Exhibit 10.1

 

ULTRATECH, INC.

1993 STOCK OPTION/STOCK ISSUANCE PLAN

 

(Amended and Restated as of March 2, 2004)

 

 

ARTICLE ONE

GENERAL

 

I.                                         PURPOSE OF THE PLAN

 

This 1993 Stock Option/Stock Issuance Plan (“Plan”) is intended to promote the
interests of Ultratech, Inc., a Delaware corporation (the “Corporation”), by
providing (i) key employees (including officers) of the Corporation (or its
parent or subsidiary corporations) who are responsible for the management,
growth and financial success of the Corporation (or its parent or subsidiary
corporations), (ii) the non-employee members of the Corporation’s Board of
Directors and (iii) independent consultants and other advisors 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).

 

A.                                   THE PLAN BECAME EFFECTIVE ON SEPTEMBER 29,
1993, THE DATE ON WHICH THE SHARES OF THE CORPORATION’S COMMON STOCK WERE
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 THE PLAN.

 

B.                                     THIS PLAN SHALL SERVE AS THE SUCCESSOR TO
THE CORPORATION’S EXISTING 1993 STOCK OPTION AND 1993 STOCK ISSUANCE PLANS (THE
“PREDECESSOR PLANS”), AND NO FURTHER OPTION GRANTS OR SHARE ISSUANCES SHALL BE
MADE UNDER THE PREDECESSOR PLANS FROM AND AFTER THE EFFECTIVE DATE OF THIS
PLAN.  ALL OUTSTANDING STOCK OPTIONS AND UNVESTED SHARE ISSUANCES UNDER THE
PREDECESSOR PLANS ON THE EFFECTIVE DATE ARE HEREBY INCORPORATED INTO THIS PLAN
AND SHALL ACCORDINGLY BE TREATED AS OUTSTANDING STOCK OPTIONS AND UNVESTED SHARE
ISSUANCES UNDER THIS PLAN.  HOWEVER, EACH OUTSTANDING OPTION GRANT AND UNVESTED
SHARE ISSUANCE SO INCORPORATED SHALL CONTINUE TO BE GOVERNED SOLELY BY THE
EXPRESS TERMS AND CONDITIONS OF THE INSTRUMENT EVIDENCING SUCH GRANT OR
ISSUANCE, 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 COMMON STOCK THEREUNDER.  ALL
UNVESTED SHARES OF COMMON STOCK OUTSTANDING UNDER THE PREDECESSOR PLANS ON THE
EFFECTIVE DATE SHALL CONTINUE TO BE GOVERNED SOLELY BY THE EXPRESS TERMS AND
CONDITIONS OF THE INSTRUMENTS EVIDENCING SUCH ISSUANCES, AND NO PROVISION OF
THIS PLAN SHALL BE DEEMED TO AFFECT OR MODIFY THE RIGHTS OR OBLIGATIONS OF THE
HOLDERS OF SUCH UNVESTED SHARES.

 

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II.                                     DEFINITIONS

 

A.                                   FOR PURPOSES OF THE PLAN, THE FOLLOWING
DEFINITIONS SHALL BE IN EFFECT:

 

Board:  the Corporation’s Board of Directors.

 

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

 

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

 

Common Stock:  shares of the Corporation’s common stock.

 

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 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.

 

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

 

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

 

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

 

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

 

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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.

 

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 or any
successor system.  If there is no reported closing selling price for the Common
Stock on the date in question, then the closing selling price 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.  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.

 

Hostile Take-Over:  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.

 

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

 

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

 

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

 

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

 

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

 

Take-Over Price:  the greater of (a) the Fair Market Value per share of 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.

 

B.                                     THE FOLLOWING PROVISIONS SHALL BE
APPLICABLE IN DETERMINING THE PARENT AND SUBSIDIARY CORPORATIONS OF THE
CORPORATION:

 

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

 

Each corporation (other than the Corporation) in an unbroken chain of
corporations which begins with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation (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 BOARD MEMBERS WILL RECEIVE A SERIES OF AUTOMATIC
OPTION GRANTS OVER THEIR PERIOD OF CONTINUED BOARD SERVICE 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 FAIR
MARKET VALUE 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.

