EXHIBIT 10.43

 

QRS CORPORATION

 

1993 STOCK OPTION/STOCK ISSUANCE PLAN

 

(As Amended and Restated Through March 18, 2003)

 

ARTICLE ONE

 

GENERAL

 

  I.   PURPOSE OF THE PLAN

 

A.    This 1993 Stock Option/Stock Issuance Plan (“Plan”) is intended to promote
the interests of QRS Corporation, 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), (ii) the non-employee members of the Corporation’s Board of
Directors and (iii) 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 Discretionary Option Grant and Stock Issuance Programs under this Plan
became effective on the date on which the shares of the Corporation’s Common
Stock were first registered under Section 12(g) of the Securities Exchange Act
of 1934, as amended (the “1934 Act”). Such date is hereby designated as the
Effective Date for those two programs. The Automatic Option Grant Program under
this Plan became effective immediately on the execution and final pricing of the
Underwriting Agreement for the initial public offering of the Corporation’s
Common Stock. The execution date of such Underwriting Agreement is hereby
designated as the Effective Date of the Automatic Option Grant Program.

 

C.    This Plan shall serve as the successor to the Corporation’s amended and
restated 1990 Stock Option Plan (the “1990 Plan”), and no further option grants
or stock issuances shall be made under the 1990 Plan from and after the
Effective Date of this Plan. All options outstanding under the 1990 Plan on the
Effective Date of the Discretionary Option Grant Program are hereby incorporated
into this Plan and shall accordingly be treated as outstanding options under
this Plan. However, each outstanding option so incorporated shall continue to be
governed solely by the express terms and conditions of the instrument evidencing
such grant, and no provision of this Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of the Corporation’s Common Stock
thereunder.

 

D.    All share numbers in this March 2003 Restatement reflect the 3-for-2 split
of the Common Stock which was effected on July 21, 1999.

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  II.   DEFINITIONS

 

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

 

1.    Board:  the Corporation’s Board of Directors.

 

2.    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; or

 

b.    there is 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
proxy contests for the election of Board members, 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.

 

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

 

4.    Common Stock:  Common Stock, $0.001 par value, of the Corporation.

 

5.    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

 

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transferred to a person or persons different from those who held such securities
immediately prior to such merger.

 

6.    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.

 

7.    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 stock exchange but is traded on the Nasdaq National Market, the
Fair Market Value shall be the closing selling price per share on the date in
question, as such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market and published in The Wall Street Journal.
If there is no reported closing selling price for the Common Stock on the date
in question, then the closing selling price 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 on the date in question on the exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange and
published in The Wall Street Journal. 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 on the exchange on the last preceding date for
which such quotation exists.

 

8.    Hostile Take-Over:  a change in ownership of the Corporation effected
through the acquisition, directly or indirectly, by 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) of
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.

 

9.    Incentive Option:  an option which satisfies the requirements of Code
Section 422.

 

10.    Non-statutory Option:  an option not intended to satisfy the requirements
of Code Section 422.

 

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

 

12.    Participant:  any person who receives a direct issuance of Common Stock
under the Stock Issuance Program in effect under the Plan.

 

13.    Plan Administrator:  the particular entity, whether the Board, the
Primary Committee, the Secondary Committee or a delegate, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

 

14.    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.

 

15.    Primary Committee:  the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to Section 16 Insiders.

 

16.    Secondary Committee:  a committee of one or more Board members appointed
by the Board to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to eligible persons other than Section 16 Insiders.

 

17.    Section 16 Insider:  an officer or director of the Corporation subject to
the short-swing profit liabilities rule of Section 16 of the 1934 Act.

 

18.    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.

 

19.    Take-Over Price:  the greater of (a) the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over or (b) the highest reported price per share
of Common Stock 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.

 

20.    Withholding Taxes:  the Federal, state and local income and employment
withholding taxes to which the holder of Non-statutory Options or unvested
shares of Common Stock may become subject in connection with the exercise of
those options or the vesting of those shares.

 

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

 

1.    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.

