Exhibit 10.01

CALIFORNIA COASTAL COMMUNITIES, INC.

 

AMENDED AND RESTATED

 

1993 STOCK OPTION/STOCK ISSUANCE PLAN

(AS APPROVED BY THE BOARD OF DIRECTORS ON MARCH 4, 2004)

 

 

ARTICLE ONE

GENERAL

 

I.     PURPOSE OF THE AMENDED AND RESTATED PLAN

        A.    This Amended and Restated 1993 Stock Option/Stock Issuance Plan
(“Plan”) is intended to promote the interests of California Coastal
Communities, Inc., a Delaware corporation (the “Corporation”), by providing
(i) key employees (including officers) of the Corporation (or its parent or
subsidiary corporations) who are responsible for the management, growth and
financial success of the Corporation (or its parent or subsidiary corporations),
and (ii) consultants and other independent contractors who provide valuable
services to the Corporation (or its parent or subsidiary corporations) with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation (or its parent or subsidiary corporations).

        B.    The Plan amends and restates the Corporation’s Amended and
Restated 1993 Stock Option/Stock Issuance Plan (the “1993 Plan”) which became
effective immediately upon adoption by the Board on November 29, 1993 and was
approved by the Corporation’s stockholders on May 20, 1994.

II.    DEFINITIONS

        A.    For purposes of the Plan, the following definitions shall be in
effect:

        Board:    the Corporation’s Board of Directors.

        Change in Control:    a change in ownership or control of the
Corporation effected through either of the following transactions:

        a.     any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation’s outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation’s stockholders which the Board
does not recommend such stockholders to accept; or

        b.     a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or nomination was
approved by the Board.

--------------------------------------------------------------------------------

 

        Common Stock:    shares of the Corporation’s Common Stock, par value
$.05 per share, on a post 1997 capital stock combination and one for one hundred
(1:100) reverse stock split basis.

        Code:    the Internal Revenue Code of 1986, as amended.

        Committee:    the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Plan.

        Corporate Transaction:    any of the following stockholder-approved
transactions to which the Corporation is a party:

        a.     a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Corporation is incorporated,

        b.     the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or dissolution of
the Corporation, or

        c.     any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such merger.

        Employee:    an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.

        Exercise Date:    the date on which the Corporation shall have received
written notice of the option exercise.

        Fair Market Value:    the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:

        a.     If the Common Stock is not at the time listed or admitted to
trading on any national securities exchange but is traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price per share of
that security on the date in question, as such price is reported by the National
Association of Securities Dealers through the Nasdaq National Market or any
successor system. If there is no reported closing selling price for the Common
Stock on the date in question, then the closing selling price per share of that
security on the last preceding date for which such quotation exists shall be
determinative of Fair Market Value.

        b.     If the Common Stock is at the time listed or admitted to trading
on any national stock exchange, then the Fair Market Value shall be the closing
selling price per share of that security on the date in question on the exchange
serving as the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price per share of that security
on the exchange on the last preceding date for which such quotation exists.

        Hostile Take-Over:    a change in ownership of the Corporation effected
through the following transaction:

        a.     any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of

2

--------------------------------------------------------------------------------

the Corporation’s outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders which the Board does not
recommend such stockholders to accept, and

        b.     more than fifty percent (50%) of the securities so acquired in
such tender or exchange offer are accepted from holders other than the officers
and directors of the Corporation subject to the short-swing profit restrictions
of Section 16 of the 1934 Act.

        Incentive Option:    a stock option which satisfies the requirements of
Code Section 422.

        1934 Act:    the Securities and Exchange Act of 1934, as amended.

        Non-Statutory Option:    a stock option not intended to meet the
requirements of Code Section 422.

        Optionee:    any person to whom an option is granted under the
Discretionary Option Grant Program in effect under the Plan.

        Permanent Disability or Permanently Disabled:    the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.

        Plan Administrator:    the Committee in its capacity as the
administrator of the Plan.

        Service:    the performance of services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an independent
consultant or advisor, except to the extent otherwise specifically provided in
the applicable stock option or stock issuance agreement.