 

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IV.                                ADMINISTRATION OF THE PLAN

 

A.                                   BOTH THE DISCRETIONARY OPTION GRANT PROGRAM
AND THE STOCK ISSUANCE PROGRAM SHALL BE ADMINISTERED BY A COMMITTEE
(“COMMITTEE”) OF TWO OR MORE NON-EMPLOYEE BOARD MEMBERS.  MEMBERS OF THE
COMMITTEE SHALL SERVE FOR SUCH PERIOD OF TIME AS THE BOARD MAY DETERMINE AND
SHALL BE SUBJECT TO REMOVAL BY THE BOARD AT ANY TIME.

 

B.                                     THE COMMITTEE AS PLAN ADMINISTRATOR SHALL
HAVE FULL POWER AND AUTHORITY (SUBJECT TO THE EXPRESS PROVISIONS OF THE PLAN) TO
ESTABLISH RULES AND REGULATIONS FOR THE PROPER ADMINISTRATION OF THE
DISCRETIONARY OPTION GRANT 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.                                     ADMINISTRATION OF THE AUTOMATIC OPTION
GRANT PROGRAM SHALL BE SELF-EXECUTING IN ACCORDANCE WITH THE EXPRESS TERMS AND
CONDITIONS OF ARTICLE THREE, AND THE COMMITTEE AS PLAN ADMINISTRATOR SHALL
EXERCISE NO DISCRETIONARY FUNCTIONS WITH RESPECT TO OPTION GRANTS MADE PURSUANT
TO THAT PROGRAM.

 

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 SHALL BE LIMITED TO THE FOLLOWING:

 

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 MEMBERS OF THE BOARD; AND

 

3.                                       THOSE INDEPENDENT CONSULTANTS OR OTHER
ADVISORS WHO PROVIDE VALUABLE SERVICES TO THE CORPORATION (OR ITS PARENT OR
SUBSIDIARY CORPORATIONS).

 

B.                                     The Plan Administrator shall have full
authority to determine, (I) with respect to the option grants made under the
Discretionary Option Grant Program, which eligible individuals are to receive
option grants, the time or time when such grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an incentive stock option (“Incentive Option”) which satisfies the
requirements of Section 422 of the Code or a non-statutory option not intended
to meet such requirements, 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 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.

 

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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.  SUBJECT TO THE AUTOMATIC SHARE INCREASE PROVISIONS OF SECTION VI. B. OF
THIS ARTICLE ONE, THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE OVER THE TERM OF THE PLAN SHALL BE LIMITED TO 8,872,647 SHARES(1). 
SUCH SHARE RESERVE INCLUDES (I) THE INITIAL NUMBER OF SHARES  INCORPORATED INTO
THIS PLAN FROM THE PREDECESSOR PLANS ON THE EFFECTIVE DATE, (II) AN ADDITIONAL
600,000-SHARE INCREASE AUTHORIZED BY THE BOARD ON MARCH 21, 1996 AND APPROVED BY
THE STOCKHOLDERS AT THE 1996 ANNUAL STOCKHOLDERS MEETING, (III) AN ADDITIONAL
277,239 SHARES ATTRIBUTABLE TO THE AUTOMATIC ANNUAL SHARE INCREASE FOR FISCAL
1996 WHICH WAS EFFECTED ON JANUARY 2, 1996, (IV) AN ADDITIONAL 284,346 SHARES
ATTRIBUTABLE TO THE AUTOMATIC ANNUAL SHARE INCREASE FOR FISCAL 1997 WHICH WAS
EFFECTED ON JANUARY 2, 1997, (V) AN ADDITIONAL 450,000 SHARES AUTHORIZED BY THE
BOARD ON MARCH 18, 1997 AND APPROVED BY THE STOCKHOLDERS AT THE 1997 ANNUAL
MEETING, (VI) AN ADDITIONAL 291,008 SHARES ATTRIBUTABLE TO THE AUTOMATIC ANNUAL
SHARE INCREASE FOR FISCAL 1998 WHICH WAS EFFECTED ON JANUARY 2, 1998, (VII)  AN
ADDITIONAL 295,480 SHARES ATTRIBUTABLE TO THE AUTOMATIC ANNUAL SHARE INCREASE
FOR FISCAL 1999 WHICH WAS EFFECTED ON JANUARY 4, 1999, (VIII) AN ADDITIONAL
299,490 SHARES ATTRIBUTABLE TO THE AUTOMATIC ANNUAL SHARE INCREASE FOR FISCAL
2000 WHICH WAS EFFECTED ON JANUARY 3, 2000, (IX) AN ADDITIONAL 898,045 SHARES OF
COMMON STOCK ADDED TO THE SHARE RESERVE ON JANUARY 2, 2002 BY REASON OF THE
AUTOMATIC INCREASE PROVISION OF SECTION VI.B OF THIS ARTICLE ONE, (X) AN
ADDITIONAL 905,088 SHARES OF COMMON STOCK ADDED TO THE SHARE RESERVE ON
JANUARY 2, 2003 BY REASON OF THE AUTOMATIC INCREASE PROVISION OF SECTION VI.B OF
THIS ARTICLE ONE AND (XI) AN ADDITIONAL 943,285 SHARES OF COMMON STOCK ADDED TO
THE SHARE RESERVE ON JANUARY 2, 2004 BY REASON OF THE AUTOMATIC INCREASE
PROVISION OF SECTION VI.B OF THIS ARTICLE ONE..  THE SHARE RESERVE IN EFFECT
FROM TIME TO TIME UNDER THE PLAN SHALL BE SUBJECT TO PERIODIC ADJUSTMENT IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION VI.  TO THE EXTENT ONE OR MORE
OUTSTANDING OPTIONS UNDER THE PREDECESSOR PLANS 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.