 

2.    Each corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation (other than the
last corporation) in the unbroken chain 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 three separate components:
the Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three and the Stock Issuance Program
specified in Article Four. 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 accordance with the
provisions of Article Two. Under the Automatic Option Grant Program,
non-employee members of the Board will receive at periodic intervals special
option grants to purchase shares of Common Stock in accordance with the
provisions of Article Three. Under the Stock Issuance Program, eligible
individuals may be issued shares of Common Stock directly, either through the
immediate purchase of such shares at a price not less than the Fair Market Value
of the shares at the time of issuance or as a bonus tied to the performance of
services or the Corporation’s attainment of financial objectives, without any
cash payment required of the recipient.

 

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

 

  IV.   ADMINISTRATION OF THE PLAN

 

A.    The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board’s discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee must be authorized by a disinterested majority of the Board. Members
of the Primary and Secondary Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the

 

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Board at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee. Additionally, the Board, or the Primary or Secondary
Committee, may at any time delegate to an officer of the Corporation the
authority, subject to such limitations as it may impose, to administer the
Discretionary Option Grant and Stock Issuance Programs to the limited extent
allowed under Delaware law.

 

B.    Each 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 and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding option grants or stock
issuances 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 or Stock Issuance Program or any
outstanding option or share issuance thereunder.

 

C.    Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

 

  V.   OPTION GRANTS AND STOCK ISSUANCES

 

A.    The persons eligible to participate in the Discretionary Option Grant
Program under Article Two or the Stock Issuance Program under Article Four are
as follows:

 

1.    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);

 

2.    non-employee Board members; and

 

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

 

B.    Non-employee Board members shall also be eligible to receive automatic
option grants pursuant to the provisions of Article Three.

 

C.    The Plan Administrator shall have full authority to determine, (i) with
respect to the option grants made under the Plan, which eligible individuals are
to receive option grants, the number of shares to be 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 may remain
outstanding and (ii), with respect to stock issuances under the Stock Issuance
Program, the number of shares to be

 

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issued to each Participant, the vesting schedule (if any) to be applicable to
the issued shares, and the consideration to be paid by the individual for such
shares.

 

  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. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
6,200,000 shares. Such authorized share reserve is comprised of (i) the number
of shares which remained available for issuance, as of the Effective Date, under
the 1990 Plan as last approved by the Corporation’s stockholders prior to such
Effective Date, including the shares subject to the outstanding options
incorporated into this Plan and any other shares which would have been available
for future option grant under the 1990 Plan as last approved by the stockholders
(estimated to be 1,083,000 shares in the aggregate), (ii) an increase of 192,000
shares authorized by the Board under this Plan as of the Effective Date, (iii)
an additional increase of 750,000 shares authorized by the Board on February 27,
1995 and approved by the stockholders at the 1995 Annual Meeting, (iv) a further
increase of an additional 750,000 shares authorized by the Board on February 16,
1996 and approved by the stockholders at the 1996 Annual Meeting, (v) an
additional increase of another 525,000 shares authorized by the Board on
February 16, 1998 and approved by the stockholders at the 1998 Annual Meeting,
(vi) an additional increase of 600,000 shares authorized by the Board on
February 15, 1999 and approved by the stockholders at the 1999 Annual Meeting,
(vii) an additional increase of 800,000 shares authorized by the Board on
February 22, 2000 and approved by the stockholders at the 2000 Annual Meeting,
(viii) an additional increase of 750,000 shares approved by the Board on March
1, 2001 and approved by the stockholders at the 2001 Annual Meeting, and (ix) an
additional increase of 750,000 shares approved by the Board on March 20, 2002
and approved by the stockholders at the 2002 Annual Meeting.

 

B.    To the extent one or more outstanding options under the 1990 Plan which
have been incorporated into this Plan are subsequently exercised, the number of
shares issued with respect to each such option shall reduce, on a
share-for-share basis, the number of shares available for issuance under this
Plan.

 

C.    Should one or more outstanding options under this Plan (including
outstanding options under the 1990 Plan incorporated into 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
option grants under the Plan. Unvested shares issued under the Plan and
subsequently cancelled or repurchased by the Corporation, at the original option
exercise or direct issue price paid per share, pursuant to the Corporation’s
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. However, the shares subject to any option or
portion thereof surrendered in accordance with Section IV of Article Two or
Section III.B. of Article Three shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent option grants under
the Plan. In addition, should the

 

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exercise price of an option under the Plan (including any option incorporated
from the Predecessor 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 option or the vesting of a stock issuance under the Plan, then
the number of shares of Common Stock 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 stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.

