EXHIBIT 10.4

 

 

 

AMERICAN STATES WATER COMPANY

2003 NON-EMPLOYEE DIRECTORS STOCK PLAN, AS AMENDED

(As Amended as of May 18, 2015)

 

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TABLE OF CONTENTS

PAGE

 

 

 

 

 

 

SECTION 1.

GENERAL DESCRIPTION

1

SECTION 2.

DEFINITIONS

1

SECTION 3.

EFFECTIVE DATE; DURATION

3

SECTION 4.

STOCK OPTION AWARDS

4

4.1

Annual Award

4

4.2

Maximum Number of Shares

4

4.3

Option Price

4

4.4

Option Period and Exercisability

4

4.5

Termination of Directorship

4

4.6

Option Agreements

5

4.7

Dividend Equivalent Credits to Option Dividend Equivalent Accounts

5

SECTION 5.

STOCK UNITS AWARDS

5

5.1

2003 Awards

5

5.2

Annual Award

6

5.3

Crediting of Dividend Equivalents to Stock Unit Accounts

6

5.4

Units and Other Amounts Vest Immediately

7

5.5

Distribution of Benefits

7

SECTION 6.

CHANGES IN CAPITAL STRUCTURE

8

6.1

Adjustments

8

6.2

Corporate Transactions-Assumption or Termination of Awards

8

6.3

Option Termination

9

SECTION 7.

SHARES SUBJECT TO THE PLAN; SHARE LIMITS

9

7.1

Shares Available for Issuance

9

7.2

Share Limits; Cut Backs

9

7.3

Fractional Shares; Minimum Issue

10

SECTION 8.

ADMINISTRATION

10

8.1

The Administrator

10

8.2

Committee Action

10

8.3

Rights and Duties; Delegation and Reliance; Decisions Binding

10

 

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TABLE OF CONTENTS

PAGE

 

(continued)

 

 

 

 

 

 

 

 

 

 

SECTION 9.

AMENDMENT AND TERMINATION; STOCKHOLDER APPROVAL

11

9.1

Amendment and Termination

11

9.2

Stockholder Approval

11

SECTION 10.

MISCELLANEOUS

11

10.1

Limitation on Participants’ Rights

11

10.2

Beneficiaries

12

10.3

Non-Transferability

12

10.4

Obligations Binding Upon Successors

13

10.5

Governing Law; Severability

13

10.6

Compliance with Laws

13

10.7

Limitations on Rights Associated with Units

13

10.8

Plan Construction

14

10.9

Headings Not Part of Plan

14

 

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AMERICAN STATES WATER COMPANY

2003 NON-EMPLOYEE DIRECTORS STOCK PLAN

 

Section 1.                               General Description

 

The American States Water Company 2003 Non-Employee Directors Stock Plan (the
“Plan”) provides for grants of stock units and stock options to non-employee
directors.  The purposes of the Plan are (a) to attract, motivate and retain
eligible directors of the Company by providing to them supplemental stock-based
compensation and (b) to encourage eligible directors to increase their stock
ownership in the Company.

 

Section 2.                               Definitions

 

Whenever the following terms are used in this Plan they shall have the meaning
specified below unless the context clearly indicates to the contrary:

 

“Account or Accounts” means the Participant’s Stock Unit Account or Option
Dividend Equivalent Account, as the context requires.

 

“Award Units” means Stock Units credited pursuant to Sections 5.1 and 5.2 and
any Dividend Equivalents credited thereon pursuant to Section 5.3.

 

“Board” means the Board of Directors of the Company.

 

“Cause” has the same meaning as determined under Section 304 of the California
Corporations Code or any successor thereof.

 

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

 

“Common Stock” means the Common Stock of the Company, subject to adjustment
pursuant to Section 6.

 

“Committee” means the Board or a Committee of the Board acting under delegated
authority from the Board.

 

“Company” means American States Water Company, a California corporation, and its
successors and assigns.