 

B.                                     THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE FOR ISSUANCE UNDER THE PLAN SHALL AUTOMATICALLY INCREASE ON THE FIRST
TRADING DAY OF JANUARY OF EACH CALENDAR YEAR, BEGINNING WITH CALENDAR YEAR 2002
AND CONTINUING THROUGH CALENDAR YEAR 2006, BY AN AMOUNT EQUAL TO FOUR PERCENT
(4%) OF THE TOTAL NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ON THE LAST
TRADING DAY OF THE CALENDAR YEAR IMMEDIATELY PRECEDING THE CALENDAR YEAR OF EACH
SUCH SHARE INCREASE, BUT IN NO EVENT SHALL ANY SUCH ANNUAL INCREASE EXCEED
1,700,000 SHARES.

 

C.                                     IN NO EVENT MAY THE AGGREGATE NUMBER OF
SHARES OF COMMON STOCK FOR WHICH ANY ONE INDIVIDUAL PARTICIPATING IN THE PLAN
MAY BE GRANTED STOCK OPTIONS, SEPARATELY-EXERCISABLE STOCK APPRECIATION RIGHTS
AND DIRECT STOCK ISSUANCES EXCEED 400,000 SHARES PER FISCAL YEAR, BEGINNING WITH
THE 1995 FISCAL YEAR.  HOWEVER, FOR THE FISCAL YEAR IN WHICH AN INDIVIDUAL
RECEIVES HIS OR HER INITIAL STOCK OPTION GRANT OR DIRECT STOCK ISSUANCE UNDER
THE PLAN, THE LIMIT SHALL

 

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(1)  All figures have been adjusted to reflect the 2:1 stock split the
Corporation effected May 10, 1995.

 

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be increased to 600,000 shares.  Such limitations shall be subject to adjustment
from time to time in accordance with the provisions of this Section VI.

 

