AUTOMATIC DATA PROCESSING INC (Form: S-8)

As filed with the Securities and Exchange Commission on August 30, 2010

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AUTOMATIC DATA PROCESSING, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-1467904
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One ADP Boulevard

Roseland, New Jersey 07068

(Address of Principal Executive Offices, Including Zip Code)

Cobalt Holding Company 2002 Stock Option Plan

(Full title of the plan)

Michael A. Bonarti, Esq.

Vice President, General Counsel and Secretary

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, New Jersey 07068

(Name and address of agent for service)

(973) 974-5000

(Telephone number, including area code, of agent for service)

Copies to:

David S. Huntington, Esq.

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

212-373-3000

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨
(Do not check if a smaller reporting company.)

CALCULATION OF REGISTRATION FEE



Title of securities to be registered	Amount to be registered	Proposed maximum offering price per share	Proposed maximum aggregate offering price	Amount of registration fee
Common stock, par value $0.10 per share	497,525 (1)(2)	$38.76 (3)	$19,284,069 (3)	$1,374.95

(1)

This registration statement (the " Registration Statement ") registers the issuance of an aggregate of 497,525 shares of the common stock of Automatic Data Processing, Inc. (the “ Company ” or " Registrant "), par value $0.10 per share (the " Common Stock "), issuable under the Cobalt Holding Company 2002 Stock Option Plan (the " Cobalt Plan "), assumed by the Registrant in connection with its acquisition of Cobalt Holding Company on August 16, 2010.

(2)

Pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the " Securities Act "), this Registration Statement also covers an indeterminate number of additional shares that may be offered or issued by reason of certain corporate transactions or events, including any stock dividend, stock split or any other similar transaction effected which results in an increase in the number of shares of Common Stock.

(3)

Estimated solely for the purpose of computing the registration fee in accordance with Rules 457(c) and 457(h) under the Securities Act. Pursuant to Rules 457(c) and 457(h) under the Securities Act, the proposed maximum aggregate offering price was determined based on the average of the high and low prices reported for the Company’s Common Stock on the Nasdaq Global Select Market on August 25, 2010.

EXPLANATORY NOTE

Except as the context otherwise requires, references to “we,” “our,” the “Registrant,” and the “Company” are to Automatic Data Processing, Inc. and its consolidated subsidiaries.

The Company has prepared this Registration Statement on Form S-8 (the “ Registration Statement ”) in accordance with the requirements of Form S-8 under the Securities Act of 1933, as amended (the “ Securities Act ”), to register 497,525 shares of its common stock, par value $0.10 per share (the “ Common Stock ”), that are reserved for issuance in respect of awards issued under the Cobalt Holding Company 2002 Stock Option Plan (the “ Cobalt Plan ”), assumed by the Company in connection with its acquisition of Cobalt Holding Company on August 16, 2010.

PART I

INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

The document(s) containing the information specified in Part I of Form S-8 will be sent or given to participants in the Cobalt Plan as specified by Rule 428(b)(1) under the Securities Act. Such documents are not being filed with the Securities and Exchange Commission the " Commission ") either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424 under the Securities Act, but constitute, along with the documents incorporated by reference into this Registration Statement, a prospectus that meets the requirements of Section 10(a) of the Securities Act.

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

The following documents filed by the Company with the Commission are incorporated herein by reference:

1.	The Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010.

2.	The Company’s Current Report on Form 8-K dated July 9, 2010.

3.	The description of the Company’s Common Stock contained in its registration statement on Form 8-A/A under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), as filed with the Commission on October 20, 2008, including any amendment or report filed for the purpose of amending such description.

In addition, all reports and documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (other than any portion of such filings that are furnished under applicable Commission rules rather than filed) subsequent to the date hereof and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents.

Any statement contained this Registration Statement, in an amendment hereto or in a document incorporated or deemed to be incorporated by reference herein and to be a part hereof shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained in this Registration Statement, or in any other subsequently filed amendment to this Registration Statement or in any document which also is or is deemed to be incorporated by reference in this Registration Statement, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

Item 4. Description of Securities.

Not applicable.

Item 5. Interests of Named Experts and Counsel.