 

“Dividend Equivalent” means (a), with respect to a Participant’s Option Dividend
Equivalent Account, the amount of cash dividends or other cash distributions
paid by the Company on that number of shares of Common Stock that is equal to
the number of shares subject to each outstanding Option held by the Participant
as of the applicable measurement date for the dividend or other distribution,
which amount shall be allocated as Stock Units credited to the Participant’s
Option Dividend Equivalent Account pursuant to Section 4.7; and (b), with
respect to a Participant’s Stock Unit Account, the amount of cash dividends or
other cash

 

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distributions paid by the Company on that number of shares of Common Stock that
is equal to the number of Stock Units then credited to the Participant’s Stock
Unit Account as of the applicable measurement date for the dividend or other
distribution, which amount shall be allocated as additional Stock Units to the
Participant’s Stock Unit Account pursuant to Section 5.3.

 

“Distribution Subaccount” means a subaccount of a Non-Employee Director’s Option
Dividend Equivalent Account established to separately account for Dividend
Equivalents credited in the form of Stock Units with respect to each outstanding
Option.

 

“Effective Date” means May 20, 2003, subject to shareholder approval at the 2004
annual meeting of shareholders.

 

“Eligible Non-Employee Director” means each Non-Employee Director who first
becomes a Non-Employee Director on or after the date of the 2003 Annual Meeting
and each other Non-Employee Director who notifies the Company in writing of his
or her election to waive all benefits under the Retirement Plan in exchange for
participation in the Stock Unit Award feature under Section 5.2(a) of this Plan.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time.

 

“Fair Market Value” on any date means (1) if the stock is listed or admitted to
trade on a national securities exchange, the closing price of the stock on the
Composite Tape, as published in the Western Edition of The Wall Street Journal,
of the principal national securities exchange on which the stock is so listed or
admitted to trade, on such date, or, if there is no trading of the stock on such
date, then the closing price of the stock as quoted on such Composite Tape on
the next preceding date on which there was trading in such shares; (2) if the
stock is not listed or admitted to trade on a national securities exchange, the
last price for the stock on such date, as furnished by the National Association
of Securities Dealers, Inc. (“NASD”) through the NASDAQ National Market
Reporting System or a similar organization if the NASD is no longer reporting
such information; (3) if the stock is not listed or admitted to trade on a
national securities exchange and is not reported on the National Market
Reporting System, the mean between the bid and asked price for the stock on such
date, as furnished by the NASD or a similar organization; or (4) if the stock is
not listed or admitted to trade on a national securities exchange, is not
reported on the National Market Reporting System and if bid and asked prices for
the stock are not furnished by the NASD or a similar organization, the value as
established by the Committee at such time for purposes of this Plan.

 

“Grant Date” means the date on which an Option is granted pursuant to Section 4.

 

“Non-Employee Director” means a member of the Board who is not an officer or
employee of the Company or a subsidiary.

 

“Option or Nonqualified Stock Option” means an option to purchase a number of
shares of Common Stock granted to Non-Employee Directors pursuant to
Section 4.1.

 

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“Option Dividend Equivalent Account” means the bookkeeping account maintained by
the Company on behalf of each Participant that is credited with Dividend
Equivalents in accordance with Section 4.7, and includes each Distribution
Subaccount.

 

“Participant” means any person who has been granted an Option or Award Units
under this Plan.

 

“Plan” means the American States Water Company 2003 Non-Employee Directors Stock
Plan.

 

“Retirement” means a retirement or resignation by a Non-Employee Director who
either (a) has attained age 65 and has provided at least five years service as a
member of the Board or (b) is required to retire from service on the Board and
not seek reelection or nomination pursuant to the Company’s director retirement
policy.

 

“Retirement Plan” means the Company’s Amended and Restated Retirement Plan for
Non-Employee Directors of American States Water Company.

 

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

 

“Stock” means a share of Common Stock.

 

“Stock Unit or Unit” means a non-voting unit of measurement which is deemed for
bookkeeping and payment purposes to represent one outstanding share of Common
Stock of the Company solely for purposes of determining benefits under this
Plan, established pursuant to the grant of Award Units under Sections 5.1 and
5.2, or in respect of Dividend Equivalents under Section 4.7 or Section 5.3, and
payable solely in a share of Stock, on a one-for-one basis.

 

“Stock Unit Account” means the bookkeeping account maintained by the Company on
behalf of each Participant that is credited with Award Units and Dividend
Equivalents in accordance with Section 5.

 

“2003 Annual Meeting”  means the Company’s 2003 annual meeting of stockholders.