        Take-Over Price:    the greater of (a) the Fair Market Value per share
of the Common Stock subject to the particular option surrendered to the
Corporation in connection with a Hostile Take-Over on the date such option
surrender is effected or (b) the highest reported price per share of that
security paid by the tender offeror in effecting such Hostile Take-Over.
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the clause (a) price per share.

        B.    The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:

        —    Any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation shall be considered to be a parent
of the Corporation, provided each such corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

        —    Each corporation (other than the Corporation) in an unbroken chain
of corporations which begins with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation in the unbroken
chain (other than the last corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

III.  STRUCTURE OF THE PLAN

        A.    Stock Programs.    The Plan shall be divided into two (2) separate
components: the Discretionary Option Grant Program specified in Article Two and
the Director Fee Program specified in Article Three. Under the Discretionary
Option Grant Program, eligible individuals may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock in

3

--------------------------------------------------------------------------------

 

accordance with the provisions of Article Two. Under the Director Fee Program,
each non-employee Board member may, in accordance with the provisions of Article
Three, elect to apply all or any portion of his or her annual retainer fee to
the acquisition of unvested shares of Common Stock.

        B.    General Provisions.    Unless the context clearly indicates
otherwise, the provisions of Articles One and Four shall apply to the
Discretionary Option Grant Program and the Director Fee Program and shall
accordingly govern the interests of all individuals under the Plan.

IV.    ADMINISTRATION OF THE PLAN

        A.    The Discretionary Option Grant Program shall be administered by
the Committee in its capacity as Plan Administrator. No non-employee Board
member shall be eligible to serve on the Committee if such individual has,
within the twelve (12)-month period immediately preceding the date of his or her
appointment to the Committee, received an option grant or direct stock issuance
under this Plan or any other stock plan of the Corporation (or any parent or
subsidiary corporation), other than pursuant to the Director Fee Program.

        B.    Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time.

        C.    The Committee as Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish rules and
regulations for the proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, the provisions of such program and any outstanding option grants thereunder
as it may deem necessary or advisable. Decisions of the Plan Administrator shall
be final and binding on all parties who have an interest in the Discretionary
Option Grant Program or any outstanding option or unvested share issuance
thereunder.

        D.    Administration of the Director Fee Program shall be self-executing
in accordance with the express terms and conditions of Article Three and the
Committee as Plan Administrator shall exercise no discretionary functions with
respect to option grants or share issuances made pursuant to those programs.

V.     OPTION GRANTS AND STOCK ISSUANCES

        A.    The persons eligible to participate in the Discretionary Option
Grant Program under Article Two shall be limited to the following:

        —    officers and other key employees of the Corporation (or its parent
or subsidiary corporations) who render services which contribute to the
management, growth and financial success of the Corporation (or its parent or
subsidiary corporations);

        —    members of the Board or the members of the board of directors of
any parent or subsidiary corporation; and

        —    those consultants or other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary corporations).

        B.    Non-employee Board members who serve as Plan Administrator shall
not, during their period of service as such, be eligible to participate in the
Discretionary Option Grant Program or in any other stock option, stock purchase,
stock bonus or other stock plan of the Corporation (or its parent or subsidiary
corporations), other than the Director Fee Program, to the extent they are
eligible for participation in those latter programs in accordance with the
provisions of Articles Three.

        C.    The Plan Administrator shall have full authority to determine
which eligible individuals are to receive option grants under the Discretionary
Option Grant Program, the number of shares to be

4

--------------------------------------------------------------------------------

 

covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option is to remain outstanding.

VI.   STOCK SUBJECT TO THE PLAN

        A.    Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation’s authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. Nine Hundred Nine
Thousand Nine Hundred and Eighty-Four (909,984) shares of Common Stock may be
issued over the term of the Plan, subject to adjustment from time to time in
accordance with the provisions of this Section VI. Such authorized share reserve
is comprised of the number of shares of Common Stock which remained available
for issuance under the 1993 Plan prior to this amendment, as reduced by this
amendment.

