock invest any cash
dividends received in additional Restricted Stock. Such additional
Restricted Stock shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid.
Such additional Restricted Stock shall not reduce the number of Shares
available under Section 5.

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<PAGE> 17

(j) STOCK UNIT VOTING AND DIVIDEND RIGHTS. The holders of Stock Units
shall have no voting rights. Prior to settlement or forfeiture, any
Stock Unit awarded under the Plan may, at the Committee's discretion,
carry with it a right to dividend equivalents. Such right entitles the
holder to be credited with an amount equal to all cash dividends paid on
one Share while the Stock Unit is outstanding. Dividend equivalents may
be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Shares, or
in a combination of both. Prior to distribution, any dividend
equivalents which are not paid shall be subject to the same conditions
and restrictions as the Stock Units to which they attach.

(k) CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject
to the terms and conditions of the applicable Stock Unit Agreement.

SECTION 9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

(a) SAR AGREEMENT. Each Award of a SAR under the Plan shall be evidenced
by a SAR Agreement between the Optionee and the Company. Such SAR shall
be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of
the various SAR Agreements entered into under the Plan need not be
identical. SARs may be granted in consideration of a reduction in the
Optionee's other compensation.

(b) NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Section 10.

(c) EXERCISE PRICE. Each SAR Agreement shall specify the Exercise Price.
A SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.

(d) EXERCISABILITY AND TERM. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may
provide for accelerated exercisability in the event of the Optionee's
death, Disability or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination
of the Optionee's Service. SARs may also be awarded in combination with
Options, Restricted Stock or Stock Units, and such an Award may provide
that the SARs will not be exercisable unless the related Options,
Restricted Stock or Stock Units are forfeited. A SAR may be included in
an ISO only at the time of Grant but may be included in an NSO at the
time of Grant or at any subsequent time, but not later than six months
before the expiration of such NSO. A SAR granted under the Plan may
provide that it will be exercisable only in the event of a Change in
Control.

(e) EXERCISE OF SARS. If, on the date when a SAR expires, the Exercise
Price under such SAR is less than the Fair Market Value on such date but
any portion of such SAR

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<PAGE> 18

has not been exercised or surrendered, then such SAR shall automatically
be deemed to be exercised as of such date with respect to such portion.
Upon exercise of a SAR, the Optionee (or any person having the right to
exercise the SAR after his or her death) shall receive from the Company
(i) Shares, (ii) cash or (iii) a combination of Shares and cash, as the
Committee shall determine. The amount of cash and/or the Fair Market
Value of Shares received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of
surrender) of the Shares subject to the SARs exceeds the Exercise Price.

(f) MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the
Company or by another issuer) in return for the grant of new SARs for
the same or a different number of Shares and at the same or a different
Exercise Price. The foregoing notwithstanding, no modification of a SAR
shall, without the consent of the Optionee, alter or impair his or her
rights or obligations under such SAR.

SECTION 10. PROTECTION AGAINST DILUTION.

(a) ADJUSTMENTS. In the event of a subdivision of the outstanding
Shares, a declaration of a dividend payable in Shares, a declaration of
a dividend payable in a form other than Shares in an amount that has a
material effect on the price of Shares, a combination or consolidation
of the outstanding Shares (by reclassification or otherwise) into a
lesser number of Shares, a recapitalization, reorganization, merger,
liquidation, spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its reasonable discretion, deems appropriate
in order to prevent the dilution or enlargement of rights hereunder in
one or more of:

(i) the number of Shares available for future Awards and the per
person Share limits under Section 5;

(ii) the number of Shares covered by each outstanding Award; or

(iii) the Exercise Price under each outstanding SAR or Option.

(b) PARTICIPANT RIGHTS. Except as provided in this Section 10, a
Participant shall have no rights by reason of any issue by the Company
of stock of any class or securities convertible into stock of any class,
any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class.

SECTION 11. EFFECT OF A CHANGE IN CONTROL.

(a) MERGER OR REORGANIZATION. In the event that the Company is a party
to a merger or other reorganization, outstanding Awards shall be subject
to the agreement of merger or reorganization. Such agreement may
provide, without limitation, for the assumption

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<PAGE> 19

of outstanding Awards by the surviving corporation or its parent, for
their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting or for their cancellation with or
without consideration.

(b) ACCELERATION. The Committee may determine, at the time of granting
an Award or thereafter, that such Award shall become fully vested as to
all Shares subject to such Award in the event that a Change in Control
occurs with respect to the Company.

SECTION 12. LIMITATIONS ON RIGHTS.

(a) RETENTION RIGHTS. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an
employee, consultant or director of the Company, a Parent, a Subsidiary
or an Affiliate. The Company and its Parents and Subsidiaries and
Affiliates reserve the right to terminate the Service of any person at
any time, and for any reason, subject to applicable laws, the Company's
Certificate of Incorporation and Bylaws and a written employment
agreement (if any).

(b) STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any
Shares covered by his or her Award prior to the issuance of a stock
certificate for such Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date
when such certificate is issued, except as expressly provided in Section
10.

(c) REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under the
Plan shall be subject to all applicable laws, rules and regulations and
such approval by any regulatory body as may be required. The Company
reserves the right to restrict, in whole or in part, the delivery of
Shares pursuant to any Award prior to the satisfaction of all legal
requirements relating to the issuance of such Shares, to their
registration, qualification or listing or to an exemption from
registration, qualification or listing.

SECTION 13. WITHHOLDING TAXES.

(a) GENERAL. A Participant shall make arrangements satisfactory to the
Company for the satisfaction of any withholding tax obligations that
arise in connection with his or her Award. The Company shall not be
required to issue any Shares or make any cash payment under the Plan
until such obligations are satisfied.

(b) SHARE WITHHOLDING. If a public market for the Company's Shares
exists, the Committee may permit a Participant to satisfy all or part of
his or her withholding or income tax obligations by having the Company
withhold all or a portion of any Shares that otherwise would be issued
to him or her or by surrendering all or a portion of any Shares that he
or she previously acquired. Such Shares shall be valued at their Fair
Market Value on the date when taxes otherwise would be withheld in cash.
Any payment of taxes by assigning Shares to the Company may be subject
to restrictions, including, but

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<PAGE> 20

not limited to, any restrictions required by rules of the Securities and
Exchange Commission.

SECTION 14. DURATION AND AMENDMENTS.

(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board, subject to the
approval of the Company's stockholders. No Options or SARs shall be
exercisable until such stockholder approval is obtained. In the event
that the stockholders fail to approve the Plan within twelve (12) months
after its adoption by the Board, any Awards made shall be null and void
and no additional Awards shall be made. To the extent required by
applicable law, the Plan shall terminate on the date that is ten (10)
years after its adoption by the Board and may be terminated on any
earlier date pursuant to Section 14(b).

(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board may amend or
terminate the Plan at any time and for any reason. The termination of
the Plan, or any amendment thereof, shall not affect any Award
previously granted under the Plan. No Awards shall be granted under the
Plan after the Plan's termination. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules.

SECTION 15. EXECUTION.

To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to execute this Plan on behalf of the
Company.

NOVATEL WIRELESS, INC.

By
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