 

Section 3.                               Effective Date; Duration

 

The effective date of the Plan is May 20, 2003, subject to approval of the
Company’s stockholders at their 2004 annual meeting.  No awards may be granted
under the Plan after May 19, 2013.  The Plan shall continue in effect until all
matters relating to Options, Stock Units and the administration of the Plan have
been completed and all payments of benefits have been made.

 

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Section 4.                               Stock Option Awards

 

4.1                            Annual Award.

 

(a)                               On the date of each annual meeting of
stockholders in the years 2003 through 2006, each Non-Employee Director in
office immediately following the annual meeting shall be granted, without
further action by the Committee, a Nonqualified Stock Option to purchase shares
of Common Stock.  Each Non-Qualified Stock Option granted pursuant to this
Section 4.1(a) in 2003 and 2004 shall be an option to purchase 1000 shares and
each Nonqualified Stock Option granted pursuant to this Section 4.1(a) in 2005
and 2006 shall be an option to purchase 3000 shares.

 

(b)                              If any person who was not a Non-Employee
Director at the immediately preceding annual meeting of stockholders at which a
grant is made pursuant to Section 4.1(a) becomes a Non-Employee Director within
six months following such annual meeting, then such Non-Employee Director shall
be granted, without any further action by the Committee, a Nonqualified Stock
Option to purchase that number of shares of Common Stock granted to Non-Employee
Directors at the immediately preceding annual meeting, the Grant Date of which
shall be the date the person takes office; provided, however, that no such grant
shall be made after May 1, 2007.

 

4.2                            Maximum Number of Shares.   Annual grants that
would otherwise exceed the maximum number of shares allotted for issuance under
the Plan contained in Section 7.1 shall be prorated within such limitation
pursuant to Section 7.2.

 

4.3                            Option Price.   The exercise price per share of
the Stock covered by each Option granted pursuant to this Section 4 shall be
100% of the Fair Market Value of the Stock on the Grant Date.  The exercise
price of any Option granted under this Section 4 shall be paid in full at the
time of each purchase in cash, by electronic funds transfer, or by check or in
shares of Stock valued at their Fair Market Value on the date the Participant
exercises the Option, or partly in such shares and partly in cash, provided that
any such shares used in payment that were previously acquired by the Participant
from the Company upon exercise of an Option or otherwise shall have been owned
by the Participant at least six months prior to the date of exercise.  The
Company shall not be obligated to deliver shares of Stock unless and until it
receives full payment of the exercise price therefor and any related conditions
of the Option have been satisfied.

 

4.4                            Option Period and Exercisability.   Each Option
granted under this Section 4 and all rights or obligations thereunder shall
expire 10 years after the Grant Date and shall be subject to earlier termination
as provided below.  Each Option shall be fully exercisable upon the Grant Date.

 

4.5                            Termination of Directorship.

 

(a)                               If a Non-Employee Director’s services as a
member of the Board terminate for any reason other than Cause, then any Option
granted pursuant to this

 

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Section 4 held by such Participant shall remain exercisable for the period of
time set forth in the option agreement evidencing his or her Option.

 

(b)                              If a Non-Employee Director’s services as a
member of the Board terminate for Cause, all unexercised Options shall terminate
on the date of termination of services.

 

4.6                            Option Agreements.   Each Option granted to a
Non-Employee Director shall be evidenced by an agreement in a form approved by
the Committee and shall contain the terms and conditions consistent with the
Plan as approved by the Committee relating to the Option.

 

4.7                            Dividend Equivalent Credits to Option Dividend
Equivalent Accounts.

 

(a)                               As of each dividend record date from the date
of grant of an Option to the earlier of (1) the third anniversary of the date of
grant of such Option or (2) the Participant’s termination of service for Cause,
regardless of whether the Option has been partially or fully exercised, a
Participant’s Option Dividend Equivalent Account shall be credited with Stock
Units in an amount equal to the Dividend Equivalents representing dividends
payable as of such dividend record date on a number of shares equal to the
aggregate number of shares originally subject to such Option divided by the then
Fair Market Value of a share of Common Stock on the dividend record date.  The
Dividend Equivalents attributable to each Option granted to a Participant shall
be credited to a separate Distribution Subaccount established for such
Participant.