        B.    In no event shall there be issued over the remaining term of the
Plan, from the effective date of this amendment to the 1993 Plan until the
termination of the Plan pursuant to Article Four, Section IV, more than Nine
Hundred Nine Thousand Nine Hundred and Eighty-Four (909,984) shares in the
aggregate of Common Stock. The foregoing share limitations shall be subject to
periodic adjustment in accordance with the provisions of Section F of this
Article VI.

        C.    Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full then the shares subject to
the portion of each option not so exercised shall be available for subsequent
issuance under the Plan. Shares subject to any option or portion thereof
surrendered in accordance with Section IV of Article Two and all share issuances
under the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
(as the case may be) available for issuance under the Plan shall be reduced by
the gross number of shares for which the option is exercised or which vest under
the share issuance, and not by the net number of shares of Common Stock actually
issued to the holder of such option or share issuance.

        D.    Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation’s receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities in the aggregate for which any one individual participating in the
Plan may be granted stock options, separately exercisable stock appreciation
rights and direct share issuances over the term of the Plan, (iii) the number
and/or class of securities for which share issuances are subsequently to be made
to non-employee Board members under the Director Fee Program, and (iv) the
number and/or class of securities and price per share in effect under each
option outstanding under the Discretionary Option Grant. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

5

--------------------------------------------------------------------------------

 

ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM

I.     TERMS AND CONDITIONS OF OPTIONS

        Options granted pursuant to the Discretionary Option Grant Program shall
be authorized by action of the Plan Administrator and may, at the Plan
Administrator’s discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.

        A.    Exercise Price.

      1.  The exercise price per share of Common Stock subject to any option
granted under this Article Two shall be fixed by the Plan Administrator at the
time of the grant, but in no event shall such exercise price be less than one
hundred percent (100%) of the Fair Market Value per share of that security on
the grant date.

      2.   The exercise price shall become immediately due upon exercise of the
option and, subject to the provisions of Section I of Article Four and the
instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:

             a.     full payment in cash or check made payable to the
Corporation’s order;

             b.     full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation’s earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date;

             c.     full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation’s
earnings for financial reporting purposes and valued at Fair Market Value on the
Exercise Date and cash or check drawn to the Corporation’s order; or

             d.     to the extent the option is exercised for vested shares,
full payment through a broker-dealer sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written instructions
to (i) a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation in directly to such brokerage firm in order to complete the sale
transaction.

        Except to the extent the sale and remittance procedure is utilized in
connection with the exercise of the option for vested shares, payment of the
exercise price for the purchased shares must accompany the exercise notice.

        B.    Term and Exercise of Options.    Each option granted under this
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date. During the
lifetime of the Optionee, the option, together with any stock appreciation
rights pertaining to such option, shall be exercisable

6

--------------------------------------------------------------------------------

 

only by the Optionee and shall not be assignable or transferable by the Optionee
except for a transfer of the option effected by will or by the laws of descent
and distribution following the Optionee’s death.

        C.    Termination of Service.

1.     The following provisions shall govern the exercise period applicable to
any outstanding options under this Article Two held by the Optionee at the time
of cessation of Service or death.

—    Should an Optionee cease Service for any reason (including death or
Permanent Disability) while holding one or more outstanding options under this
Article Two, then none of those options shall (except to the extent otherwise
provided pursuant to subparagraph 3 below) remain exercisable for more than a
thirty-six (36)-month period (or such shorter period determined by the Plan
Administrator and set forth in the instrument evidencing the grant) measured
from the date of such cessation of Service.

—    Any option held by the Optionee under this Article Two and exercisable in
whole or in part on the date of his or her death may be subsequently exercised
by the personal representative of the Optionee’s estate or by the person or
persons to whom the option is transferred pursuant to the Optionee’s will or in
accordance with the laws of descent and distribution. The right to exercise such
option, however, shall lapse upon the earlier of (i) the third anniversary of
the date of the Optionee’s death (or such shorter period determined by the Plan
Administrator and set forth in the instrument evidencing the grant) or (ii) the
specified expiration date of the option term. Accordingly, upon the occurrence
of the earlier event, the option shall terminate and cease to be outstanding.