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D.                                    SHOULD ONE OR MORE OUTSTANDING OPTIONS
UNDER THIS PLAN (INCLUDING OUTSTANDING OPTIONS UNDER THE PREDECESSOR PLANS
INCORPORATED INTO THIS PLAN) EXPIRE OR TERMINATE FOR ANY REASON PRIOR TO
EXERCISE IN FULL (INCLUDING ANY OPTION CANCELLED IN ACCORDANCE WITH THE
CANCELLATION-REGRANT PROVISIONS OF SECTION IV OF ARTICLE TWO OF THE PLAN), THEN
THE SHARES SUBJECT TO THE PORTION OF EACH OPTION NOT SO EXERCISED SHALL BE
AVAILABLE FOR SUBSEQUENT ISSUANCE UNDER THE PLAN.  UNVESTED SHARES ISSUED UNDER
THE PLAN AND SUBSEQUENTLY REPURCHASED BY THE CORPORATION, AT THE ORIGINAL
EXERCISE OR 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.  SHARES SUBJECT TO ANY OPTION OR PORTION THEREOF
SURRENDERED OR CANCELLED IN ACCORDANCE WITH SECTION V OF ARTICLE TWO SHALL
REDUCE ON A SHARE-FOR-SHARE BASIS THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE
FOR SUBSEQUENT ISSUANCE UNDER THE PLAN.  IN ADDITION, SHOULD THE EXERCISE PRICE
OF AN OUTSTANDING OPTION UNDER THE PLAN (INCLUDING ANY OPTION INCORPORATED FROM
THE PREDECESSOR PLANS) BE PAID WITH SHARES OF COMMON STOCK OR SHOULD SHARES OF
COMMON STOCK OTHERWISE ISSUABLE UNDER THE PLAN BE WITHHELD BY THE CORPORATION IN
SATISFACTION OF THE WITHHOLDING TAXES INCURRED IN CONNECTION WITH THE EXERCISE
OF AN OUTSTANDING OPTION UNDER THE PLAN OR THE VESTING OF A DIRECT SHARE
ISSUANCE MADE UNDER THE PLAN, THEN THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE FOR ISSUANCE UNDER THE PLAN SHALL BE REDUCED BY THE GROSS NUMBER OF
SHARES FOR WHICH THE OPTION IS EXERCISED OR WHICH VEST UNDER THE SHARE ISSUANCE,
AND NOT BY THE NET NUMBER OF SHARES OF COMMON STOCK ACTUALLY ISSUED TO THE
HOLDER OF SUCH OPTION OR SHARE ISSUANCE.

 

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 PERSON MAY BE
GRANTED STOCK OPTIONS, SEPARATELY EXERCISABLE STOCK APPRECIATIONS RIGHTS AND
DIRECT STOCK ISSUANCES UNDER THIS PLAN PER CALENDAR YEAR, (III) THE NUMBER
AND/OR CLASS OF SECURITIES FOR WHICH AUTOMATIC OPTION GRANTS ARE TO BE
SUBSEQUENTLY MADE PER ELIGIBLE 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 PREDECESSOR PLANS.  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 AND SHALL IN NO EVENT BE LESS THAN ONE HUNDRED
PERCENT (100%) OF THE FAIR MARKET VALUE OF SUCH COMMON STOCK ON THE GRANT DATE.

 

2.                                       THE OPTION PRICE SHALL BECOME
IMMEDIATELY DUE UPON EXERCISE OF THE OPTION AND, SUBJECT TO THE PROVISIONS OF
SECTION I OF ARTICLE FOUR AND THE INSTRUMENT EVIDENCING THE GRANT, SHALL BE
PAYABLE IN ONE OF THE FOLLOWING ALTERNATIVE FORMS SPECIFIED BELOW:

 

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

 

•                                          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); or

 

•                                          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

 

•                                          full payment through a broker-dealer
sale and remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate option price payable for the purchased shares plus all
applicable

 

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Federal and State income and employment taxes required to be withheld by the
Corporation in connection with such purchase and (II) shall 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.

 

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.                                     LIMITED TRANSFERABILITY.  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,
NON-STATUTORY OPTIONS 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.

 

D.                                    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 D.(3) below)
remain exercisable for more than a thirty-six (36)-month period (or such shorter
period determined by the Plan Administrator and set forth in the instrument
evidencing the grant) measured from the date of such cessation of Service.

 

•                                          Any option held by the Optionee under
this Article Two and exercisable in whole or in part on the date of his or her
death may be subsequently exercised by the personal representative of the
Optionee’s estate or by the person or persons to whom the option is transferred
pursuant to the Optionee’s will or in accordance with the laws of descent and
distribution.  Such

 

10

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exercise, however, must occur prior to the earlier of (i) the first anniversary
of the date of the Optionee’s death or (ii) the specified expiration date of the
option term.  Upon the occurrence of the earlier event, the option shall
terminate.