 

(b)                              Stock Units credited to the Participant’s
Distribution Subaccount with respect to an Option shall become payable to the
Participant upon the earlier to occur of (1) the date of the Non-Employee
Director’s termination of service as a director of the Company or (2) three
years from the Grant Date.

 

(c)                               Stock Units credited to a Non-Employee
Director’s Option Dividend Equivalent Account shall at all times be fully vested
and non-forfeitable and shall be distributed in an equivalent whole number of
shares of Stock.  Any fractional share interests shall be accumulated and paid
in cash on the distribution date.

 

Section 5.                               Stock Units Awards

 

5.1                            2003 Awards

 

(a)                               Continuing Eligible Non-Employee Directors. 
As of the date of the 2003 Annual Meeting, the Stock Unit Account of each person
who is continuing in office as an Eligible Non-Employee Director immediately
following such meeting shall be credited with a number of Stock Units equal to
(1) $15,000, multiplied by (2) the lesser of (i) the Non-Employee Director’s
years of prior Board service or (ii) 10, divided by (3) the Fair Market Value of
a share of Common Stock on the last trading date prior to the 2003 Annual
Meeting.

 

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(b)                              New Eligible Non-Employee Directors.  As of the
date of the 2003 Annual Meeting, the Stock Unit Account of each person who first
becomes a Non-Employee Director at the 2003 Annual Meeting shall be credited
with a number of Stock Units equal to (1) the amount of the then-current annual
retainer divided by (2) the Fair Market Value of a share of Common Stock on the
last trading date prior to the 2003 Annual Meeting.

 

5.2                            Annual Award.

 

(a)       As of the date of each annual meeting of stockholders in the years
2004 through 2008, the Stock Unit Account of each Eligible Non-Employee Director
in office immediately following the annual meeting shall be credited with a
number of Stock Units (the “Retirement Stock Units”) equal to (1) the amount of
the then-current annual retainer payable by the Company for services rendered as
a director for such year, divided by (2) the Fair Market Value of Common Stock
on the last trading date prior to such annual meeting; provided, however, that
in no event shall the Stock Unit Account of an Eligible Non-Employee Director be
credited with Retirement Stock Units with respect to more than 10 years of
service (including, for this purpose, the number of years of service taken into
account under Section 5.1(a)).

 

(b)      As of the date of each annual meeting of the stockholders commencing in
2009, the Stock Unit Account of each Non-Employee Director in office immediately
following the annual meeting shall be credited with a number of Stock Units (the
“Compensation Stock Units”) equal to (1) two times the amount of the
then-current annual retainer payable by the Company for services rendered as a
director for such year, divided by (2) the Fair Market Value of Common Stock on
the last trading date prior to such annual meeting.  As of the date of each
annual meeting of the stockholders in 2007 and 2008, the Stock Unit Account of
each Non-Employee Director was credited with a number of Compensation Stock
Units equal to (1) the amount of the then-current annual retainer payable by the
Company for services rendered as a director for such year, divided by (2) the
Fair Market Value of Common Stock on the last trading date prior to such annual
meeting.

 

(c)       Annual grants that would otherwise exceed the maximum number of shares
allotted for issuance under the Plan contained in Section 7.1 shall be prorated
within such limitation pursuant to Section 7.2.

 

5.3                            Crediting of Dividend Equivalents to Stock Unit
Accounts.

 

(a)                               As of each dividend record date, a
Non-Employee Director’s Stock Unit Account shall be credited with additional
Stock Units in an amount equal to the Dividend Equivalents representing
dividends payable as of such dividend record date on a number of shares equal to
the aggregate number of Units credited to the Participant’s Stock Unit Account
divided by the Fair Market Value of a share of Common Stock on the dividend
record date.

 

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(b)                              Stock Units credited in respect of Dividend
Equivalents shall be paid in Stock at the same time and the same manner as the
Stock Units to which they relate.

 

5.4                            Units and Other Amounts Vest Immediately.  All
Units or other amounts credited to a Non-Employee Director’s Stock Unit Account
shall be at all times fully vested and not subject to a risk of forfeiture.

 

5.5                            Distribution of Benefits.

 

(a)       Notwithstanding anything herein to the contrary, the portion of a
Non-Employee Director’s Stock Unit Account attributable to Stock Units granted
pursuant to Section 5.1 or Retirement Stock Units granted pursuant to
Section 5.2(a) (and any Dividend Equivalents attributable to such Stock Units)
shall be distributed in accordance with this Section 5.5(a).