—    During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of shares (if any) in which
the Optionee is vested at the time of his or her cessation of Service. Upon the
expiration of the limited post-Service exercise period or (if earlier) upon the
specified expiration date of the option term, each such option shall terminate
and cease to he outstanding with respect to any vested shares for which the
option has not otherwise been exercised. However, each outstanding option shall
immediately terminate and cease to be outstanding, at the time of the Optionee’s
cessation of Service, with respect to any shares for which the option is not
otherwise at that time exercisable or in which the Optionee is not otherwise
vested.

—    Under no circumstances shall any such option be exercisable after the
specified expiration date of the option term.

—    Should (i) the Optionee’s Service be terminated for misconduct (including,
but not limited to, any act of dishonesty, willful misconduct, fraud or
embezzlement) or (ii) the Optionee make any unauthorized use or disclosure of
confidential information or trade secrets of the Corporation or its parent or
subsidiary corporations, then in any such event all outstanding options held by
the Optionee under this Article Two shall terminate immediately and cease to be
outstanding.

2.     The Plan Administrator shall have complete discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited post-Service exercise period
applicable under subparagraph 1 above, not only with respect to the number of
vested shares of Common Stock for which each such option is exercisable at the
time of the Optionee’s cessation of Service but also with respect to one or more
subsequent installments of vested shares for which the option would otherwise
have become exercisable had such cessation of Service not occurred.

7

--------------------------------------------------------------------------------

3.     The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain exercisable following the Optionee’s cessation of Service or death
from the limited period in effect under subparagraph 1 above to such greater
period of time as the Plan Administrator shall deem appropriate. In no event,
however, shall such option be exercisable after the specified expiration date of
the option term.

        D.    Stockholder Rights.    An Optionee shall have no stockholder
rights with respect to any shares covered by the option until such individual
shall have exercised the option and paid the exercise price for the purchased
shares.

        E.    Repurchase Rights.    The shares of Common Stock acquired upon the
exercise of any Article Two option grant may be subject to repurchase by the
Corporation in accordance with the following provisions:

        —    The Plan Administrator shall have the discretion to authorize the
issuance of unvested shares of Common Stock under this Article Two. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall
have the right to repurchase any or all of those unvested shares at the exercise
price paid per share. The terms and conditions upon which such repurchase right
shall be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the instrument evidencing such
repurchase right.

        —    All of the Corporation’s outstanding repurchase rights under this
Article Two shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction or (ii) such termination is precluded
by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.

        —    The Plan Administrator shall have the discretionary authority,
exercisable either before or after the Optionee’s cessation of Service, to
cancel the Corporation’s outstanding repurchase rights with respect to one or
more shares purchased or purchasable by the Optionee under this Discretionary
Option Grant Program and thereby accelerate the vesting of such shares in whole
or in part at any time.

II.    INCENTIVE OPTIONS

        The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees of the Corporation. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to such terms and conditions.

        A.    Dollar Limitation.    The aggregate Fair Market Value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or its parent or subsidiary corporations) may for the
first time become exercisable as incentive stock options under the Federal tax
laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more
such options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
incentive stock options under the Federal tax laws shall be applied on the basis
of the order in which such options are granted. Should the number of shares of
Common Stock for which any Incentive Option first becomes exercisable in any
calendar year exceed the applicable One Hundred Thousand Dollar ($100,000)

8

--------------------------------------------------------------------------------

 

limitation, then that option may nevertheless be exercised in that calendar year
for the excess number of shares as a non-statutory option under the Federal tax
laws.

        B.    10% Stockholder.    If any individual to whom an incentive Option
is granted is the owner of stock (as determined under Section. 424(d) of the
Code) possessing ten percent (10%) or more of the total combined voting power of
all classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the exercise price per share of the Common Stock subject to
that option shall not be less than one hundred and ten percent (110%) of the
Fair Market Value per share of that security on the grant date, and the option
term shall not exceed five (5) years, measured from the grant date.

        Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.

III.  CORPORATE TRANSACTIONS/CHANGES IN CONTROL

        A.    In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become fully exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for all or
any portion of such shares. However, an outstanding option under this Article
Two shall not so accelerate if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof, (ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the option spread existing at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.