The validity of the shares of Common Stock being registered pursuant hereto has been passed upon by Michael A. Bonarti, Esq., Vice President, General Counsel and Secretary of the Company. Mr. Bonarti, a full-time employee of the Company, owns 10,277 shares of the Company's Common Stock, and holds options to purchase 63,625 shares of the Company's Common Stock.

Item 6. Indemnification of Directors and Officers.

Section 145 of the General Corporation Law of the State of Delaware authorizes a corporation to indemnify its directors, officers, employees and agents against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement reasonably incurred, including liabilities under the Securities Act, provided they act in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe their conduct was unlawful, although in the case of proceedings brought by or on behalf of the corporation, such indemnification is limited to expenses and is not permitted if the individual is adjudged liable to the corporation (unless the Delaware Court of Chancery or the court in which such proceeding was brought determines otherwise in accordance with the General Corporation Law of the State of Delaware). Section 102 of the General Corporation Law of the State of Delaware authorizes a corporation to limit or eliminate its directors’ liability to the corporation or its stockholders for monetary damages for breaches of fiduciary duties, other than for (i) breaches of the duty of loyalty, (ii) acts or omissions not in good faith or that involve intentional misconduct or knowing violations of law, (iii) unlawful payments of dividends, stock purchases or redemptions, or (iv) transactions from which a director derives an improper personal benefit. In addition, Section 145 of the General Corporation Law of the State of Delaware authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against and incurred by such person in any such capacity, or arising out of such person’s status as such.

Article Fifth, Sections 3 and 4 of the Company’s Amended and Restated Certificate of Incorporation provide as follows:

“The Corporation shall indemnify all directors and officers of the Corporation to the full extent permitted by the General Corporation Law of the State of Delaware (and in particular Paragraph 145 thereof), as from time to time amended, and may purchase and maintain insurance on behalf of such directors and officers. In addition, the Corporation shall, in the manner and to the extent as the By-laws of the Corporation shall provide, indemnify to the full extent permitted by the General Corporation Law of the State of Delaware (and in particular Paragraph 145 thereof), as from time to time amended, such other persons as the By-laws shall provide, and may purchase and maintain insurance on behalf of such other persons.”

“A director of the Corporation shall not be held personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; except for liability (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of any director of the Corporation existing at the time of, or for or with respect to any acts or omissions occurring prior to, such repeal or modification.”

Article 6, Section 6.01 of the Company’s Amended and Restated By-Laws provides as follows:

“Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer, of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she (x) acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, in the case of any such employee or agent, in a manner he or she reasonably believed to be not in violation of any policies or directives of the Corporation, and (y) with respect to any criminal action or proceeding had no reasonable cause to believe his or her conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (i) such indemnification shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The indemnification under this Section 6.01 shall apply to all directors and officers of the

Corporation who sit on the boards of directors of non-profit corporations in keeping with the Corporation’s philosophy.”

“The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.”

As permitted by Section 145 of the General Corporation Law of the State of Delaware and the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws, the Company also maintains a directors and officers liability insurance policy which insures, subject to certain exclusions, deductibles and maximum amounts, directors and officers of the Company against damages, judgments, settlements and costs incurred by reason of certain acts committed by such persons in their capacities as directors and officers.

Item 7. Exemption From Registration Claimed.

Not applicable.

Item 8. Exhibits.

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement No. 333-72023 on Form S-4 filed with the Commission on February 9, 1999)
3.2		Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 13, 2007)
4.1		Form of the Company’s Common Stock certificate (incorporated by reference to Exhibit 4.4 to Registrant’s Registration Statement on Form S-3 filed with the Commission on January 21, 1992)
5.1		Opinion of Michael A. Bonarti, Esq.
23.1		Consent of Michael A. Bonarti, Esq. (included in Exhibit 5.1)
23.2		Consent of Deloitte & Touche LLP
24.1		Power of Attorney (included in the signature pages of this Registration Statement)
99.1		Cobalt Holding Company 2002 Stock Option Plan

Item 9. Undertakings.

a. The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided , however , that paragraphs (1)(i) and (1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

b. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

c. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than

the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Roseland, State of New Jersey, on August 30, 2010.