 

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

 

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

 

•                                          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 THE OPTION SHARES IN
WHICH THE OPTIONEE WOULD HAVE OTHERWISE VESTED 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.

 

11

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E.                                      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.

 

F.                                      REPURCHASE RIGHTS.

 

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

 

(A)                                  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
UPON WHICH SUCH REPURCHASE RIGHT SHALL BE EXERCISABLE (INCLUDING THE PERIOD AND
PROCEDURE FOR EXERCISE AND THE APPROPRIATE VESTING SCHEDULE FOR THE PURCHASED
SHARES) SHALL BE ESTABLISHED BY THE PLAN ADMINISTRATOR AND SET FORTH IN THE
INSTRUMENT EVIDENCING SUCH REPURCHASE RIGHT.

 

(B)                                 ALL OF THE CORPORATION’S OUTSTANDING
REPURCHASE RIGHTS UNDER THIS ARTICLE TWO SHALL AUTOMATICALLY TERMINATE, AND ALL
SHARES SUBJECT TO SUCH TERMINATED RIGHTS SHALL IMMEDIATELY VEST IN FULL, UPON
THE OCCURRENCE OF A CORPORATE TRANSACTION, EXCEPT TO THE EXTENT:  (I) ANY SUCH
REPURCHASE RIGHT IS EXPRESSLY ASSIGNED TO THE SUCCESSOR CORPORATION (OR PARENT
THEREOF) IN CONNECTION WITH THE CORPORATE TRANSACTION OR (II) SUCH ACCELERATED
VESTING IS PRECLUDED BY OTHER LIMITATIONS IMPOSED BY THE PLAN ADMINISTRATOR AT
THE TIME THE REPURCHASE RIGHT IS ISSUED.

 

(C)                                  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 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 AFTER
DECEMBER 31, 1986 UNDER THIS PLAN (OR ANY OTHER OPTION PLAN OF THE CORPORATION
OR ITS PARENT OR SUBSIDIARY CORPORATIONS) MAY FOR THE FIRST TIME BECOME
EXERCISABLE AS INCENTIVE STOCK OPTIONS UNDER THE FEDERAL TAX LAWS DURING ANY ONE
CALENDAR YEAR SHALL NOT EXCEED THE SUM OF ONE HUNDRED THOUSAND DOLLARS
($100,000).  TO THE EXTENT THE EMPLOYEE HOLDS TWO

 

12

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(2) or more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such options as
incentive stock options under the Federal tax laws shall be applied on the basis
of the order in which such options are granted.  Should the number of shares of
Common Stock for which any Incentive Option first becomes exercisable in any
calendar year exceed the applicable One Hundred Thousand Dollar ($100,000)
limitation, then that option may nevertheless be exercised in that calendar year
for the excess number of shares as a non-statutory option under the Federal tax
laws.

 

B.                                     10% STOCKHOLDER.  IF ANY INDIVIDUAL TO
WHOM AN INCENTIVE OPTION IS GRANTED IS THE OWNER OF STOCK (AS DETERMINED UNDER
SECTION 424(D) OF THE CODE) POSSESSING TEN PERCENT (10%) OR MORE OF THE TOTAL
COMBINED VOTING POWER OF ALL CLASSES OF STOCK OF THE CORPORATION OR ANY ONE OF
ITS PARENT OR SUBSIDIARY CORPORATIONS, THEN THE 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 AS FULLY-VESTED SHARES.  HOWEVER, AN OUTSTANDING OPTION UNDER THIS
ARTICLE TWO SHALL NOT SO ACCELERATE IF AND TO THE EXTENT:  (I) SUCH OPTION IS,
IN CONNECTION WITH THE CORPORATE TRANSACTION, EITHER TO BE ASSUMED BY THE
SUCCESSOR CORPORATION OR PARENT THEREOF OR TO BE REPLACED WITH A COMPARABLE
OPTION TO PURCHASE SHARES OF THE CAPITAL STOCK OF THE SUCCESSOR CORPORATION OR
PARENT THEREOF, (II) SUCH OPTION IS TO BE REPLACED WITH A CASH INCENTIVE PROGRAM
OF THE SUCCESSOR CORPORATION WHICH PRESERVES THE OPTION SPREAD EXISTING AT THE
TIME OF THE CORPORATE TRANSACTION AND PROVIDES FOR SUBSEQUENT PAYOUT IN
ACCORDANCE WITH THE SAME VESTING SCHEDULE APPLICABLE TO SUCH OPTION, OR (III)
THE ACCELERATION OF SUCH OPTION IS SUBJECT TO OTHER LIMITATIONS IMPOSED BY THE
PLAN ADMINISTRATOR AT THE TIME OF THE OPTION GRANT.  THE DETERMINATION OF OPTION
COMPARABILITY UNDER CLAUSE (I) ABOVE SHALL BE MADE BY THE PLAN ADMINISTRATOR,
AND ITS DETERMINATION SHALL BE FINAL, BINDING AND CONCLUSIVE.

