Exhibit 10.3A

TERCICA, INC.

2004 STOCK PLAN

Amended by the Board on September 6, 2006

Amended by the Board on February 26, 2008

SECTION 1

BACKGROUND AND PURPOSE OF THE PLAN

1.1 Background. The Plan permits the grant of Incentive Stock Option,
Nonstatutory Stock Options, Stock Purchase Rights, Restricted Stock, Restricted
Stock Units, Stock Appreciation Rights, Performance Units and Performance
Shares.

1.2 Purpose. The purposes of this Plan are (a) to attract and retain the best
available personnel for positions of substantial responsibility, (b) to provide
additional incentive to Employees, Directors and Consultants, and (c) to promote
the success of the Company’s business.

SECTION 2

DEFINITIONS

As used herein, the following definitions will apply:

2.1 “Administrator” means the Board or any of its Committees as will be
administering the Plan, in accordance with Section 4 of the Plan.

2.2 “Affiliated SAR” means an SAR that is granted in connection with a related
Option, and which automatically will be deemed to be exercised at the same time
that the related Option is exercised.

2.3 “Applicable Laws” means the requirements relating to the administration of
stock option plans under U. S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Awards are, or will be, granted under the Plan.

2.4 “Award” means, individually or collectively, a grant under the Plan of
Options, SARs, Stock Purchase Rights, Restricted Stock, Restricted Stock Units,
Performance Units or Performance Shares.

2.5 “Award Agreement” means the written agreement setting forth the terms and
provisions applicable to each Award granted under the Plan. The Award Agreement
is subject to the terms and conditions of the Plan.

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

 

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2.7 “Change in Control” means the occurrence of any of the following events:

2.7.1 Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting securities;

2.7.2 The consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets;

2.7.3 A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

2.7.4 The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation.

2.8 “Code” means the Internal Revenue Code of 1986, as amended. Any reference to
a section of the Code herein will be a reference to any successor or amended
section of the Code.

2.9 “Committee” means a committee appointed by the Board in accordance with
Section 4 of the Plan.

2.10 “Common Stock” means the common stock of the Company.

2.11 “Company” means Tercica, Inc., a Delaware corporation, or any successor
thereto.

2.12 “Consultant” means any person, including an advisor, engaged by the Company
or a Parent or Subsidiary to render services to such entity.

2.13 “Director” means a member of the Board.

2.14 “Disability” means, with respect to a Participant, the inability of such
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the
Code.

 

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2.15 “Employee” means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.17 “Exchange Program” means a program under which (a) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have
lower exercise prices and different terms), Awards of a different type, and/or
cash, and/or (b) the exercise price of an outstanding Award is reduced. The
terms and conditions of any Exchange Program will be determined by the
Administrator in its sole discretion.

2.18 “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

2.18.1 If the Common Stock is listed on any established stock exchange including
the NASDAQ Global Select Market, NASDAQ Global Market or NASDAQ Capital Market,
its Fair Market Value will be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange on the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

2.18.2 If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock will be the mean between the high bid and low asked prices for the Common
Stock on the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable; or

2.18.3 In the absence of an established market for the Common Stock, the Fair
Market Value will be determined in good faith by the Administrator in a manner
that complies with Section 409A of the Code.

2.19 “Fiscal Year” means the fiscal year of the Company.

2.20 “Freestanding SAR” means a SAR that is granted independently of any Option.

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

2.22 “Inside Director” means a Director who is an Employee.

2.23 “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

2.24 “Officer” means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

 

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2.25 “Option” means a stock option granted pursuant to the Plan.

2.26 “Optioned Stock” means the Common Stock subject to an Award.

2.27 “Outside Director” means a Director who is not an Employee.

2.28 “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.

2.29 “Participant” means the holder of an outstanding Award granted under the
Plan.

2.30 “Performance Share” means an Award granted to a Participant pursuant to
Section 9.

2.31 “Performance Unit” means an Award granted to a Participant pursuant to
Section 9.

2.32 “Period of Restriction” means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and therefore, the Shares
are subject to a substantial risk of forfeiture. Such restrictions may be based
on the passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator, in its
discretion.

2.33 “Plan” means this 2004 Stock Plan.