 

D.    In no event may any one individual participating in the Plan be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances for more than 750,000 shares in the aggregate over the term of the
Plan. However, any stock options, stock appreciation rights or direct stock
issuances granted prior to January 1, 1994 shall not be taken into account for
purposes of such limitation.

 

E.    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 for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan after December 31, 1993, (iii) the number and/or class
of securities for which automatic option grants are to be subsequently made to
each new or continuing non-employee Board member under the Automatic Option
Grant Program, (iv) the number and/or class of securities and price per share in
effect under each option outstanding under either the Discretionary Option Grant
or Automatic Option Grant Program and (v) the number and/or class of securities
and price per share in effect under each outstanding option incorporated into
this Plan from the 1990 Plan. 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.

 

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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.    Option Price.

 

1.    The option price per share shall be fixed by the Plan Administrator but in
no event shall be less than one hundred percent (100%) of the Fair Market Value
per share of such Common Stock on the grant date.

 

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

 

  •   full payment in cash or check drawn to the Corporation’s order;

 

  •   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 (as such
term is defined below);

 

  •   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

 

  •   if and to the extent authorized by the Plan Administrator, full payment
through a broker-dealer sale and remittance procedure pursuant to which the
Optionee (I) shall provide irrevocable instructions to a 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 option price payable for the purchased shares plus all
applicable Withholding Taxes required to be withheld by the Corporation in
connection with such purchase and (II) shall provide directives to the
Corporation to deliver the

 

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certificates for the purchased shares directly to such brokerage firm in order
to complete the sale transaction.

 

For purposes of this subparagraph (2), the Exercise Date shall be the date on
which written notice of the option exercise is delivered to the Corporation.
Except to the extent the sale and remittance procedure is utilized in connection
with the exercise of the option, payment of the option price for the purchased
shares must accompany such 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.

 

C.    Termination of Service.

 

1.    The following provisions shall govern the exercise period applicable to
any outstanding options 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 C.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 at the time of his or her death and which
is 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 or by
the designated beneficiary or beneficiaries of the option. Such exercise,
however, must occur prior to 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. On the occurrence of the earlier
event, the option shall terminate and cease to be outstanding.

 

  •   During the applicable post-Service 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 cessation of Service. On the expiration of the
limited post-Service exercise period or (if earlier) on the specified expiration
date of the option term, each such option shall terminate and cease to be
outstanding with respect to any vested shares for which it has not otherwise
been exercised. However, each outstanding option shall immediately

 

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terminate and cease to be outstanding, at the time of the Optionee’s cessation
of Service, with respect to any shares for which it is not otherwise at that
time exercisable or in which Optionee is not otherwise vested.

 

  •   Under no circumstances, however, 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.

 

3.    The Plan Administrator shall also have full power and authority 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 option price for the purchased shares.

 

E.    Limited Transferability of Options. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee’s death. However, a Non-statutory Option
may, in connection with the Optionee’s estate plan, be assigned in whole or in
part during the Optionee’s lifetime to one or more members of the Optionee’s
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding

 

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options under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
on the Optionee’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee’s death.

 

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

 

1.    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 option price paid
per share. The terms and conditions on 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.

 

2.    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, on the occurrence of a Corporate
Transaction, except to the extent: (a) any such repurchase right is expressly
assigned to the successor corporation (or parent thereof) in connection with the
Corporate Transaction or (b) such termination is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

 

3.    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 Options 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

 

12

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first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options 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) limitation, then that option may nevertheless be exercised in that
calendar year for the excess number of shares as a Non-statutory Option.

 

B.    10% Stockholder. If any Employee to whom an Incentive Option is granted is
the owner of stock (as determined under Section 424(d) of the Internal Revenue
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 option price per share shall not be less than one hundred
and ten percent (110%) of the Fair Market Value per share of Common Stock 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 Five 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 with respect to the total
number of 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.    On 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 option

 

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price payable per share, provided the aggregate option price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted. To the extent the
actual holders of the Corporation’s outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
the outstanding options under the Discretionary Option Grant Program, substitute
one or more shares of its own common stock with a fair market value equivalent
to the cash consideration paid per share of Common Stock in such Corporate
Transaction.