	AUTOMATIC DATA PROCESSING, INC.
	By:	/s/ Gary C. Butler
		Name: Gary C. Butler Title: President and Chief Executive Officer

POWER OF ATTORNEY

The officers and directors of Automatic Data Processing, Inc. whose signatures appear below hereby constitute and appoint Gary C. Butler and Michael A. Bonarti, and each of them (with full power to each of them to act alone), their true and lawful attorneys-in-fact, with full powers of substitution and resubstitution, to sign and execute on behalf of the undersigned any and all amendments, including post-effective amendments, to this Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Commission, and each of the undersigned does hereby ratify and confirm all that said attorneys-in-fact shall do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below on August 30, 2010 by the following persons in the capacities indicated.

Signature		Title
/s/ Gary C. Butler		President and Chief Executive Officer, Director (Principal Executive Officer)
(Gary C. Butler)
/s/ Christopher R. Reidy		Chief Financial Officer (Principal Financial Officer)
(Christopher R. Reidy)

Signature		Title
/s/ Alan Sheiness		Corporate Controller (Principal Accounting Officer)
(Alan Sheiness)
/s/ Gregory D. Brenneman
(Gregory D. Brenneman)		Director
/s/ Leslie A. Brun
(Leslie A. Brun)		Director
/s/ Leon G. Cooperman
(Leon G. Cooperman)		Director
/s/ Eric C. Fast
(Eric C. Fast)		Director
/s/ Linda R. Gooden
(Linda R. Gooden)		Director
/s/ R. Glenn Hubbard
(R. Glenn Hubbard)		Director
/s/ John P. Jones
(John P. Jones)		Director
/s/ Sharon T. Rowlands
(Sharon T. Rowlands)		Director
/s/ Enrique T. Salem
(Enrique T. Salem)		Director
/s/ Gregory L. Summe
(Gregory L. Summe)		Director

EXHIBIT INDEX


Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement No. 333-72023 on Form S-4 filed with the Commission on February 9, 1999)
3.2		Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 13, 2007)
4.1		Form of the Company’s Common Stock certificate (incorporated by reference to Exhibit 4.4 to Registrant’s Registration Statement on Form S-3 filed with the Commission on January 21, 1992)
5.1		Opinion of Michael A. Bonarti, Esq.
23.1		Consent of Michael A. Bonarti, Esq. (included in Exhibit 5.1)
23.2		Consent of Deloitte & Touche LLP
24.1		Power of Attorney (included in the signature pages of this Registration Statement)
99.1		Cobalt Holding Company 2002 Stock Option Plan

Exhibit 99.1

COBALT HOLDING COMPANY

2002 STOCK OPTION PLAN

Section 1. Purpose

Cobalt Holding Company 2002 Stock Option Plan (including the provisions of Exhibit A for Participants who reside in California on the date the Option is granted) (the “ Plan ”) is intended as an incentive to improve the performance, encourage the continued employment and increase the proprietary interest of certain Directors, officers, advisors, Employees and Consultants of the Company, participating in the Plan. The Plan is designed to grant such Directors, officers, advisors, Employees and Consultants the opportunity to share in the Company’s long-term success through stock ownership and to afford them the opportunity for additional compensation related to the value of Stock of the Company. It is intended that certain options granted under this Plan may qualify as “incentive stock options” under Section 422 of the Code.

Section 2. Definitions

(a) “ Affiliate ” means any parent corporation or any majority-owned direct or indirect subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

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

(c) “ Cause ” means (i) the violation by the Participant of any reasonable rule or policy of the Board or the Participant’s superiors or the CEO of the Company that results in damage to the Company or which, after notice to do so, the Participant fails to correct with a reasonable period of time, (ii) any willful misconduct or gross negligence by the Participant in the responsibilities assigned to the Participant; (iii) any willful failure by the Participant to perform his or her job as required to meet the objectives of the Company, (iv) any wrongful conduct of the Participant which has an adverse impact on the Company or which constitutes a misappropriation of the assets of the Company, (v) unauthorized disclosure of confidential information, (vi) the Participant’s performing services for any other company or person that competes with the Company while he or she is employed by or provides services to the Company without the prior written approval of the CEO.

(d) “ CEO ” means the Chief Executive Officer of the Company.

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

(f) “ Committee ” means the Board or such other committee of at least two persons as the Board may appoint to administer the Plan; provided, however, upon and after the time that a director, officer or stockholder of the Company first becomes subject to Section 16(b) of the Exchange Act, each member of the Committee shall, unless otherwise determined by the Board, be a “nonemployee director” within the meaning of the

rules promulgated under Section 16(b) and an “outside director” within the meaning of U.S. Treas. Reg. § 1.162-27(m)(3).