 

B.                                     IMMEDIATELY FOLLOWING THE CONSUMMATION OF
THE CORPORATE TRANSACTION, ALL OUTSTANDING OPTIONS UNDER THIS ARTICLE TWO SHALL
TERMINATE AND CEASE TO BE OUTSTANDING, EXCEPT TO THE EXTENT ASSUMED BY THE
SUCCESSOR CORPORATION OR ITS PARENT COMPANY.

 

C.                                     EACH OUTSTANDING OPTION UNDER THIS
ARTICLE TWO WHICH IS ASSUMED IN CONNECTION WITH THE CORPORATE TRANSACTION OR IS
OTHERWISE TO CONTINUE IN EFFECT SHALL BE APPROPRIATELY ADJUSTED, IMMEDIATELY
AFTER SUCH CORPORATE TRANSACTION, TO APPLY AND PERTAIN TO THE NUMBER AND CLASS
OF SECURITIES WHICH WOULD HAVE BEEN ISSUED TO THE OPTION HOLDER, IN CONSUMMATION
OF SUCH CORPORATE TRANSACTION, HAD SUCH PERSON EXERCISED THE OPTION IMMEDIATELY

 

13

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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, appropriate
adjustments to reflect the Corporate Transaction shall be made to (i) the class
and number of securities available for issuance over the remaining term of the
Plan, (ii) the maximum number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances under this Plan per calendar year and (iii)
the maximum number and/or class of securities which may be issued pursuant to
Incentive Options granted under the Plan.

 

D.                                    THE PLAN ADMINISTRATOR SHALL HAVE THE
DISCRETION,  EXERCISABLE EITHER AT THE TIME THE OPTION IS GRANTED OR AT ANY TIME
WHILE THE OPTION REMAINS OUTSTANDING, TO PROVIDE (UPON SUCH TERMS AS IT MAY DEEM
APPROPRIATE) FOR THE AUTOMATIC ACCELERATION OF ONE OR MORE OUTSTANDING OPTIONS
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.

 

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 AT THE TIME THE OPTION IS GRANTED OR
AT ANY TIME WHILE THE OPTION REMAINS OUTSTANDING, 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) UPON THE OCCURRENCE OF ANY CHANGE IN CONTROL.  THE PLAN
ADMINISTRATOR SHALL ALSO HAVE FULL POWER AND AUTHORITY TO CONDITION ANY SUCH
OPTION ACCELERATION (AND THE TERMINATION OF ANY OUTSTANDING REPURCHASE RIGHTS)
UPON THE SUBSEQUENT TERMINATION OF THE OPTIONEE’S SERVICE WITHIN A SPECIFIED
PERIOD FOLLOWING THE CHANGE IN CONTROL.

 

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.                                    THE EXERCISABILITY AS INCENTIVE STOCK
OPTIONS UNDER THE FEDERAL TAX LAWS OF ANY OPTIONS ACCELERATED UNDER THIS
SECTION III IN CONNECTION WITH A CORPORATE TRANSACTION OR CHANGE IN CONTROL
SHALL REMAIN SUBJECT TO THE DOLLAR LIMITATION OF SECTION II OF THIS
ARTICLE TWO.  TO THE EXTENT SUCH DOLLAR LIMITATION IS EXCEEDED, THE ACCELERATED
OPTION SHALL BE EXERCISABLE AS A NON-STATUTORY OPTION UNDER THE FEDERAL TAX
LAWS.