 

D.    The Plan Administrator shall have the discretion, exercisable either in
advance of any actually-anticipated Corporate Transaction or at the time of an
actual Corporate Transaction, to provide (On such terms as it may deem
appropriate) for the automatic acceleration of one or more outstanding options
under this Article Two which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, in the event the
Optionee’s Service should subsequently terminate within a designated period
following the effective date of such Corporate Transaction. The Plan
Administrator may also structure one or more option grants under this Article
Two so that those options will automatically accelerate at the time of a
Corporate Transaction, whether or not those options are to be assumed or
replaced by successor corporation.

 

E.    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.

 

F.    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 termination of one
or more of the Corporation’s outstanding repurchase rights under this Article
Two) on 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) on the subsequent
termination of the Optionee’s Service within a specified period following the
Change in Control.

 

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

 

H.    Any Incentive Option accelerated under this Section III in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the dollar limitation of Section II of this
Article Two is not exceeded. To the extent such limitation is exceeded, the
accelerated portion of such option shall be exercisable as a Non-statutory
Option.

 

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  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 on 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 at the time subject to
the surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such shares. The distribution 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 determined by the Plan Administrator.

 

B.    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.

 

C.    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 in tandem with
their outstanding options under the Plan. On the occurrence of a Hostile
Take-Over, the officer will have a thirty (30)-day period in which he or she may
surrender any outstanding options with such a limited stock appreciation right
to the Corporation. 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 shares of Common Stock at the time subject to each
surrendered option over (ii) the aggregate exercise price payable for such
shares. The cash distribution payable on such option surrender shall be made
within five (5) days following the consummation of the Hostile Take-Over. At the
time such limited stock appreciation right is granted, the Plan Administrator
shall pre-approve the subsequent exercise of that right in accordance with the
terms of this Paragraph D. Accordingly, no further approval of the Plan
Administrator or the Board shall be required at the time of the actual 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.

 

D.    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 option grant under the Plan.

 

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ARTICLE THREE

AUTOMATIC OPTION GRANT PROGRAM

 

The following provisions set forth the terms and conditions of the Automatic
Option Grant Program as amended and restated by the Board on March 18, 2003 and
approved by our stockholders on May 14, 2003 at the 2003 Annual Meeting of
Stockholders. Stockholder approval of the March 2003 Restatement shall also
constitute pre-approval of each option grant made under this amended Automatic
Option Grant Program on or after the date of the 2003 Annual Meeting and the
subsequent exercise of that option in accordance with the terms of such program
as set forth below.

 

  I.   ELIGIBILITY

 

The individuals eligible to receive automatic option grants pursuant to the
provisions of this Article Three program as amended February 22, 2000, March 22,
2000, March 20, 2002, January 1, 2003 and March 18, 2003 shall be limited to (i)
those individuals who are first elected or appointed as non-employee Board
members on or after the date of the 2000 Annual Stockholders Meeting, whether
through appointment by the Board or election by the Corporation’s stockholders,
and (ii) those individuals who continue to serve as non-employee Board members
after the date of the 2000 Annual Stockholders Meeting.

 

  II.   TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

 

A.    Grant Dates. Option grants shall be made under this amended and restated
Article Three on the dates specified below:

 

(i)    For each individual who first becomes a non-employee Board member on or
after the date of the 2000 Annual Meeting, whether through election by the
Corporation’s stockholders or appointment by the Board, shall automatically be
granted on (or, with respect to individuals who first become non-employee Board
members after March 18, 2003, on the first trading day following) the date of
such initial election or appointment, a Non-statutory Option to purchase 15,000
shares of Common Stock on the terms and conditions of this Article Three,
provided that such individual has not previously been in the employ of the
Corporation or any parent or subsidiary.

 

(ii)    On the first trading day in January of 2001 and 2002 and on the first
trading day after each Annual Meeting that occurs during or after 2003, each
individual who is to continue to serve as a non-employee Board member, whether
or not that individual is standing for re-election to the Board at that
particular Annual Meeting, shall automatically be granted a Non-statutory option
to purchase 10,000 shares of Common Stock, provided such individual has served
as a non-employee Board member for at least six (6) months. There shall be no
limit on the number of such 10,000-share option grants any one non-employee
Board member may receive over his or her period of Board service.