        B.    Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.

        C.    Each outstanding option under this Article Two which is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share, provided the aggregate exercise price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and per
participant basis following the consummation of the Corporate Transaction shall
be appropriately adjusted.

        D.    The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide (upon such terms as it may deem appropriate) for both
(i) the automatic acceleration of one or more outstanding options granted under
this Article Two Plan which are assumed or replaced in a Corporate Transaction
and do not otherwise accelerate at that time and (ii) the immediate termination
of one or more of the Corporation’s outstanding repurchase rights which are
assigned in connection with such Corporate Transaction and do not otherwise
terminate at that time, in the event the Optionee’s Service should

9

--------------------------------------------------------------------------------

 

subsequently terminate within a designated period following the effective date
of such Corporate Transaction.

        E.    The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually-anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and the
immediate termination of one or more of the Corporation’s outstanding repurchase
rights under this Article Two) upon the occurrence of the Change in Control. The
Plan Administrator shall also have full power and authority to condition any
such option acceleration (and the termination of any outstanding repurchase
rights) upon the subsequent termination of the Optionee’s Service within a
specified period following the Change in Control.

        F.     Any options accelerated in connection with the Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term.

        G.    The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.

        H.    The exercisability as incentive stock options under the Federal
tax laws of any options accelerated under this Section III in connection with a
Corporate Transaction or Change in Control shall remain subject to the dollar
limitation of Section II of this Article Two. To the extent such dollar
limitation is exceeded, the accelerated option shall be exercisable as a
non-statutory option under the Federal tax laws.

IV.    STOCK APPRECIATION RIGHTS.

        A.    Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this
Section IV, one or more Optionees may be granted the right, exercisable upon
such terms and conditions as the Plan Administrator may establish, to surrender
all or part of an unexercised option under this Article Two in exchange for a
distribution from the Corporation in an amount equal to the excess of (i) the
Fair Market Value (on the option surrender date) of the number of shares of
Common Stock in which the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (ii) the aggregate exercise price
payable for such vested shares.

        B.    No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section IV may be made in shares of Common Stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate.

        C.    If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.

        D.    One or more officers of the Corporation subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator’s sole discretion, be granted limited stock appreciation rights
with respect to their outstanding options under the Plan. Upon the occurrence of
a Hostile Take-Over, the officer shall have a thirty (30)-day period in which he
or she may surrender any outstanding options with such a limited stock
appreciation right in effect for at least six (6) months to the Corporation, to
the extent such option is at the time exercisable for fully-vested shares of
Common

10

--------------------------------------------------------------------------------

 

Stock. The officer shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
vested shares of Common Stock at the time subject to each surrendered option (or
surrendered portion of such option) over (ii) the aggregate exercise price
payable for such shares. The cash distribution payable upon such option
surrender shall be made within five (5) days following the date the option is
surrendered to the Corporation. Neither the approval of the Plan Administrator
nor the consent of the Board shall be required in connection with such option
surrender and cash distribution. Any unsurrendered portion of the option shall
continue to remain outstanding and become exercisable in accordance with the
terms of the instrument evidencing such grant.

        E.    The shares of Common Stock subject to any option surrendered for
an appreciation distribution pursuant to this Section IV shall not be available
for subsequent issuance under the Plan.

ARTICLE THREE
DIRECTOR FEE PROGRAM

I.     ELIGIBILITY

        Subject to the availability of shares of Common Stock under the Plan
pursuant to Article One, Section VI of the Plan, each individual serving as a
non-employee Board member shall be eligible to apply all or any portion of the
annual retainer fee otherwise payable to him or her in cash to the acquisition
of unvested shares of Common Stock under this Article Three Program.

II.    ELECTION PROCEDURE

        A.    Filing.    The non-employee Board member must make the
stock-in-lieu-of-fee election prior to the start of the calendar year for which
the election is to be effective. The first calendar year for which any such
election may be filed shall be the 1994 calendar year. The election must be
filed with the Plan Administrator on the appropriate form provided for this
purpose, and the election, once filed, shall be irrevocable. The election for
any upcoming calendar year may be filed at any time prior to the start of that
year, but in no event later than December 31 of the immediately preceding
calendar year. The non-employee Board member may file a standing election to be
in effect for two or more consecutive calendar years or to remain in effect
indefinitely until revoked by written instrument filed with the Plan
Administrator at least six (6) months prior to the start of the first calendar
year for which such standing election is no longer to remain in effect.