 

IV.                                CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected optionees, the cancellation of
any or all outstanding options under this Article Two (including outstanding
options under the Predecessor Plans incorporated into this Plan) and to grant in
substitution new options under the Plan covering the same or different numbers
of shares of Common Stock but with an option price per share not less than the
Fair Market Value of the Common Stock on the new grant date.

 

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V.                                    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 V, ONE OR MORE OPTIONEES MAY BE GRANTED THE RIGHT,
EXERCISABLE UPON SUCH TERMS AND CONDITIONS AS THE PLAN ADMINISTRATOR MAY
ESTABLISH, TO SURRENDER ALL OR PART OF AN UNEXERCISED OPTION UNDER THIS
ARTICLE TWO IN EXCHANGE FOR A DISTRIBUTION FROM THE CORPORATION IN AN AMOUNT
EQUAL TO THE EXCESS OF (I) THE FAIR MARKET VALUE (ON THE OPTION SURRENDER DATE)
OF THE NUMBER OF SHARES IN WHICH THE OPTIONEE IS AT THE TIME VESTED UNDER THE
SURRENDERED OPTION (OR SURRENDERED PORTION THEREOF) OVER (II) THE AGGREGATE
OPTION PRICE PAYABLE FOR SUCH VESTED SHARES.

 

B.                                     NO SURRENDER OF AN OPTION SHALL BE
EFFECTIVE HEREUNDER UNLESS IT IS APPROVED BY THE PLAN ADMINISTRATOR.  IF THE
SURRENDER IS SO APPROVED, THEN THE DISTRIBUTION TO WHICH THE OPTIONEE SHALL
ACCORDINGLY BECOME ENTITLED UNDER THIS SECTION V MAY BE MADE IN SHARES OF COMMON
STOCK VALUED AT FAIR MARKET VALUE ON THE OPTION SURRENDER DATE, IN CASH, OR
PARTLY IN SHARES AND PARTLY IN CASH, AS THE PLAN ADMINISTRATOR SHALL IN ITS SOLE
DISCRETION DEEM APPROPRIATE.

 

C.                                     IF THE SURRENDER OF AN OPTION IS REJECTED
BY THE PLAN ADMINISTRATOR, THEN THE OPTIONEE SHALL RETAIN WHATEVER RIGHTS THE
OPTIONEE HAD UNDER THE SURRENDERED OPTION (OR SURRENDERED PORTION THEREOF) ON
THE OPTION SURRENDER DATE AND MAY EXERCISE SUCH RIGHTS AT ANY TIME PRIOR TO THE
LATER OF (I) FIVE (5) BUSINESS DAYS AFTER THE RECEIPT OF THE REJECTION NOTICE OR
(II) THE LAST DAY ON WHICH THE OPTION IS OTHERWISE EXERCISABLE IN ACCORDANCE
WITH THE TERMS OF THE INSTRUMENT EVIDENCING SUCH OPTION, BUT IN NO EVENT MAY
SUCH RIGHTS BE EXERCISED MORE THAN TEN (10) YEARS AFTER THE DATE OF THE OPTION
GRANT.

 