2.34 “Registration Date” means the effective date of the first registration
statement which is filed by the Company and declared effective pursuant to
Section 12(g) of the Exchange Act, with respect to any class of the Company’s
securities.

2.35 “Restricted Stock” means shares of Common Stock acquired pursuant to a
grant of Stock Purchase Rights under Section 6 of the Plan or issued pursuant to
Section 7 of the Plan.

2.36 “Restricted Stock Unit” means a bookkeeping entry representing an amount
equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each
Restricted Stock Unit represents an unfunded and unsecured obligation of the
Company.

2.37 “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.

2.38 “Section 16(b)” means Section 16(b) of the Exchange Act.

2.39 “Service Provider” means an Employee, Director or Consultant.

2.40 “Share” means a share of the Common Stock, as adjusted in accordance with
Section 3 of the Plan.

2.41 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 8 is designated as an
SAR.

 

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2.42 “Stock Purchase Right” means the right to purchase Common Stock pursuant to
Section 6 of the Plan.

2.43 “Subsidiary” means a “subsidiary corporation”, whether now or hereafter
existing, as defined in Section 424(f) of the Code.

2.44 “Tandem SAR” means an SAR that is granted in connection with a related
Option, the exercise of which will require forfeiture of the right to purchase
an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR will be canceled to the same extent).

SECTION 3

SHARES SUBJECT TO THE PLAN

3.1 Stock Subject to the Plan. The maximum aggregate number of Shares that may
be optioned and sold under the Plan includes (a) any Shares which have been
reserved but not issued under the Company’s 2002 Executive Stock Plan (the
“Executive Plan”), (b) any Shares which have been reserved but not issued under
the Company’s 2002 Stock Plan (the “2002 Plan”), (c) any Shares returned to the
Executive Plan or the 2002 Plan as a result of termination of options or
repurchase of Shares issued under either such plan, and (d) an annual increase
to be added on the first day of the Company’s fiscal year beginning in 2005,
equal to the lesser of (i) 1,250,000 Shares, (ii) 4% of the outstanding Shares
on such date or (iii) an amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock. Shares shall not be deemed
to have been issued pursuant to the Plan with respect to any portion of an Award
that is settled in cash. Upon payment in Shares pursuant to the exercise of an
SAR, the number of Shares available for issuance under the Plan shall be reduced
only by the number of shares actually issued in such payment. If the exercise
price of an Option is paid by tender to the Company, or attestation to the
ownership, of Shares owned by the Participant, the number of shares available
for issuance under the Plan shall be reduced by the gross number of shares for
which the Option is exercised.

3.2 Lapsed Awards. If an Award expires or becomes unexercisable without having
been exercised in full, is surrendered pursuant to an Exchange Program, or, with
respect to Restricted Stock, Restricted Stock Units, Performance Units or
Performance Shares, is forfeited to or repurchased by the Company due to failure
to vest, the unpurchased Shares (or for Awards other than Options or Stock
Appreciation Rights the forfeited or repurchased Shares) which were subject
thereto will become available for future grant or sale under the Plan (unless
the Plan has terminated). Shares that have actually been issued under the Plan
under any Award will not be returned to the Plan and will not become available
for future distribution under the Plan; provided, however, that if Shares issued
pursuant to Restricted Stock, Restricted Stock Units, Performance Shares or
Performance Units are repurchased by the Company at their original purchase
price or, if less than their original purchase price, their fair market value,
or are forfeited to the Company, such Shares will become available for future
grant under the Plan.

3.3 Adjustments. In the event that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse

 

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stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, or other change in the corporate structure of the Company affecting the
Shares occurs, the Administrator, to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
shall appropriately and proportionately adjust (a) the number and class of
Shares which may be delivered under the Plan, (b) the number, class, and price
of Shares covered by each outstanding Award, (c) the numerical Share limits of
Section 5, and (d) the number of Shares issuable pursuant to Section 11.

3.4 Share Reserve. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Plan.

SECTION 4

ELIGIBILITY/ADMINISTRATION OF THE PLAN

4.1 Eligibility. Nonstatutory Stock Options, Stock Purchase Rights, Restricted
Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and
Performance Shares may be granted to Service Providers. Incentive Stock Options
may be granted only to Employees.

4.2 Procedure.

4.2.1 Multiple Administrative Bodies. Different Committees with respect to
different groups of Service Providers may administer the Plan.