(g) “ Company ” means Cobalt Holding Company, a Delaware corporation.

(h) “ Consultant ” means any person, including any advisor, engaged by the Company or an Affiliate to render consulting, advisory or other services and who is compensated for such services. The term Consultant shall not include any Director or any Employee.

(i) “ Director ” means any director of either the Board or the board of directors of an Affiliate who is not an Employee.

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

(k) “ Disqualifying Disposition ” means any disposition (including any sale) of Stock acquired by exercise of an Incentive Stock Option made within the period which is (a) two years after the date the Participant was granted the Incentive Stock Option or (b) one year after the date the Participant acquired Stock by exercising the Incentive Stock Option.

(l) “ Eligible Persons ” means any (i) Employee, (ii) Director or (iii) Consultant.

(m) “ Employee ” means any person employed by the Company or an Affiliate.

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

(o) “ Fair Market Value ” means (i) prior to an IPO, the fair market value per share of Stock as determined by the Board, (ii) at the time of an IPO, the per share price to the public in such IPO, and (iii) after an IPO, (A) if the Stock is listed on a national securities exchange, the closing sale price reported as having occurred on the primary exchange with which the Stock is listed and traded on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported, (B) if the Stock is not listed on any national securities exchange but is quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System (“NASDAQ-NMS”) on a last sale basis, the closing price reported on the date prior to such date, or, if there is no such sale on that date then on the last preceding date on which such a sale was reported, or (C) if the Stock is not listed on an exchange or quoted on NASDAQ-NMS, or if representative quotes are not otherwise available, the amount determined by the Board to be the fair market value per share of Stock. In the event that Fair Market Value is to be determined by the Board pursuant to subsections (i) or (iii)(C) hereof, such determination shall be made in good faith.

(p) “ Form S-8 ” means a Form S-8 Registration Statement filed under the Securities Act.

(q) “ IPO ” means an initial public offering of the Stock registered under the Securities Act pursuant to an effective registration statement.

(r) “ IPO Date ” means the effective date of the IPO.

(s) “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(t) “ Nonqualified Stock Option ” means an Option that is not intended to qualify as an Incentive Stock Option.

(u) “ Option ” means an Incentive Stock Option or a Nonqualified Stock Option granted pursuant to the Plan.

(v) “ Option Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant.

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

(x) “ Permitted Transferee ” means a “family member” as such term is defined in, and under the circumstances permitted by Rule 701, or in the case of the death of a Participant, a (i) the Participant’s estate, (ii) person acquiring Stock by bequest or inheritance, or (iii) person designated as a beneficiary by the Participant. A Permitted Transferee will be subject to the same transfer restrictions as the transferor.

(y) “ Resignation in Lieu of Dismissal ” means a resignation by a Participant of employment with or service to the Company if (i) the Company has given prior written notice to such Participant of its intent to dismiss the Participant for circumstances that constitute Cause, or (ii) within two months of the Participant’s resignation, the Chief Operating Officer or the CEO of the Company determines, which determination shall be final and binding, that such resignation was related to an act that would have led to termination for Cause.

(z) “ Rule 701 ” means Rule 701 promulgated under the Securities Act.

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

(bb) “ Stock ” means the common stock of the Company, par value $0.01 per share.

(cc) “ Ten Percent Stockholder ” means an individual who, at the time the Option is granted, owns directly, or indirectly within the meaning of Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power (as determined pursuant to applicable law) of all classes of stock of the Company or of any parent or subsidiary thereof.

Section 3. Administration

(a) General . The Plan shall be administered by the Committee.

(b) Powers of the Committee . Subject to the provisions of the Plan, the Committee shall have sole authority, in its absolute discretion:

(i) To determine from time to time which of the Eligible Persons shall be granted Options, when and how each Option shall be granted, what type or combination of types of Options shall be granted, the provisions of each Option granted (which need not be identical), including the time or times when a person shall be permitted to receive Stock pursuant to an Option; and the number of shares of Stock with respect to which an Option shall be granted to each such person;

(ii) To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration;

(iii) To amend the Plan or an Option as provided in Section 14 hereof; and

(iv) To exercise such powers and to perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.