 

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Non-employee Board members who have previously been in the employ of the
Corporation or who have otherwise received one or more stock option grants from
the Corporation shall be eligible to receive one or more such annual option
grants over their period of continued Board service.

 

The number of shares for which the automatic grants are to be made to each
newly-elected or continuing non-employee director shall be subject to periodic
adjustment pursuant to the applicable provisions of Section V.C. of Article One.

 

B.    Exercise Price. The exercise price per share of Common Stock subject to
each automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
automatic grant date.

 

C.    Payment. The exercise price shall be payable in one of the alternative
forms specified below:

 

(i)    full payment in cash or check made payable to the Corporation’s order; or

 

(ii)    full payment in shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation’s reported earnings and valued at
Fair Market Value on the Exercise Date; or

 

(iii)    full payment in a combination of shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation’s reported
earnings and valued at Fair Market Value on the Exercise Date and cash or check
payable to the Corporation’s order; or

 

(iv)    full payment through a sale and remittance procedure pursuant to which
the non-employee Board member (a) shall provide irrevocable written instructions
to a 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 and shall (b) concurrently provide written directives to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction.

 

The Exercise Date shall be the date on which written notice of the option
exercise is delivered to the Corporation. Except to the extent the sale and
remittance procedure is utilized for the exercise of the option, payment of the
option price for the purchased shares must accompany the exercise notice.

 

D.    Option Term. Each automatic grant under this Article Three shall have a
maximum term of ten (10) years measured from the automatic grant date.

 

17

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E.    Exercisability. The shares subject to each initial 15,000-share option
grant shall vest and become exercisable as follows: (i) the option shall become
exercisable for fifty percent (50%) of the option shares on Optionee’s
completion of one (1) year of Board service measured from the grant date, and
(ii) the option shall become exercisable for the balance of the option shares on
the Optionee’s completion of an additional one (1) year of Board service
measured from the one-year anniversary of the grant date. The shares subject to
each annual 10,000-share option grant shall vest and become exercisable for all
of the 10,000 option shares on the Optionee’s completion of one (1) year of
Board service measured from the grant date.1 For the initial 15,000-share and
annual 10,000-share option grants, if a director terminates Board service at an
Annual Meeting that occurs within one (1) month before the one (1) year
anniversary of the grant date, the director shall be deemed to have completed
one (1) year of Board service for vesting purposes. The exercisability of each
automatic grant shall be subject to acceleration in accordance with the
provisions of Section II.G. and Section III of this Article Three.

 

F.    Limited-Transferability. During the lifetime of the Optionee, each
automatic option grant, together with the limited stock appreciation right
pertaining to such option, shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee other than (i) a transfer of
the option effected by will or by the laws of descent and distribution following
Optionee’s death or (ii) an assignment of the option in whole or in part during
the Optionee’s lifetime to one or more members of the Optionee’s immediate
family or to a trust established exclusively for one or more such family
members, to the extent such assignment is effected for estate planning purposes.
The assigned portion may only be exercised by the person or persons who acquire
a proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Three, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
on the Optionee’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee’s death.

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1   Prior to the February 2000 Restatement, each automatic option grant made
under this Article Three was to become exercisable in a series of four (4)
successive equal annual installments over the Optionee’s period of Service on
the Board, with the first such installment to become exercisable six (6) months
after the automatic grant date. Following the February 2000 Restatement and
prior to the March 2003 Restatement, each automatic option grant made under this
Article Three was to become exercisable in a series of installments over the
Optionee’s period of Service on the Board, with the first such installment for
twenty-five (25%) of the option shares to become exercisable six (6) months
after the automatic grant date and the remainder of the option shares to become
exercisable in thirty-six (36) successive equal monthly installments over the
following thirty-six (36) months. The new vesting schedule for the automatic
option grants has been approved by our stockholders at the 2003 Annual Meeting
and will be in effect for all options granted under the Automatic Option Grant
Program after the date of such stockholder approval.

 

18

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  G.   Termination of Board Service.