4.2.2 Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the Plan will be
administered by a Committee of two or more “outside directors” within the
meaning of Section 162(m) of the Code.

4.2.3 Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder will be
structured to satisfy the requirements for exemption under Rule 16b-3.

4.2.4 Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will be
constituted to satisfy Applicable Laws.

4.3 Powers of the Administrator. Subject to the provisions of the Plan, and in
the case of a Committee, subject to the specific duties delegated by the Board
to such Committee, the Administrator will have the authority, in its discretion:
(a) to determine the Fair Market Value; (b) to select the Service Providers to
whom Awards may be granted hereunder; (c) to determine the number of shares of
Common Stock to be covered by each Award granted hereunder; (d) to approve forms
of agreement for use under the Plan; (e) to determine the terms and conditions,
not inconsistent with the terms of the Plan, of any Award granted hereunder
(such terms and conditions include, but are not limited to, the exercise price,
the time or times when Awards may

 

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be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole discretion,
will determine); (f) to institute an Exchange Program; (g) to construe and
interpret the terms of the Plan and awards granted pursuant to the Plan; (h) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of satisfying applicable foreign laws; (i) to modify or amend each Award
(subject to Section 18.3 of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan; (j) to allow Participants to satisfy
withholding tax obligations by electing to have the Company withhold from the
Shares to be issued upon exercise of an Award that number of Shares having a
Fair Market Value equal to the minimum amount required to be withheld (the Fair
Market Value of the Shares to be withheld will be determined on the date that
the amount of tax to be withheld is to be determined and all elections by a
Participant to have Shares withheld for this purpose will be made in such form
and under such conditions as the Administrator may deem necessary or advisable);
(k) to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator; (l) allow a Participant to defer the receipt of the payment of
cash or the delivery of Shares that would otherwise be due to such Participant
under an Award, and (m) to make all other determinations deemed necessary or
advisable for administering the Plan.

4.4 Effect of Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations will be final and binding on all Participants
and any other holders of Awards.

SECTION 5

STOCK OPTIONS

5.1 Limitations.

5.1.1 Incentive Stock Options may be granted only to Employees.

5.1.2 Each Option will be designated in the Award Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options will be
treated as Nonstatutory Stock Options. For purposes of this Section 5.1.2,
Incentive Stock Options will be taken into account in the order in which they
were granted. The Fair Market Value of the Shares will be determined as of the
time the Option with respect to such Shares is granted.

5.1.3 The following limitations will apply to grants of Options:

(a) No Service Provider will be granted, in any Fiscal Year, Options to purchase
more than 500,000 Shares.

 

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(b) In connection with his or her initial service as an Employee, a Service
Provider may be granted Options to purchase up to an additional 250,000 Shares,
which will not count against the limit set forth in subsection (a) above.

(c) The foregoing limitations will be adjusted proportionately in connection
with any change described in Section 3.3.

(d) If an Option is cancelled in the same Fiscal Year in which it was granted
(other than in connection with a transaction described in Section 14), the
cancelled Option will be counted against the limits set forth in subsections
(a) and (b) above. For this purpose, if the exercise price of an Option is
reduced, the transaction will be treated as a cancellation of the Option and the
grant of a new Option.

5.2 Term of Option. The term of each Option will be stated in the Award
Agreement. In the case of an Incentive Stock Option, the term will be ten
(10) years from the date of grant or such shorter term as may be provided in the
Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option will be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.

5.3 Option Exercise Price and Consideration.

5.3.1 Exercise Price. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option will be determined by the Administrator,
subject to the following:

(a) In the case of an Incentive Stock Option

(i) granted to an Employee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price will be no less than 110% of the Fair Market Value per
Share on the date of grant.

(ii) granted to any Employee other than an Employee described in paragraph
(i) immediately above, the per Share exercise price will be no less than 100% of
the Fair Market Value per Share on the date of grant.

(b) In the case of a Nonstatutory Stock Option, the per Share exercise price
will be determined by the Administrator. In the case of a Nonstatutory Stock
Option intended to qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the per Share exercise price will be no
less than 100% of the Fair Market Value per Share on the date of grant.

(c) Notwithstanding the foregoing, Options may be granted with a per Share
exercise price of less than 100% of the Fair Market Value per Share on the date
of grant pursuant to a merger or other corporate transaction.