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

Section 4. Stock Subject to the Plan

(a) Share Reserve . Subject to Section 8 hereof relating to adjustments, Section 4(d) hereof relating to acquisitions, and including Options granted to Participants who reside or are principally employed in the State of California pursuant to Exhibit A, attached hereto, the total number of shares of Stock which may be granted pursuant to Options under the Plan shall not exceed, in the aggregate, 10.75 million.

(b) Source . The stock to be optioned under the Plan shall be shares of authorized but unissued Stock or previously issued shares of Stock reacquired by the Company on the open market, as applicable, or by private purchase.

(c) Reversion of Shares . If any Option shall for any reason expire, be forfeited or otherwise terminate, in whole or in part, the shares of Stock not acquired under such Option shall revert to and again become available for issuance under the Plan. If shares of Stock under the Plan are reacquired by the Company pursuant to any forfeiture provision, exercise of repurchase right or withholding requirement, such shares shall again be available for issuance under the Plan.

(d) Acquisitions . In connection with an acquisition by the Company or any Affiliate of another corporation or other business entity, any outstanding grants, awards or sales of options or other similar rights pertaining to such other corporation or other business entity may be assumed or replaced by options under the Plan upon such terms and conditions as the Board determines. The date of any such grant or award shall relate back to the date of the initial grant or award being assumed or replaced, and, subject to Board approval, service with the acquired corporation or business shall constitute service with the Company and its Affiliates for purposes of such grant or award. Any shares underlying any grant or award or sale pursuant to any such acquisition shall be disregarded for purposes of applying, and shall not reduce the number of shares available under Section 4(a) above.

(e) 162(m) Limitation . Subject to the provisions of Section 8 relating to adjustments upon changes in the shares of Stock, no Employee shall be eligible to be granted Options covering more than 500,000 shares of Stock during any calendar year. This Section 4(e) shall not apply prior to the IPO Date and, following the IPO Date, this Section 4(e) shall not apply until (i) the earliest of: (1) the first material modification of the Plan (including any increase in the number of shares of Stock reserved for issuance under the Plan in accordance with Section 4(a)); (2) the issuance of all of the shares of Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or (4) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration of an equity security under Section 12 of the Exchange Act; or (ii) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.

Section 5. Eligibility

(a) General . Participation shall be limited to Eligible Persons who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan. Except in the case of Incentive Stock Options, Options may be granted to Employees, Directors and Consultants.

(b) Incentive Stock Option Limitation . Incentive Stock Options may be granted only to Employees.

(i) Prior to the IPO Date, a Consultant shall not be eligible for the grant of an Option if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.

(ii) From and after the IPO Date, a Consultant shall not be eligible for the grant of an Option if, at the time of grant, a Form S-8 is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (A) that such grant (1) shall be registered in another manner under the Securities Act ( e.g., on a Form S-3 Registration Statement) or (2) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (B) that such grant complies with the securities laws of all other relevant jurisdictions.

Section 6. Options

(a) General . Options granted hereunder shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonqualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. Options granted to Eligible Persons who reside in the State of California on the date the Option is grated shall be granted pursuant to the terms of the Plan that are specific to California residents, which is attached hereto as Exhibit A. The provisions of separate Options (including Options for California residents) shall be set forth in an Option Agreement, which agreements need not be identical, and each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

(i) Term . The term upon which an Option shall remain exercisable shall be determined by the Committee and shall be set forth in an applicable Option Agreement; provided, that subject to Section 6(b) hereof in the case of Incentive Stock Options, no Option granted hereunder shall be exercisable after the expiration of ten (10) years from the date it was granted. Notwithstanding the foregoing, in the event a Participant’s employment or service with the Company or an Affiliate is terminated, unless otherwise provided in, and subject to, the applicable Option Agreement, the term of the Option shall expire on:

(A) the three-month anniversary of the date of any termination other than by reason of death, Disability or Cause;

(B) the one-year anniversary of the date of any termination by reason of death or Disability; or

(C) the date of any termination by the Company for Cause or the date of resignation in the event of any Resignation in Lieu of Dismissal.

