Exhibit 10.38

2004 16(b) Executive Officer Incentive Plan

INTRODUCTION

The Company’s 2004 16(b) Executive Officer Incentive Plan (“EOIP”) is intended
to provide short-term incentives to the 16(b) executive officers for their
contributions towards achieving overall company success.

OBJECTIVES

The EOIP has three primary objectives:

  •   Reward executive performance in meeting or exceeding stated business
objectives,     •   Deliver competitive compensation, and     •   Build
shareholder value.

The EOIP is designed to focus each participant on the key business objectives of
his/her position, encourage teamwork to achieve success, and recognize and
reward sustained personal contributions.

EFFECTIVE PLAN DATE AND DURATION

The effective plan date and duration is January 1, 2004 through December 31,
2004.

FUNDING

Funding for the 2004 EOIP is calculated as a percentage of operating income and
a percentage of incremental revenue. The Compensation Committee of the Board of
Directors approves funding of the plan. The percentages below reflect 2004
operating income target and may increase or decrease depending on the actual
operating income achieved.

              Performance
Category   Operating
Income % of
Plan   Incremental
Revenue % of
Plan   2004 EOIP
Incentive Pool
Available   <50%   <50%   $0 Threshold   50%   50%   $1,110,775 Target   100%  
100%   $2,221,550 Maximum   150%   150%   $3,332,325

If the actual operating income falls between the target and the threshold, the
incentive pool will be interpolated between the relevant two points by the plan
administrators.

 

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If planned awards exceed the incentive pool fund, the CEO and/or the
Compensation Committee will make the appropriate adjustments to ensure that
actual award expenditures do not exceed approved plan funding.

PARTICIPATION

Executive officers are nominated by the CEO and approved for participation on an
annual basis by the Compensation Committee. Participation in the EOIP in any one
year does not guarantee or imply continued participation in the EOIP in any
subsequent year.

TARGET AWARD LEVEL

Targeted award levels, before the application of individual performance
modifiers, are as follows:

          Performance Category   Operating Income % of
Plan   Target Award Level Threshold
Target
Maximum   50%
100%
150%   50%
100%
150%

Notwithstanding the above stated targeted awards, the CEO has discretion to
modify targeted awards in any way that, in his sole judgment, meets the
objectives of the EOIP.

INDIVIDUAL TARGET INCENTIVES

At the beginning of the EOIP year, targets for each participant are established
that reflect organizational structure and competitive pay opportunities. The
target is the incentive amount that may be granted for achievement of the
operating income and incremental revenue at plan with no performance
modification. The targets may subsequently be modified in the order of
corporate, division or organizational/functional performance first and
individual performance factors second.

The targets are expressed as a percentage of the participant’s base salary. Base
salaries at the beginning of the EOIP year (January 1, 2004) will be used for
the calculation, except for hires or promotions during the first half of the
year, when base salary at hire or promotion will be used. The CEO will present
the executive officer targets to the Compensation Committee for approval.

PERFORMANCE MODIFIERS AND FACTORS

Targets for all participants may be modified dependent upon individual
performance and organizational contribution, subject to the discretion of the
CEO.

The Compensation Committee will have final approval of all executive officer
performance awards.

 

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AWARD CALCULATION

Operating income and incremental revenue will first be determined to calculate
the size of the funding pool, and then the targets will be adjusted accordingly,
as shown by the following examples:

                  Employee   Individual
Target   Actual
Operating
Income
%/Incremental
Revenue % of
Target   Calculation
for
Adjustment   Adjusted
Target 1   55%   125%   x 1.00   100% 2   45%   100%   x 1.00   45% 3   45%  
75%   x 0.75   34%

After the adjusted targets are determined, each participant’s target may be
assigned an individual performance modifier based on individual performance. The
adjusted target is then multiplied or divided by the performance modifier to
calculate the final award, as shown below:

                  Employee   Adjusted
Target   Individual
Performance
Modifier   Calculation   Final Award 1   100%   +32%   x 1.32   132% 2   45%  
-27%   ¸1.27   36% 3   34%   +10%   x 1.10   38%

AWARD PAYMENT

Actual award payments will be distributed as soon as possible following the
close of the fiscal year and after securing all necessary approvals.

PLAN PROVISIONS

To receive an award payment, the employee must be on active status at the time
of award distribution. The CEO and/or the Compensation Committee, as
appropriate, must approve any exceptions to individual participants.

PLAN ADMINISTRATION

The Compensation Committee and the CEO will administer the 2004 EOIP.
Administration shall include but is not limited to: modification, funding,
participation, target award percentages, payout type, range and criteria, annual
financial and strategic objectives as they relate to the EOIP.

 

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In the event that there is a change in the equity or capitalization structure of
the Company through merger, consolidation, reorganization, recapitalization,
significant change in strategic direction or otherwise, the incentive payment
may be adjusted by the EOIP administrators as they deem equitable and
appropriate.

The EOIP administrators may modify or discontinue the EOIP at any time.

Participation in the EOIP does not constitute a contract of employment with the
Company for any specified period of time nor is it an entitlement to participate
in any other plan or any future performance period under this EOIP. Furthermore,
participation in the EOIP does not constitute any promise of award payments even
if all performance factors and funding mechanisms are achieved or surpassed.
EOIP administrators may also include or exclude participation in the EOIP at any
time and for any reason they deem appropriate. The Company may terminate a
participant’s employment with the Company at any time for any reason, with or
without cause.

In the event this EOIP requires legal interpretation or becomes the subject of
litigation, it shall be governed by the laws of the State of California.