 

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5.3.2 Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and
will determine any conditions that must be satisfied before the Option may be
exercised.

5.3.3 Form of Consideration. The Administrator will determine the acceptable
form of consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator will determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other
Shares which have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option will be
exercised; (v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; (vi) a reduction
in the amount of any Company liability to the Participant, including any
liability attributable to the Participant’s participation in any
Company-sponsored deferred compensation program or arrangement; (vii) any
combination of the foregoing methods of payment; or (viii) such other
consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.

5.4 Exercise of Option.

5.4.1 Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder will be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Award Agreement. An Option may not be exercised for a fraction of a
Share.

An Option will be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Award Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Award Agreement and the Plan. Shares issued upon exercise of an
Option will be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder will exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company will issue (or cause to be issued) such Shares promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 3.3 of the Plan.

Exercising an Option in any manner will decrease the number of Shares thereafter
available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.

5.4.2 Termination of Relationship as a Service Provider. If a Participant ceases
to be a Service Provider, other than upon the Participant’s death or Disability,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement). In the

 

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absence of a specified time in the Award Agreement, the Option will remain
exercisable for three (3) months following the Participant’s termination. If, on
the date of termination, the Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will revert to
the Plan. If, after termination, the Participant does not exercise his or her
Option within the time specified by the Administrator, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.

5.4.3 Disability of Participant. If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months following
the Participant’s termination. If, on the date of termination, the Participant
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. If, after termination, the
Participant does not exercise his or her Option within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

5.4.4 Death of Participant. If a Participant dies while a Service Provider, the
Option may be exercised following the Participant’s death within such period of
time as is specified in the Award Agreement to the extent that the Option is
vested on the date of death (but in no event may the option be exercised later
than the expiration of the term of such Option as set forth in the Award
Agreement), by the Participant’s designated beneficiary, provided such
beneficiary has been designated prior to Participant’s death in a form
acceptable to the Administrator. If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant’s estate or by the person(s) to whom the
Option is transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution. In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death. If, at the time of death, Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will immediately revert to the Plan. If the Option is not
so exercised within the time specified herein, the Option will terminate, and
the Shares covered by such Option will revert to the Plan.

 

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SECTION 6

STOCK PURCHASE RIGHTS

6.1 Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it will advise the offeree in
writing or electronically, by means of an Award Agreement, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree will be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer will be accepted
by execution of an Award Agreement in the form determined by the Administrator.

6.2 Repurchase Option. Unless the Administrator determines otherwise, the Award
Agreement will grant the Company a repurchase option exercisable upon the
voluntary or involuntary termination of the purchaser’s service with the Company
for any reason (including death or Disability). The purchase price for Shares
repurchased pursuant to the Award Agreement will be determined by the
Administrator and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option will lapse at a rate determined
by the Administrator.

6.3 Other Provisions. The Award Agreement will contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator in its sole discretion.

6.4 Rights as a Stockholder. Once the Stock Purchase Right is exercised, the
purchaser will have the rights equivalent to those of a stockholder, and will be
a stockholder when his or her purchase is entered upon the records of the duly
authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 3.3 of the Plan.

SECTION 7

RESTRICTED STOCK

7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan,
the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine. The Administrator, in its sole discretion,
will determine the number of Shares to be granted to each Service Provider.

7.2 Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced
by an Award Agreement that will specify the Period of Restriction, the number of
Shares granted, and such other terms and conditions as the Administrator, in its
sole discretion, will determine. Unless the Administrator determines otherwise,
Shares of Restricted Stock will be held by the Company as escrow agent until the
restrictions on such Shares have lapsed.

 

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7.3 Transferability. Except as provided in this Section 7, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction.

7.4 Other Restrictions. The Administrator, in its sole discretion, may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate.

7.5 Removal of Restrictions. Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan will be released from escrow as soon as practicable after the last day of
the Period of Restriction. The Administrator, in its discretion, may accelerate
the time at which any restrictions will lapse or be removed.

7.6 Voting Rights. During the Period of Restriction, Service Providers holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the Administrator determines otherwise.

7.7 Dividends and Other Distributions. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.

7.8 Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will
revert to the Company and again will become available for grant under the Plan.