        B.    Election Form.    On the election form, the non-employee Board
member must indicate the percentage or dollar amount of his or her annual
retainer fee to be applied to the acquisition of unvested shares under this
Article Three Program to be issued in lieu of such fee. The non-employee Board
member may elect to apply a portion of the fee to the acquisition of Common
Stock.

III.  SHARE ISSUANCE

        A.    Issue Date.    On the first trading day in January of the calendar
year for which the election is effective, the portion of the retainer fee
subject to such election shall automatically be applied to the acquisition of
the selected shares of Common Stock by dividing the elected dollar amount by the
Fair Market Value per share of the Common Stock on that trading day. The number
of issuable shares shall be rounded down to the next whole share, and the issued
shares shall be held in escrow by the Secretary of the Corporation until the
non-employee Board member vests in those shares. The non-employee Board member
shall have full stockholder rights, including voting, dividend and liquidation
rights, with respect to all issued shares held in escrow on his or her behalf,
but such shares shall not be assignable or transferable while they remain
unvested.

11

--------------------------------------------------------------------------------

        B.    Vesting.    Upon completion of each calendar quarter of Board
service during the year for which the election is in effect, the non-employee
Board member shall vest in one-fourth of the issued shares, and the stock
certificate for those shares shall be released from escrow. Immediate vesting in
all the issued shares shall occur in the event (i) the non-employee Board member
should die or become Permanently Disabled during his or her period of Board
service or (ii) there should occur a Corporate Transaction or Change in Control
while such individual remains in Board service. Should such individual cease
Board service prior to vesting in one or more quarterly installments of the
issued shares, then those unvested shares shall immediately be surrendered to
the Corporation for cancellation, and the non-employee Board member shall not be
entitled to any cash payment or other consideration from the Corporation with
respect to the cancelled shares and shall have no further stockholder rights
with respect to such shares.

IV.    AMENDMENT OF THE DIRECTOR FEE PROGRAM

        A.    Limited Amendments.    The provisions of this Director Fee
Program, together with the unvested share issuances outstanding under this
Article Three, may not be amended at intervals more frequently than once every
six (6) months, other than to the extent necessary to comply with applicable
Federal income tax laws and regulations.

ARTICLE FOUR
MISCELLANEOUS

I.     LOANS OR INSTALLMENT PAYMENTS

        A.    The Plan Administrator may, in its discretion, assist any Optionee
(including an officer of the Corporation) in the exercise of one or more options
granted to such Optionee under the Discretionary Option Grant Program, including
the satisfaction of any Federal, state and local income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Optionee or (ii) permitting the Optionee to pay the
exercise price for the purchased shares in installments over a period of years.
The terms of any loan or installment method of payment (including the interest
rate and terms of repayment) shall be upon such terms as the Plan Administrator
specifies in the applicable option agreement or otherwise deems appropriate
under the circumstances. Loans or installment payments may be authorized with or
without security or collateral. However, the maximum credit available to the
Optionee may not exceed the exercise price of the acquired shares (less the par
value of such shares) plus any Federal, state and local income and employment
tax liability incurred by the Optionee in connection with the acquisition of
such shares.

        B.    The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.

II.    AMENDMENT OF THE PLAN AND AWARDS

        A.    The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan,
unless the Optionee consents to such amendment, and (ii) any amendment made to
the Director Fee Program (or any stock options or share issuances outstanding
thereunder) shall be in compliance with the limitation of Section IV of Article
Four. In addition, the Board may not, without the approval of the Corporation’s
stockholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan, or increase the maximum number of shares of
Common Stock for which any one participant may receive stock options, separately
exercisable stock appreciation rights and direct share issuances over the term
of the Plan, except for permissible adjustments under

12

--------------------------------------------------------------------------------

Section VI.F of Article One, (ii) materially modify the eligibility requirements
for plan participation or (iii) materially increase the benefits accruing to
plan participants.