(ii) Exercise Price . Subject to Section 6(b) hereof in the case of Incentive Stock Options, the exercise price per share of Stock for each Option shall be set by the Committee at the time of grant, and determined by the Committee in its sole discretion; provided , however , that following the date that the exemption from the application of Section 162(m) of the Code (or any other exemption having similar effect) ceases to apply to Options, all Options intended to qualify as “performance-based compensation” under Section 162(m) of the Code shall have an exercise price per share of Stock no less than the Fair Market Value of a share of Stock on the date of grant.

(iii) Payment for Stock . Payment for shares of Stock acquired pursuant to Options granted hereunder shall be made in full, upon exercise of the Options (i) in immediately available funds in United States dollars, by certified or bank cashier’s check, (ii) by surrender to the Company of shares of Stock that have either (a) been held by the holder of such Stock for at least six-months, or (b) were acquired from a person other than the Company, (iii) by a combination of (i) and (ii), (iv) following an IPO, in consideration received by the Company under a formal cashless exercise program maintained with an outside broker adopted by the Committee in connection with the Plan, or (v) by any other means approved by the Committee.

(iv) Vesting . Options shall vest and become exercisable in such manner and on such date or dates set forth in the Option Agreement, as may be determined by the Committee; provided, however, that notwithstanding any vesting dates set by the Committee, the Committee may in its sole discretion accelerate the vesting and exercisability of any Option, which acceleration shall not affect the terms and conditions of any such Option other than with respect to vesting. However, the immediately prior sentence is not intended to provide for any automatic acceleration of vesting of any Option, which shall be left to the sole discretion of the Committee. Unless otherwise specifically determined by the Committee, the vesting of an Option shall occur only while the Participant is employed or rendering services to the Company or its Affiliates and all vesting shall cease upon a Participant’s termination of employment or services for any reason. If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires.

(v) Transferability of Options . An Option shall not be transferable except Options may be transferred to a Permitted Transferee. Options shall

be exercisable during the lifetime of the Participant only by the Participant or a Permitted Transferee. Notwithstanding the foregoing, in the event of the death of the Participant, a Permitted Transferee shall thereafter be entitled to exercise the Option subject to the terms of the Plan; provided that, prior to an IPO, a Permitted Transferee shall not be permitted to transfer the Option or Stock other than back to the Company. Subject to the foregoing, a Nonqualified Stock Option shall be transferable to the extent provided in the Option Agreement.

(b) Special Provisions Applicable to Incentive Stock Options .

(i) Exercise Price of Incentive Stock Options . Subject to the provisions of subsection (ii) hereof, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Stock subject to the Option on the date the Option is granted.

(ii) Ten Percent Stockholders . No Incentive Stock Option may be granted to a Ten Percent Stockholder unless such option (A) has an exercise price of at least one hundred ten percent (110%) of the Fair Market Value on the date of the grant of such option; and (B) cannot be exercised more than five years after the date it is granted.

(iii) $100,000 Limitation . To the extent the aggregate Fair Market Value (determined as of the date of grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

(iv) Disqualifying Dispositions . Each Participant who receives an Incentive Stock Option must agree to notify the Company in writing immediately after the Participant makes a Disqualifying Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock Option.

Section 7. Repurchase of Stock Acquired by Option Exercise

At any time prior to the IPO Date the Committee may, in its discretion, and on terms it considers appropriate, require a Participant, the executors or administrators of a Participant’s estate or a Permitted Transferee, to sell back to the Company all of the shares of Stock acquired through any Option at a price equal to the Fair Market Value at the time of such repurchase, provided, however, that except due to unforeseen circumstances, the Committee shall not exercise its repurchase right prior to the six-month anniversary of the date of the Option exercise.

Section 8. Adjustment for Recapitalization, Merger, etc.

(a) Capitalization Adjustments . The aggregate number of shares of Stock which may be granted or purchased pursuant to Options granted hereunder, the number of shares of Stock covered by each outstanding Option, the maximum number of shares of Stock with respect to which any one person may be granted Options in any calendar year, and the price per share thereof in each such Option shall be proportionately

adjusted for any increase or decrease in the number of outstanding shares of stock resulting from a stock split or other subdivision or consolidation of shares of Stock or for other capital adjustments or payments of stock dividends or extraordinary dividends payable in a form other than shares of Stock in an amount that has a material effect on the Fair Market Value of the Stock or distributions or other increases or decreases in the outstanding shares of Stock without receipt of consideration by the Company. Any adjustment shall be conclusively determined by the Committee.