SECTION 8

RESTRICTED STOCK UNITS

8.1 Grant of Restricted Stock Units. Restricted Stock Units may be granted at
any time and from time to time as determined by the Administrator. After the
Administrator determines that it will grant Restricted Stock Units under the
Plan, it will advise the Participant in an Award Agreement of the terms,
conditions, and restrictions related to the grant, including the number of
Restricted Stock Units.

8.2 Vesting Criteria and Other Terms. The Administrator will set vesting
criteria in its discretion, which, depending on the extent to which the criteria
are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant. The Administrator may set vesting criteria based upon
the achievement of Company-wide, business unit, or individual goals (including,
but not limited to, continued employment), or any other basis determined by the
Administrator in its discretion.

8.3 Earning Restricted Stock Units. Upon meeting the applicable vesting
criteria, the Participant will be entitled to receive a payout as determined by
the Administrator. Notwithstanding the foregoing, at any time after the grant of
Restricted Stock Units, the

 

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Administrator, in its sole discretion, may reduce or waive any vesting criteria
that must be met to receive a payout.

8.4 Form and Timing of Payment. Payment of earned Restricted Stock Units will be
made after the date(s) determined by the Administrator and set forth in the
Award Agreement. The Administrator, in its sole discretion, may only settle
earned Restricted Stock Units in cash, Shares, or a combination of both.

8.5 Dividend Equivalents. Dividend equivalents may be credited in respect of
Shares covered by Restricted Stock Units, as determined by the Administrator and
contained in the Award Agreement. At the sole discretion of the Administrator,
such dividend equivalents may be converted into additional Shares covered by the
Restricted Stock Units in such manner as determined by the Administrator. Any
additional Shares covered by the Restricted Stock Units credited by reason of
such dividend equivalents will be subject to all the terms and conditions of the
underlying Award Agreement to which they relate.

8.6 Cancellation. On the date set forth in the Award Agreement, all unearned
Restricted Stock Units will be forfeited to the Company.

8.7 Compliance with Section 409A of the Code. Notwithstanding anything to the
contrary set forth herein, any Restricted Stock Units granted under the Plan
that are not exempt from the requirements of Section 409A of the Code shall
incorporate terms and conditions necessary to avoid the consequences of
Section 409A(a)(1) of the Code. Such restrictions, if any, shall be determined
by the Administrator and contained in the Award Agreement evidencing such
Restricted Stock Units.

SECTION 9

STOCK APPRECIATION RIGHTS

9.1 Grant of SARs. Subject to the terms and conditions of the Plan, an SAR may
be granted to Service Providers at any time and from time to time as will be
determined by the Administrator, in its sole discretion. The Administrator may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof.

9.1.1 Number of Shares. The Administrator will have complete discretion to
determine the number of SARs granted to any Service Provider.

9.1.2 Exercise Price and Other Terms. The Administrator, subject to the
provisions of the Plan, will have complete discretion to determine the terms and
conditions of SARs granted under the Plan. However, the exercise price of Tandem
or Affiliated SARs will equal the Exercise Price of the related Option.

9.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the
Shares subject to the related Option upon the surrender of the right to exercise
the equivalent portion of the related Option. A Tandem SAR may be exercised only
with respect to the Shares for which its related Option is then exercisable.
With respect to a Tandem SAR granted in connection with an Incentive Stock
Option: (a) the Tandem SAR will expire no later than the

 

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expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR will be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive
Stock Option and the Fair Market Value of the Shares subject to the underlying
Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the
Tandem SAR will be exercisable only when the Fair Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.

9.3 Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR will not necessitate a reduction in the number of Shares subject
to the related Option.

9.4 Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such
terms and conditions as the Administrator, in its sole discretion, will
determine.

9.5 SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that
will specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, will determine.

9.6 Expiration of SARs. An SAR granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement. Notwithstanding the foregoing, the rules of Section 5.4 also
will apply to SARs.

9.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

(a) The difference between the Fair Market Value of a Share on the date of
exercise over the exercise price; times

(b) The number of Shares with respect to which the SAR is exercised.

At the discretion of the Administrator, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

9.8 Compliance with Section 409A of the Code. Notwithstanding anything to the
contrary set forth herein, any SARs granted under the Plan that are not exempt
from the requirements of Section 409A of the Code shall incorporate terms and
conditions necessary to avoid the consequences described in Section 409A(a)(1)
of the Code. Such restrictions, if any, shall be determined by the Board and
contained in the Award Agreement evidencing such SARs.