 

1.    Should the Optionee cease service as a Board member cease for any reason
(other than death or Permanent Disability) while holding one or more automatic
option grants under this Article Three, then such individual shall have a six
(6)-month period following the date of such cessation of Board service in which
to exercise each such option for any or all of the shares of Common Stock for
which the option is exercisable at the time of such cessation of Board service.
However, each such option shall immediately terminate and cease to be
outstanding, at the time of such cessation of Board service, with respect to any
shares for which the option is not otherwise at that time exercisable.

 

2.    Should the Optionee die within six (6) months after cessation of Board
service, then each outstanding automatic option grant held by the Optionee at
the time of death may subsequently be exercised, for any or all of the shares of
Common Stock for which such option is exercisable at the time of the Optionee’s
cessation of Board service (less any option shares subsequently purchased by the
Optionee prior to death), 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
or by the designated beneficiary or beneficiaries of the option. Any such
exercise must occur within twelve (12) months after the date of the Optionee’s
death.

 

3.    Should the Optionee die or become Permanently Disabled while serving as a
Board member, then each automatic option grant held by such Optionee under this
Article Three shall accelerate in full, and the Optionee (or the representative
of the Optionee’s estate or the person or persons to whom the option is
transferred on the Optionee’s death) shall have a twelve (12)-month period
following the date of the Optionee’s cessation of Board service in which to
exercise each such option for any or all of the shares of Common Stock subject
to that option at the time of such cessation of Board service.

 

4.    In no event shall any automatic grant under this Article Three remain
exercisable after the specified expiration date of the ten (10)-year option
term. On the expiration of the applicable post-service exercise period under
subparagraph 1, 2 or 3 above or (if earlier) on the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares for which the option was otherwise
exercisable at the time of the Optionee’s cessation of Board service.

 

H.    Stockholder Rights. The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to any
shares subject to such option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.

 

I.    Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the prototype Non-statutory Stock Option
Agreement as approved by the Board.

 

19

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  III.   CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

 

A.    In the event of any Corporate Transaction, each automatic option grant at
the time outstanding under this Article Three shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Corporate Transaction, become exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares. On the consummation of the Corporate Transaction, all
automatic option grants under this Article Three shall terminate and cease to be
outstanding.

 

B.    In the event of any Change in Control of the Corporation, each automatic
option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares.

 

C.    The Optionee shall have the right, exercisable at any time during the
thirty (30)-day period immediately following a Hostile Take-Over, to surrender
each option held by him or her under this Article Three to the Corporation. The
Optionee 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 shares of
Common Stock at the time subject to the surrendered option (whether or not the
option is otherwise at the time exercisable for such shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the consummation of the Hostile
Take-Over. Stockholder approval of the February 2000 Restatement at the 2000
Annual Meeting shall constitute pre-approval of each such option surrender right
granted under this Automatic Option Grant Program on or after the date of such
Annual Meeting and the subsequent exercise of each such right in accordance with
the terms and provisions of this Section III.C. No additional approval or
consent of the Plan Administrator or the Board shall be required at the time of
the actual option surrender and cash distribution.

 

D.    On the consummation of the Corporate Transaction, all options granted
under this Article Three shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction.

 

E.    Each outstanding option under this Automatic Option Grant Program 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 option
price payable per share, provided the aggregate option price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted. To the extent the
actual holders of the Corporation’s outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
the outstanding options under

 

20

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the Automatic Option Grant Program, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Common Stock in such Corporate Transaction.

 

F.    The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over shall not be available for subsequent
option grant under this Plan.

 

G.    The automatic option grants outstanding under this Article Three 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.

 

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ARTICLE FOUR

STOCK ISSUANCE PROGRAM

 

  I.   TERMS AND CONDITIONS OF STOCK ISSUANCES

 

Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate purchases without any intervening stock option grants. The
issued shares shall be evidenced by a Stock Issuance Agreement (“Issuance
Agreement”) that complies with the terms and conditions of this Article Four.

 

A.    Consideration.

 

1.    Shares of Common Stock drawn from the Corporation’s authorized but
unissued shares of Common Stock (“Newly Issued Shares”) shall be issued under
the Stock Issuance Program for one or more of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:

 

(i)    cash or check drawn to the Corporation’s order;

 

(ii)    past services rendered to the Corporation or any parent or subsidiary
corporation.