(b) Corporate Events . In the event of a merger, consolidation, plan of exchange, acquisition of property or stock, split-up, split-off, spin-off, reorganization or liquidation to which the Company is a party or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (each, a “Corporate Event”), the Board shall, in its sole discretion and to the extent possible under the structure of the Corporate Event, select one of the following alternatives for treating each outstanding Option under the Plan:

(i) Outstanding Options shall remain in effect in accordance with their terms.

(ii) Outstanding Options shall be converted into Options to purchase stock in one or more of the corporations, including the Company, that are the surviving or acquiring corporations in the Corporate Event. The amount, type of securities subject thereto and exercise price of the converted Options shall be determined by the Board, taking into account the relative values of the companies involved in the Corporate Event and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of Stock following the Corporate Event. Unless otherwise determined by the Board, the converted Options shall be vested only to the extent that the vesting requirements relating to Options granted hereunder have been satisfied.

(iii) The Board shall provide a period of 30 days or less before the completion of the Corporate Event during which outstanding Options may be exercised to the extent then exercisable, and upon the expiration of that period, all unexercised Options shall immediately terminate. The Board may, in its sole discretion, accelerate the exercisability of Options, in part or in full, so that they are exercisable during that period.

(c) Fractional Shares . Any adjustment made pursuant to this Section 8 may provide for the elimination of any fractional share which might otherwise become subject to an Option.

Section 9. Use of Proceeds

The proceeds received from the sale of Stock pursuant to the Plan shall be used for general corporate purposes.

Section 10. Rights and Privileges as a Stockholder

Except as otherwise specifically provided in the Plan, no person shall be entitled to the rights and privileges of stock ownership in respect of shares of Stock which are subject to Options hereunder until such shares have been issued to that person.

Section 11. Employment or Service Rights

No individual shall have any claim or right to be granted an Option under the Plan or, having been selected for the grant of an Option, to be selected for a grant of any other Option. Neither the Plan nor any action taken hereunder shall be construed as giving any individual any right to be retained in the employ or service of the Company or an Affiliate.

Section 12. Compliance With Laws

The obligation of the Company to make payment of Options in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Option to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Option unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale or resale under the Securities Act any of the shares of Stock issued upon exercise of the Options. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption.

Section 13. Withholding Obligations

In the Committee’s discretion, a Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Stock under an Option by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Stock from the shares of Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Stock under the Option, provided, however, that no shares of Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Stock.

Section 14. Amendment of the Plan or Options

(a) Amendment of Plan . The Board at any time, and from time to time, may amend the Plan (including Exhibit A); provided, however, that to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 promulgated under the Exchange Act, or any securities exchange listing requirements, except as provided in Section 8 relating to adjustments upon changes in Stock, no amendment shall be effective unless approved by the stockholders of the Company.

(b) No Impairment of Rights . Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

(c) Amendment of Stock Options . The Committee, at any time, and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.

Section 15. Termination or Suspension of the Plan

The Board may suspend or terminate the Plan (including Exhibit A) at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10 th ) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Options may be granted under the Plan while the Plan is suspended or after it is terminated.

Section 16. Effective Date of the Plan

The Plan shall be effective upon the earlier to occur of its adoption by the Board or its approval by the Company’s shareholders.

Section 17. Miscellaneous

(a) No Liability of Committee Members . No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided , however , that approval of the

Board shall be required for the payment of any amount in settlement of a claim against any such person. 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 Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

(b) Payments Following Accidents or Illness . If the Committee shall find that any person who has an outstanding Option granted under the Plan (or shares of Stock acquired upon the exercise of such an Option) is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(c) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of the State of Washington without reference to the principles of conflicts of laws thereof.

(d) Foreign Laws . The Committee may grant Options to individual Participants who are subject to the tax laws of nations other than the United States, which may have terms and conditions as determined by the Committee as necessary to comply with applicable foreign laws. The Committee may take any action which it deems advisable to obtain approval of such Options by the appropriate foreign governmental entity; provided, however, that no such action may be taken if they would violate the Exchange Act, the Code or any other applicable law.

(e) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than himself.

(f) Construction . The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. When used herein, the masculine gender includes the feminine gender and the singular may include the plural, unless the context clearly indicates to the contrary.

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