SECTION 10

PERFORMANCE UNITS AND PERFORMANCE SHARES

10.1 Grant of Performance Units/Shares. Performance Units and Performance Shares
may be granted to Service Providers at any time and from time to time, as will
be determined by the Administrator, in its sole discretion. The Administrator
will have complete discretion in

 

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determining the number of Performance Units and Performance Shares granted to
each Participant.

10.2 Value of Performance Units/Shares. Each Performance Unit will have an
initial value that is established by the Administrator on or before the date of
grant. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.

10.3 Performance Objectives and Other Terms. The Administrator will set
performance objectives in its discretion which, depending on the extent to which
they are met, will determine the number or value of Performance Units/Shares
that will be paid out to the Service Providers. The time period during which the
performance objectives must be met will be called the “Performance Period.” Each
Award of Performance Units/Shares will be evidenced by an Award Agreement that
will specify the Performance Period, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. The Administrator may set
performance objectives based upon the achievement of Company-wide, divisional,
or individual goals, applicable federal or state securities laws, or any other
basis determined by the Administrator in its discretion.

10.4 Earning of Performance Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units/Shares will be entitled to
receive a payout of the number of Performance Units/Shares earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance objectives have been achieved.
After the grant of a Performance Unit/Share, the Administrator, in its sole
discretion, may reduce or waive any performance objectives for such Performance
Unit/Share.

10.5 Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares will be made as soon as practicable after the
expiration of the applicable Performance Period. The Administrator, in its sole
discretion, may pay earned Performance Units/Shares in the form of cash, in
Shares (which have an aggregate Fair Market Value equal to the value of the
earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.

10.6 Cancellation of Performance Units/Shares. On the date set forth in the
Award Agreement, all unearned or unvested Performance Units/Shares will be
forfeited to the Company, and again will be available for grant under the Plan.

SECTION 11

FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS

All grants of Options to Outside Directors pursuant to this Section will be
automatic and nondiscretionary and will be made in accordance with the following
provisions:

 

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11.1 Type of Option. All Options granted pursuant to this Section will be
Nonstatutory Stock Options and, except as otherwise provided herein, will be
subject to the other terms and conditions of the Plan.

11.2 No Discretion. No person will have any discretion to select which Outside
Directors will be granted Options under this Section or to determine the number
of Shares to be covered by such Options (except as provided in Section 3).
Notwithstanding the foregoing, the Administrator, in its discretion, may grant
an Option that is otherwise issuable to an Outside Director pursuant to this
Section 11 to the Outside Director’s employer and such employer shall be deemed
an Outside Director for purposes of the Plan.

11.3 First Option. Each person who first becomes an Outside Director following
the Registration Date will be automatically granted an Option to purchase 22,500
Shares (a “First Option”) on or about the date on which such person first
becomes an Outside Director, whether through election by the stockholders of the
Company or appointment by the Board to fill a vacancy; provided, however, that
an Inside Director who ceases to be an Inside Director but who remains a
Director will not receive a First Option.

11.4 Subsequent Option. Each Outside Director who also is the Chairman of the
Board will be automatically granted an Option to purchase 22,500 Shares and each
Outside Director, other than the Chairman of the Board, will be automatically
granted an Option to purchase 11,250 Shares (collectively referred to as a
“Subsequent Option”) on each date of the annual meeting of the stockholders of
the Company beginning in 2004 or 2005, as the case may be, if as of such date,
he or she will have served on the Board for at least the preceding six
(6) months.

11.5 Terms. The terms of each Option granted pursuant to this Section will be as
follows:

11.5.1 The term of the Option will be ten (10) years.

11.5.2 The exercise price per Share will be 100% of the Fair Market Value per
Share on the date of grant of the Option.

11.5.3 Subject to Section 14, the First Option will vest and become exercisable
as to 1/3 of the Shares subject to the Option on each anniversary of its date of
grant, provided that the Participant continues to serve as a Service Provider on
such dates.

11.5.4 Subject to Section 14, the Subsequent Option will vest and become
exercisable as to 100% of the Shares subject to the Option on the anniversary of
its date of grant, provided that the Participant continues to serve as a Service
Provider on such date.