 

(1)                              Commencement of Benefits Distribution.  Subject
to the terms of this Section 5.5(a) and Section 6, each Non-Employee Director
shall be entitled to receive a distribution of his or her Stock Unit Account in
the form of shares of Stock upon his or her termination of service as a director
of the Company.

 

(2)                              Manner of Distribution.  Upon a Non-Employee
Director’s termination of service as a director of the Company, the Company
shall, subject to Section 7.2, deliver to the Participant (or his or her
Beneficiary, as applicable) a number of shares of Stock equal to the number of
Stock Units (as adjusted pursuant to Section 6, if applicable) to which the
Participant is then entitled under the terms of Section 5.5(a).  Such
distribution shall be made in a lump sum as soon as administratively
practicable, but no later than 30 days, following the Participant’s termination
of service.

 

(b)      Notwithstanding anything herein to the contrary, the portion of a
Non-Employee Director’s Stock Unit Account attributable to Compensation Stock
Units granted pursuant to Section 5.2(b) (and any Dividend Equivalents
attributable to such Stock Units) shall be distributed in accordance with this
Section 5.5(b).

 

(1)                              Commencement of Benefits Distribution.  With
respect to each grant of Stock Units to a Non-Employee Director, the
Non-Employee Director shall be entitled to receive one-third of such Stock Units
(including Dividend Equivalents applicable to such Stock Units) on each of the
first, second and third anniversaries of such grant in the form of shares of
Stock.  Notwithstanding the foregoing, if a Non-Employee Director terminates
service as a director of the Company prior to the complete distribution of his
or her Stock Unit Account, such Non-Employee Director shall be entitled to
receive a distribution of his or her Stock Unit Account in the form of shares of
Stock.

 

(2)                              Manner of Distribution.  Upon the first,
second, and third anniversaries of the date of grant of Stock Units to a
Non-Employee Director (or

 

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if earlier, the Non-Employee Director’s termination of service as a director of
the Company), the Company shall, subject to Section 7.2, deliver to the
Participant (or his or her Beneficiary, as applicable) a number of shares of
Stock equal to the number of Stock Units (as adjusted pursuant to Section 6, if
applicable) to which the Participant is then entitled under the terms of Section
5.5(b).  Such distribution shall be made in a lump sum as soon as
administratively practicable, but no later than 30 days, following the
applicable anniversary of the grant (or, if earlier, the Participant’s
termination of service).

 

Section 6.                               Changes in Capital Structure.

 

6.1    Adjustments. Upon (or, as may be necessary to effect the adjustment,
immediately prior to):  any reclassification, recapitalization, stock split
(including a stock split in the form of a stock dividend) or reverse stock
split; any merger, combination, consolidation, or other reorganization; any
spin-off, split-up, or similar extraordinary dividend distribution in respect of
the Common Stock; or any exchange of Common Stock or other securities of the
Corporation, or any similar, unusual or extraordinary corporate transaction in
respect of the Common Stock; then the Committee shall equitably and
proportionately adjust (1) the number and type of shares of Common Stock (or
other securities) that thereafter may be made the subject of awards (including
the specific share limits, maximums and numbers of shares set forth elsewhere in
this Plan), (2) the number, amount and type of shares of Common Stock (or other
securities or property) subject to any outstanding awards, (3) the grant,
purchase, or exercise price of any outstanding awards, and/or (4) the
securities, cash or other property deliverable upon exercise or payment of any
outstanding awards, in each case to the extent appropriate to preclude the
enlargement or dilution of rights and benefits under such awards.

 

It is intended that, if possible, any adjustments contemplated by the preceding
paragraph be made in a manner that satisfies applicable legal, tax (including,
without limitation and as applicable in the circumstances, Section 424 of the
Code, Section 409A of the Code and Section 162(m) of the Code) and accounting
(so as to not trigger any charge to earnings with respect to such adjustment)
requirements.

 

Without limiting the generality of Section 8.3, any good faith determination by
the Committee pursuant to this Section 6.1 shall be conclusive and binding on
all persons.