 

2.    All Newly Issued Shares shall be issued for consideration with a value
less not less than one hundred percent (100%) of the Fair Market Value of such
shares at the time of issuance.

 

3.    Shares of Common Stock reacquired by the Corporation and held as treasury
shares (“Treasury Shares”) may be issued under the Stock Issuance Program for
such consideration (including one or more of the items of consideration
specified in subparagraph 1. above) as the Plan Administrator may deem
appropriate, provided such consideration is in an amount not less than the Fair
Market Value of the Treasury Shares at the time of issuance. Treasury Shares
may, in lieu of any cash consideration, be issued subject to such vesting
requirements tied to the Participant’s period of future Service or the
Corporation’s attainment of specified performance objectives as the Plan
Administrator may establish at the time of issuance. The Treasury Share
provisions shall be in effect only for such period or periods (if any) during
which the Corporation is incorporated under the laws of the State of Delaware.

 

B.    Vesting Provisions.

 

1.    Shares of Common Stock issued under the Stock Issuance Program may, in the
absolute discretion of the Plan Administrator, be fully and immediately vested
on issuance or may vest in one or more installments over the Participant’s
period of Service. The elements of the vesting schedule applicable to any
unvested shares of Common Stock issued under the Stock Issuance Program, namely:

 

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(i)    the Service period to be completed by the Participant or the performance
objectives to be achieved by the Corporation,

 

(ii)    the number of installments in which the shares are to vest,

 

(iii)    the interval or intervals (if any) which are to lapse between
installments, and

 

(iv)    the effect which death, Permanent Disability or other event designated
by the Plan Administrator is to have on the vesting schedule, shall be
determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.

 

2.    The Participant shall have full stockholder rights with respect to any
shares of Common Stock issued to him or her under the Plan, whether or not his
or her interest in those shares is vested. Accordingly, the Participant shall
have the right to vote such shares and to receive any regular cash dividends
paid on such shares. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares by reason of any stock dividend, stock split, 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 or by reason of any Corporate Transaction shall be issued, subject
to (i) the same vesting requirements applicable to his or her unvested shares
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

 

3.    Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock under the Stock Issuance Program, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent, the
Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares. The surrendered shares may, at the Plan Administrator’s
discretion, be retained by the Corporation as Treasury Shares or may be retired
to authorized but unissued share status. Treasury Shares will only be an
available election during the period or periods (if any) the Corporation is
incorporated under the laws of the State of Delaware.

 

4.    The Plan Administrator may in its discretion elect to waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur on the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant’s interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant’s cessation of Service or the attainment or
non-attainment of the applicable performance objectives.

 

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  II.   CORPORATE TRANSACTIONS/CHANGE IN CONTROL

 

A.    On the occurrence of any Corporate Transaction, all of the Corporation’s
outstanding repurchase rights under this Article Three shall automatically
terminate, and all shares subject to such terminated rights shall immediately
vest in full, 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.

 

B.    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 immediate and automatic
vesting of one or more unvested shares outstanding under the Stock Issuance
Program at the time of such Change in Control. The Plan Administrator shall also
have full power and authority to condition any such accelerated vesting on the
subsequent termination of the Participant’s Service within a specified period
following the Change in Control.

 

  III.   SHARE ESCROW/TRANSFER RESTRICTIONS

 

A.    Unvested shares may, in the Plan Administrator’s discretion, be held in
escrow by the Corporation until the Participant’s interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent an escrow
arrangement is utilized, the unvested shares and any securities or other assets
issued with respect to such shares (other than regular cash dividends) shall be
delivered in escrow to the Corporation to be held until the Participant’s
interest in such shares (or other securities or assets) vests. Alternatively, if
the unvested shares are issued directly to the Participant, the restrictive
legend on the certificates for such shares shall read substantially as follows:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE ACCORDINGLY
SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR REPURCHASE
IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES
TO REMAIN IN THE CORPORATION’S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS
AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK
ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED                         ,             , A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.”