11.6 Amendment. The Administrator in its discretion may change the number of
Shares subject to the First Options and Subsequent Options.

 

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SECTION 12

LEAVE OF ABSENCE

Unless the Administrator provides otherwise, vesting of Awards granted hereunder
will be suspended during any unpaid leave of absence. A Service Provider will
not cease to be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or between the
Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options,
no such leave may exceed three (3) months, unless reemployment upon expiration
of such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
then any Incentive Stock Option held by the Participant will cease to be treated
as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option three (3) months following the first day immediately
following such three (3)-month period.

SECTION 13

TRANSFERABILITY OF AWARDS

Unless determined otherwise by the Administrator, an Award may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Participant, only by the Participant. If the
Administrator makes an Award transferable, such Award will contain such
additional terms and conditions as the Administrator deems appropriate.

SECTION 14

DISSOLUTION OR LIQUIDATION OR CHANGE IN CONTROL

14.1 Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed transaction. To
the extent it has not been previously exercised, an Award will terminate
immediately prior to the consummation of such proposed action.

14.2 Change in Control. In the event of a Change in Control, each outstanding
Award will be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.

In the event that the successor corporation does not assume or substitute for
the Award, the Participant will fully vest in and have the right to exercise the
Option, SAR or Stock Purchase Right as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable, all vesting
restrictions on Restricted Stock and Restricted Stock Units held by the
Participant will lapse, and, with respect to Awards with performance-based
vesting, all performance goals or other vesting criteria will be deemed achieved
at one hundred percent (100%) of target levels and all other terms and
conditions met, in each case subject to the consummation of the Change in
Control. In addition, if an Option, SAR or Stock Purchase Right becomes fully
vested and exercisable in lieu of assumption or substitution in the

 

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event of a Change in Control, the Administrator will notify the Participant in
writing or electronically that the Option, SAR or Stock Purchase Right will be
fully vested and exercisable (subject to the consummation of the Change in
Control) for a period of fifteen (15) days from the date of such notice, and the
Option, SAR or Stock Purchase Right will terminate upon the expiration of such
period.

With respect to Awards granted to an Outside Director that are assumed or
substituted for, if on the date of or following such assumption or substitution
the Participant’s status as a Director or a director of the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the Participant, then, with respect to any Option, SAR and/or
Stock Purchase Rights held by the Participant, the Participant will fully vest
in and have the right to exercise the Option, SAR and/or Stock Purchase Rights
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable, all vesting restrictions on Restricted Stock
and Restricted Stock Units held by the Participant will lapse, and, with respect
to Awards with performance-based vesting, all performance goals or other vesting
criteria will be deemed achieved at one hundred percent (100%) of target levels
and all other terms and conditions met.

For the purposes of this Section 14.2, an Award will be considered assumed if,
following the Change in Control, the Award confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Award immediately prior
to the Change in Control, the consideration (whether stock, cash, or other
securities or property) received in the Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the Change in Control is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of an Option, SAR or Stock Purchase Right, or upon
the payout of a Restricted Stock Unit, Performance Unit or Performance Share for
each Share of Optioned Stock subject to such Award, to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the Change in
Control.

Notwithstanding anything in this Section 14.2 to the contrary, an Award that
vests, is earned or paid-out upon the satisfaction of one or more performance
goals will not be considered assumed if the Company or its successor modifies
any of such performance goals without the Participant’s consent; provided,
however, a modification to such performance goals only to reflect the successor
corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

SECTION 15

NO EFFECT ON EMPLOYMENT OR SERVICE

Neither the Plan nor any Award will confer upon a Participant any right with
respect to continuing the Participant’s relationship as a Service Provider with
the Company, nor will they

 

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interfere in any way with the Participant’s right or the Company’s right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.

SECTION 16

DATE OF GRANT

The date of grant of an Award will be, for all purposes, the date on which the
Administrator makes the determination granting such Award, or such other later
date as is determined by the Administrator. Notice of the determination will be
provided to each Participant within a reasonable time after the date of such
grant.

SECTION 17

TERM OF PLAN

Subject to Section 20 of the Plan, the Plan will become effective following its
adoption by the Board and on the day immediately preceding the date of the
Company’s firmly underwritten initial public offering. It will continue in
effect for a term of ten (10) years unless terminated earlier under Section 18
of the Plan.