 

6.2    Corporate Transactions-Assumption or Termination of Awards.  Upon the
occurrence of any of the following:  any merger, combination, consolidation, or
other reorganization; any exchange of Common Stock or other securities of the
Corporation; a sale of all or substantially all the business, stock or assets of
the Corporation; a dissolution of the Corporation; or any other event in which
the Corporation does not survive (or does not survive as a public company in
respect of its Common Stock); then the Committee may make provision for a cash
payment in settlement of, or for the assumption, substitution or exchange of any
or all outstanding share-based awards or the cash, securities or property
deliverable to the holder of any or all outstanding share-based awards, based
upon, to the extent relevant under the

 

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circumstances, the distribution or consideration payable to holders of the
Common Stock upon or in respect of such event.

 

The Committee may adopt such valuation methodologies for outstanding awards as
it deems reasonable in the event of a cash or property settlement and, in the
case of options or similar rights, but without limitation on other
methodologies, may base such settlement solely upon the excess if any of the per
share amount payable upon or in respect of such event over the exercise or base
price of the award.

 

In any of the events referred to in this Section 6.2, the Committee may take
such action contemplated by this Section 6.2 prior to such event (as opposed to
on the occurrence of such event) to the extent that the Committee deems the
action necessary to permit the participant to realize the benefits intended to
be conveyed with respect to the underlying shares.

 

Without limiting the generality of Section 8.3, any good faith determination by
the Committee pursuant to its authority under this Section 6.2 shall be
conclusive and binding on all persons.

 

6.3    Option Termination.  To the extent that any vested Option is not
exercised prior to (i) a dissolution of the Company or (ii) a merger or other
corporate event, and no provision is made for the assumption, conversion,
substitution or exchange of the Option, the Option shall terminate upon the
occurrence of such event.

 

Section 7.                               Shares Subject To The Plan; Share
Limits

 

7.1                            Shares Available for Issuance.   Subject to
adjustment under Section 6, the aggregate number of shares of Stock that may be
issued or delivered under the Plan shall not exceed 250,000 shares.  Stock
delivered by the Company under the Plan shall be shares of authorized and
unissued shares of Stock and/or previously issued Stock held as treasury shares
and shall be fully paid and non-assessable when issued.  Shares issuable on
exercise of Options or payment of Stock Units shall be reserved for issue, and
to the extent that awards terminate or expire without payment in shares, the
shares will be available for subsequent grants or accretions. Subject to
adjustment under Section 6, the aggregate number of Stock Units that may be
issued or delivered under the Plan is 118,000.

 

7.2                            Share Limits; Cut Backs.   If any grant of an
Option or the award or crediting of Stock Units would cause the sum of the
shares of Stock previously issued and shares issuable under outstanding awards
under the Plan to exceed the maximum number of shares authorized under the Plan,
the Company shall prorate among the Non-Employee Directors the grant of new
Options or award of Stock Units and allocate the number of remaining shares
available for issuance first to the grant of Options and second toward the award
of Award Units.  If and for so long as no available share authorization remains,
no additional Options shall be granted or Stock Units credited and cash shall be
paid in lieu of dividend equivalents under Sections 4.7 and 5.3 for such
duration.

 

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7.3                            Fractional Shares.   Fractional share interests
may be accumulated but shall not be issued.  Cash will be paid or transferred in
lieu of any fractional share interests that remain upon a final distribution
under the Plan

 

Section 8.                               Administration

 

8.1                            The Administrator.

 

The Administrator of this Plan shall be the Board as a whole or a Committee as
appointed from time to time by the Board to serve as administrator of this
Plan.  The participating members of any Committee so acting shall include, as to
decisions in respect of participants who are subject to Section 16 of the
Exchange Act, only those members who are Non-Employee Directors (as defined in
Rule 16b-3 promulgated under the Exchange Act).  Members of the Committee shall
not receive any additional compensation for administration of this Plan.

 

8.2                            Committee Action.

 

A member of the Committee shall not vote or act upon any matter which relates
solely to himself or herself as a Participant in this Plan.  Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or (assuming compliance with Section 8.1) by
unanimous written consent of its members.