        B.    Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program, which are in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under the Discretionary Option Grant Program are held in escrow
until stockholder approval is obtained for a sufficient increase in the number
of shares available for issuance under the Plan. If such stockholder approval is
not obtained within twelve (12) months after the date the first such excess
option grants are made, then (i) any unexercised excess options shall terminate
and cease to be exercisable and (ii) the Corporation shall promptly refund the
purchase price paid for any excess shares actually issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow.

III.  TAX WITHHOLDING

        A.    The Corporation’s obligation to deliver shares of Common Stock
upon the exercise of stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.

        B.    The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III of Article Four and such supplemental
rules as the Plan Administrator may from time to time adopt (including the
applicable safe-harbor provisions of Securities and Exchange Commission
Rule 16b-3), provide any or all holders of Non-Statutory Options or unvested
shares (other than the unvested shares issued under the Director Fee Program)
with the right to use shares of the Corporation’s Common Stock in satisfaction
of all or part of the Federal, state and local income and employment tax
liabilities incurred by such holders in connection with the exercise of their
options or the vesting of their shares (the “Taxes”). Such right may be provided
to any such holder in either or both of the following formats:

        Stock Withholding:    The holder of the Non-Statutory Option or unvested
shares may be provided with the election to have the Corporation withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of the shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the applicable
Taxes (not to exceed one hundred percent (100%)) designated by the holder.

        Stock Delivery:    The Plan Administrator may, in its discretion,
provide the holder of the Non-Statutory Option or the unvested shares with the
election to deliver to the Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of Common Stock previously
acquired by such individual (other than in connection with the option exercise
triggering the Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes incurred in connection with such option exercise or
share vesting (not to exceed one hundred percent (100%)) designated by the
holder.

IV.    EFFECTIVE DATE AND TERM OF PLAN

        A.    The 1993 Plan originally became effective immediately upon
adoption by the Board on November 29, 1993. The Plan, as amended hereby, will
become effective immediately upon approval by the Company’s stockholders at the
Annual Meeting on May 27, 2004. Stock options may be made under the Plan, as
amended hereby, immediately thereafter upon the effective date of this
amendment.

        B.    The Plan shall terminate upon the earlier of (i) December 31, 2013
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise, surrender or cash-out of
the options granted under the Plan or the issuance of shares (whether vested or
unvested) under the Director Fee Program. If the date of termination is
determined

13

--------------------------------------------------------------------------------

 

under clause (i) above, then all option grants and unvested share issuances
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.

V.     USE OF PROCEEDS

        Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes

VI.   REGULATORY APPROVALS

        A.    The implementation of the Plan, the granting of any option under
the Plan, the issuance of any shares under the Director Fee Program and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation’s procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it and the Common Stock issued pursuant
to it.

        B.    No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal, and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.

VII.   NO EMPLOYMENT/SERVICE RIGHTS

        Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
Service of the Corporation (or any parent or subsidiary corporation) for any
period of specific duration, and the Corporation (or any parent or subsidiary
corporation retaining the services of such individual) may terminate such
individual’s Service at any time and for any reason, with or without cause.

VIII.   MISCELLANEOUS PROVISIONS

        A.    Except to the extent otherwise expressly provided under the Plan,
the right to acquire Common Stock or other assets under the Plan may not be
assigned, encumbered or otherwise transferred by any Optionee or Participant.

        B.    The provisions of the Plan relating to the exercise of options and
the vesting of shares shall be governed by the laws of the State of California,
as such laws are applied to contracts entered into and performed in such State.

        C.    The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Optionees and any holders of
unvested shares under the Plan, the legal representatives of their respective
estates, their respective heirs or legatees and their permitted assignees.

        IN WITNESS WHEREOF, the undersigned being the duly authorized and
elected President and Chief Executive Officer of the Corporation has executed
this Amended and Restated 1993 Stock Option/Stock Issuance Plan as of May 27,
2004.

 

 

/s/ Raymond J. Pacini

 

 

 

Raymond J. Pacini
President and Chief Executive Officer

14

--------------------------------------------------------------------------------