 

B.    The Participant shall have no right to transfer any unvested shares of
Common Stock issued to him or her under the Stock Issuance Program. For purposes
of this restriction, the term “transfer” shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift, or other disposition of such
shares, whether voluntary or involuntary. On any such attempted transfer, the
unvested shares shall immediately be cancelled in accordance with

 

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substantially the same procedure in effect under Section I.B.3 of this Article
Four, and neither the Participant nor the proposed transferee shall have any
rights with respect to such cancelled shares. However, the Participant shall
have the right to make a gift of unvested shares acquired under the Stock
Issuance Program to his or her spouse or issue, including adopted children, or
to a trust established for such spouse or issue, provided the donee of such
shares delivers to the Corporation a written agreement to be bound by all the
provisions of the Stock Issuance Program and the Issuance Agreement applicable
to the gifted shares.

 

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ARTICLE FIVE

MISCELLANEOUS

 

  I.   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, no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment. The Plan Administrator may
amend the terms of any outstanding options or stock issuances; however, such
amendment shall not adversely affect the holders of such awards, unless such
Optionee or Participant consents to such amendment. Additionally, no outstanding
stock option or stock issuance may be amended to lower the exercise price or be
canceled by the Board for the purpose of reissuing a replacement stock option or
stock issuance at a lower price without stockholder approval. In addition,
certain other amendments to the Plan may require stockholder approval pursuant
to applicable laws or regulations.

 

B.    Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program, which are in both instances 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 or the Stock
Issuance 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 or excess share issuances 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.

 

  II.   TAX WITHHOLDING

 

A.    The Corporation’s obligation to deliver shares of Common Stock on 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 Withholding
Taxes.

 

B.    The Plan Administrator may, in its discretion and in accordance with the
provisions of this Section II of Article Five and such supplemental rules as the
Plan Administrator may from time to time adopt, provide any or all holders of
Non-statutory Options (other than the automatic grants made pursuant to Article
Three of the Plan) or unvested shares under the Plan with the right to use
shares of the Common Stock in satisfaction of all or part of the Withholding
Taxes to which such holders may become subject in connection with the

 

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exercise of their options or the vesting of their shares. Such right may be
provided to any such holder in either or both of the following formats:

 

1.    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 on the exercise of such
Non-statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the applicable
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.

 

2.    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 or share vesting
triggering the Withholding Taxes) with an aggregate Fair Market Value equal to
the percentage of the Withholding Taxes incurred in connection with such option
exercise or share vesting (not to exceed one hundred percent (100%)) designated
by the holder.

 

  III.   EFFECTIVE DATE AND TERM OF PLAN

 

A.    This Plan as successor to the Corporation’s 1990 Stock Option Plan became
effective as of the applicable Effective Date for each of the equity incentive
programs in effect hereunder, and no further option grants or stock issuances
shall be made under the 1990 Plan from and after such Effective Date. Each
option issued and outstanding under the 1990 Plan immediately prior to the
Effective Date of the Discretionary Option Grant Program shall be incorporated
into this Plan and treated as an outstanding option under this Plan, but each
such option shall continue to be governed solely by the terms and conditions of
the instrument evidencing such grant, and nothing in this Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder.

 

B.    The option/vesting acceleration provisions of Section III of Article Two
relating to Corporate Transactions and Changes in Control may, in the Plan
Administrator’s discretion, be extended to one or more stock options outstanding
under the 1990 Plan on the Effective Date of the Discretionary Option Grant
Program, but which do not otherwise provide for such acceleration.

 

C.    The Plan shall terminate on the earlier of (i) December 31, 2007 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 Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested stock
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.

 

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  IV.   USE OF PROCEEDS

 

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

 

  V.   REGULATORY APPROVALS

 

A.    The implementation of the Plan, the granting of any stock option or stock
appreciation right under the Plan, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock on the exercise of the stock
options or stock appreciation rights granted hereunder shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options and stock
appreciation rights 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 or the Nasdaq National Market on which stock of the
same class is then listed.

 

  VI.   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 employ or
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 employment or service at any time and for any reason, with or
without cause.

 

  VII.   MISCELLANEOUS PROVISIONS

 

A.    Except to the extent otherwise expressly provided in 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
without resort to that State conflict-of-laws rules.

 

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

 

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