 

8.3                            Rights and Duties; Delegation and Reliance;
Decisions Binding.

 

Subject to the limitations of this Plan, the Committee shall be charged with the
general administration of this Plan and the responsibility for carrying out its
provisions, and shall have powers necessary to accomplish those purposes,
including, but not by way of limitation, the following:

 

(a)                               To construe and interpret this Plan;

 

(b)                              To resolve any questions concerning the amount
of benefits payable to a Participant (except that no member of the Committee
shall participate in a decision relating solely to his or her own benefits);

 

(c)                               To make adjustments under Section 6 and all
other determinations required by this Plan;

 

(d)                             To maintain all the necessary records for the
administration of this Plan; and

 

(e)                               To make and publish forms, rules and
procedures for the administration of this Plan.

 

The determination of the Committee made in good faith as to any disputed
question or controversy and the Committee’s determination of benefits payable to
Participants, including

 

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decisions as to adjustments under Section 6, shall be conclusive and binding for
all purposes of this Plan.  In performing its duties, the Committee shall be
entitled to rely on information, opinions, reports or statements prepared or
presented by:  (i) officers or employees of the Company whom the Committee
believes to be reliable and competent as to such matters; and (ii) counsel (who
may be employees of the Company), independent accountants and other persons as
to matters which the Committee believes to be within such persons’ professional
or expert competence.  The Committee shall be fully protected with respect to
any action taken or omitted by it in good faith pursuant to the advice of such
persons.  The Committee may delegate ministerial, bookkeeping and other
non-discretionary functions to individuals who are officers or employees of the
Company.

 

Section 9.                               Amendment and Termination; Stockholder
Approval

 

9.1                            Amendment and Termination.  Subject to
Section 9.2, the Board shall have the right to amend this Plan in whole or in
part from time to time or may at any time suspend or terminate this Plan;
provided, however, that, except as contemplated by Section 6, no amendment or
termination shall cancel or otherwise adversely affect in any way, without his
or her written consent, any Participant’s rights with respect to Stock Units
credited to his or her Accounts or Options granted; and provided further that
neither Section 4 nor any other provision of the Plan or an award shall be
amended to permit the reduction (by amendment, substitution, cancellation and
regrant or other means) of the exercise price of any Option without prior
stockholder approval.  Any amendments authorized hereby shall be stated in an
instrument in writing, and all Participants shall be bound by such amendment. 
Changes contemplated by Section 6 shall not be deemed to constitute changes or
amendments for purposes of this Section 9.1.

 

9.2                            Stockholder Approval.  The Plan, any grant,
election, action, crediting or vesting prior to stockholder approval, shall be
subject to approval of the Plan by the stockholders of the Company and, to the
extent required under applicable law or listing agency rule, required by the
provisions of Section 9.1, or deemed necessary or advisable by the Board, any
amendment to the Plan shall be subject to stockholder approval.

 

 

Section 10.                       Miscellaneous

 

10.1                    Limitation on Participants’ Rights.  Participation in
this Plan shall not give any person the right to continue to serve as a member
of the Board or any rights or interests other than as expressly provided
herein.  This Plan shall create only a contractual obligation on the part of the
Company as to such amounts and shall not be construed as creating a trust or
fiduciary relationship between the Company, the Board, the Committee, and any
Participant or other person.  This Plan, in and of itself, has no assets. 
Participants shall have only the rights of a general unsecured creditor of the
Company with respect to amounts credited and benefits payable, if any, on their
Accounts, and rights no greater than the right to receive the Common Stock (or
equivalent value as a general unsecured creditor) with respect to Accounts.

 

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Participants shall not be entitled to receive actual dividends or to vote Shares
until after delivery of a certificate representing the Shares.

 

10.2                    Beneficiaries.

 

(a)                               Beneficiary Designation.  Upon forms provided
by the Company each Non-Employee Director may designate in writing the
Beneficiary or Beneficiaries (as defined in Section 10.2(b)) whom such
Non-Employee Director desires to receive any amounts payable under the Plan
after his or her death.  Beneficiary designation forms shall be effective on the
date that the form is received by the Corporate Secretary.  A Non-Employee
Director may from time to time change his or her designated Beneficiary or
Beneficiaries without the consent of such Beneficiary or Beneficiaries by filing
a new designation in writing with the Corporate Secretary.  However, if a
married Non-Employee Director wishes to designate a person other than his or her
spouse as Beneficiary, such designation shall be consented to in writing by the
spouse.  The Non-Employee Director may change any election designating a
Beneficiary or Beneficiaries without any requirement of further spousal consent
if the spouse’s consent so provides.  Notwithstanding the foregoing, spousal
consent shall not be necessary if it is established that the required consent
cannot be obtained because the spouse cannot be located or because of other
circumstances prescribed by the Committee.  The Company and the Committee may
rely on the Non-Employee Director’s designation of a Beneficiary or
Beneficiaries last filed in accordance with the terms of the Plan.