SECTION 18

AMENDMENT AND TERMINATION OF THE PLAN

18.1 Amendment and Termination. The Administrator may at any time amend, alter,
suspend or terminate the Plan.

18.2 Stockholder Approval. The Company will obtain stockholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.

18.3 Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company.
Notwithstanding the foregoing, subject to the limitations of Applicable Laws, if
any, the Administrator may amend the terms of any one or more Awards without the
affected Participant’s consent if necessary to maintain the qualified status of
the Award as an Incentive Stock Option or to bring the Award into compliance
with Section 409A of the Code and the related guidance thereunder. Termination
of the Plan will not affect the Administrator’s ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.

SECTION 19

CONDITIONS UPON ISSUANCE OF SHARES

19.1 Legal Compliance. Shares will not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares will comply with

 

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Applicable Laws and will be further subject to the approval of counsel for the
Company with respect to such compliance.

19.2 Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

SECTION 20

INABILITY TO OBTAIN AUTHORITY

The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, will relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority will not have been obtained.

SECTION 21

STOCKHOLDER APPROVAL

The Plan will be subject to approval by the stockholders of the Company within
twelve (12) months after the date the Plan is adopted. Such stockholder approval
will be obtained in the manner and to the degree required under Applicable Laws.

SECTION 22

WITHHOLDING

22.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant’s FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).

22.2 Withholding Arrangements. The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(a) electing to have the Company withhold otherwise deliverable Shares, or
(b) delivering to the Company already-owned Shares having a Fair Market Value
equal to the amount required to be withheld. The amount of the withholding
requirement will be deemed to include any amount which the Administrator agrees
may be withheld at the time the election is made, not to exceed the amount
determined by using the maximum federal, state or local marginal income tax
rates applicable to the Participant with respect to the Award on the date that
the amount of tax to be withheld is to be determined. The Fair Market Value of
the Shares to be withheld or delivered will be determined as of the date that
the taxes are required to be withheld.

 

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SECTION 23

MISCELLANEOUS

23.1 Corporate Action Constituting Grant of Awards. Corporate action
constituting a grant by the Company of an Award to any Participant shall be
deemed completed as of the date of such corporate action, unless otherwise
determined by the Administrator, regardless of when the instrument, certificate,
or letter evidencing the Award is communicated to, or actually received or
accepted by, the Participant.

23.2 Electronic Delivery. Any reference herein to a “written” agreement or
document shall include any agreement or document delivered electronically or
posted on the Company’s intranet.

23.3 Deferrals. To the extent permitted by applicable law, the Administrator, in
its sole discretion, may determine that the delivery of Common Stock or the
payment of cash, upon the exercise, vesting or settlement of all or a portion of
any Award may be deferred and may establish programs and procedures for deferral
elections to be made by Participants. Deferrals by Participants will be made in
accordance with Section 409A of the Code. Consistent with Section 409A of the
Code, the Administrator may provide for distributions while a Participant is
still an employee. The Board is authorized to make deferrals of Awards and
determine when, and in what annual percentages, Participants may receive
payments, including lump sum payments, following the Participant’s termination
of employment or retirement, and implement such other terms and conditions
consistent with the provisions of the Plan and in accordance with applicable
law.

23.4 Compliance with Section 409A. To the extent that the Administrator
determines that any Award granted under the Plan is subject to Section 409A of
the Code, the Award Agreement evidencing such Award shall incorporate the terms
and conditions necessary to avoid the consequences described in
Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award
Agreements shall be interpreted in accordance with Section 409A of the Code and
Treasury Regulations and other interpretive guidance issued thereunder.
Notwithstanding any provision of the Plan to the contrary, in the event that the
Administrator determines that any Award may be subject to Section 409A of the
Code and related guidance, the Administrator may adopt such amendments to the
Plan and the applicable Award Agreement or adopt other policies and procedures
(including amendments, policies and procedures with retroactive effect), or take
any other actions, that the Administrator determines are necessary or
appropriate to (1) exempt the Award from Section 409A of the Code and/or
preserve the intended tax treatment of the benefits provided with respect to the
Award, or (2) comply with the requirements of Section 409A of the Code and
related guidance.

 

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