 

(b)                              Definition of Beneficiary.  A Participant’s
“Beneficiary” or “Beneficiaries” shall be the person, persons, trust or trusts
(or similar entity) designated by the Participant or, in the absence of a
designation, entitled by will or the laws of descent and distribution to receive
the Participant’s benefits under this Plan in the event of the Participant’s
death, and shall mean the Participant’s executor or administrator if no other
Beneficiary is identified and able to act under the circumstances.

 

10.3                    Non-Transferability.  A Participant’s rights and
interests under the Plan in respect of Options and Stock Units, including
amounts payable or Stock deliverable under or in respect thereof, may not be
assigned, pledged, or transferred except:

 

(a)                               in the event of a Participant’s death, to a
designated beneficiary as provided in Section 10.2(b) above, or in the absence
of such designation, by will or the laws of descent and distribution; or

 

(b)                              in the case of Options, with the consent of the
Committee evidenced in writing or by duly adopted resolution, to certain persons
or entities related to the Participant, including but not limited to members of
the Participant’s immediate family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the
Participant’s immediate family and/or charitable institutions, pursuant to such
conditions and procedures as the Committee may establish.  Any permitted
transfer shall be subject to the condition that the Committee receive evidence
satisfactory to it that the transfer is being made for essentially estate and/or
tax planning purposes or a

 

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gratuitous or donative basis and without consideration (other than nominal
consideration or in exchange for an interest in a qualified transferee) and only
if such transfer would not adversely affect the Company’s eligibility to use
Form S-8 to register under the Securities Act of 1933, as amended, the offering
of shares issuable under the Plan by the Company.

 

The above exercise and transfer restrictions shall not apply to transfers to the
Company or transfers pursuant to a court order.

 

10.4                    Obligations Binding Upon Successors.

 

Obligations of the Company under this Plan shall be binding upon successors of
the Company.

 

10.5                    Governing Law; Severability.

 

The validity of this Plan and any agreements entered into under the Plan or any
of its provisions shall be construed, administered and governed in all respects
under the laws of the State of California.  If any provisions of this Plan shall
be held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.

 

10.6                    Compliance with Laws.

 

This Plan and the offer, issuance and delivery of shares of Common Stock and/or
the payment of benefits under this Plan are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal securities law) and to such approvals by any
listing, agency or any regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith.  Any securities delivered under this Plan shall be subject to prior
registration or such restrictions as the Company may deem necessary or desirable
to assure compliance with all applicable legal requirements, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as it may reasonably request to
assure such compliance.

 

10.7                    Limitations on Rights Associated with Units.  A
Non-Employee Director’s Accounts shall be a memorandum account on the books of
the Company.  The Units credited to a Non-Employee Director’s Accounts shall be
used solely as a device for the determination of the number of shares of Stock
to be distributed to the Participant in accordance with this Plan following his
or her termination of service as a director of the Company.  The Units shall not
be treated as property or as a trust fund of any kind.  No Participant shall be
entitled to any voting or other stockholder rights with respect to Units
credited under this Plan.  The number of Units credited to a Participant’s
Accounts shall be subject to adjustment in accordance with Section 6 and the
terms of this Plan.

 

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10.8                    Plan Construction.

 

It is the intent of the Company that transactions pursuant to this Plan satisfy
and be interpreted in a manner that satisfies the applicable conditions for
exemption under Rule 16b-3 promulgated under the Exchange Act (“Rule 16b-3”) so
that, to the extent consistent therewith, the crediting of Units and the payment
of Stock as well as grants of Options will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder.

 

10.9                    Headings Not Part of Plan.

 

Headings and subheadings in this Plan are inserted for reference only and are
not to be considered in the construction of the provisions hereof.

 

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