D.                                    ONE OR MORE OFFICERS OF THE CORPORATION
SUBJECT TO THE SHORT-SWING PROFIT RESTRICTIONS OF THE FEDERAL SECURITIES LAWS
MAY, IN THE PLAN ADMINISTRATOR’S SOLE DISCRETION, BE GRANTED LIMITED STOCK
APPRECIATION RIGHTS IN TANDEM WITH THEIR OUTSTANDING OPTIONS UNDER THE PLAN. 
UPON THE OCCURRENCE OF A HOSTILE TAKE-OVER EFFECTED AT ANY TIME WHEN THE
CORPORATION’S OUTSTANDING COMMON STOCK IS REGISTERED UNDER SECTION 12(G) OF THE
1934 ACT, THE OFFICER SHALL HAVE A THIRTY (30)-DAY PERIOD IN WHICH HE OR SHE MAY
SURRENDER ANY OUTSTANDING OPTION WITH SUCH A LIMITED STOCK APPRECIATION RIGHT TO
THE CORPORATION, TO THE EXTENT SUCH OPTION IS AT THE TIME EXERCISABLE FOR
FULLY-VESTED SHARES OF COMMON STOCK.  THE OFFICER SHALL IN RETURN BE ENTITLED TO
A CASH DISTRIBUTION FROM THE CORPORATION IN AN AMOUNT EQUAL TO THE EXCESS OF (I)
THE TAKE-OVER PRICE OF THE VESTED SHARES OF COMMON STOCK AT THE TIME SUBJECT TO
EACH SURRENDERED OPTION (OR SURRENDERED PORTION OF SUCH OPTION) OVER (II) THE
AGGREGATE EXERCISE PRICE PAYABLE FOR SUCH SHARES.  THE CASH DISTRIBUTION PAYABLE
UPON SUCH OPTION SURRENDER SHALL BE MADE WITHIN FIVE (5) DAYS FOLLOWING THE
CONSUMMATION OF THE HOSTILE TAKE-OVER.  THE PLAN ADMINISTRATOR SHALL
PRE-APPROVE, AT THE TIME THE LIMITED STOCK APPRECIATION RIGHT IS GRANTED, THE
SUBSEQUENT EXERCISE OF THAT RIGHT IN ACCORDANCE WITH THE TERMS OF THE GRANT AND
THE PROVISIONS OF THIS SECTION V.D.  NO ADDITIONAL APPROVAL OF THE PLAN
ADMINISTRATOR OR THE BOARD SHALL BE REQUIRED AT THE TIME OF THE ACTUAL OPTION
SURRENDER AND 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.

 

15

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E.                                      THE SHARES OF COMMON STOCK SUBJECT TO
ANY OPTION SURRENDERED FOR AN APPRECIATION DISTRIBUTION PURSUANT TO THIS
SECTION V SHALL NOT BE AVAILABLE FOR SUBSEQUENT ISSUANCE UNDER THE PLAN.

 

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ARTICLE THREE

AUTOMATIC OPTION GRANT PROGRAM

 

I.                                         ELIGIBILITY

 

The provisions of the Automatic Option Grant Program were revised, effective
March 1, 1996, to eliminate the special one-time option grant for 28,800 shares
of Common Stock to each newly-elected or newly-appointed non-employee Board
member and to implement a new program of periodic option grants to all eligible
non-employee Board members.  Under the revised Automatic Option Grant Program,
the following individuals shall be eligible to receive automatic option grants
over their period of Board service: (i) those individuals who were serving as
non-employee Board members on the date of the 1996 Annual Stockholders Meeting
but who first joined the Board after September 29, 1993, (ii) those individuals
who first join the Board as non-employee Board members after the date of the
1996 Annual Stockholders Meeting and (iii) those individuals who first joined
the Board prior to September 30, 1993 and continue to serve as non-employee
Board members through one or more Annual Stockholders Meetings, beginning with
the 1996 Annual Meeting.  However, a non-employee Board member who has
previously been in the employ of the Corporation (or any Parent or Subsidiary)
shall not be eligible to receive a 12,000-share option grant at the time of his
or her initial election or appointment to the Board, but such individual shall
be eligible to receive one or more 4,000-share annual option grants (8,000-share
annual option grants for grants made on or after the date of the 2003 Annual
Meeting) over his or her period of continued Board service.  Each non-employee
Board member eligible to participate in the Automatic Option Grant Program
pursuant to the foregoing criteria shall be designated an Eligible Director for
purposes of the Plan.

 

II.                                     TERMS AND CONDITIONS OF AUTOMATIC OPTION
GRANTS

 

A.                                   GRANT DATE.

 

1.                                       EACH INDIVIDUAL SERVING AS A
NON-EMPLOYEE BOARD MEMBER ON THE DATE OF THE 1996 ANNUAL STOCKHOLDERS MEETING
SHALL BE GRANTED ON THAT DATE A NON-STATUTORY STOCK OPTION TO PURCHASE 12,000
SHARES OF COMMON STOCK UPON THE TERMS AND CONDITIONS OF THIS ARTICLE THREE,
PROVIDED SUCH INDIVIDUAL (I) HAS NOT PREVIOUSLY BEEN IN THE EMPLOY OF THE
CORPORATION (OR ANY PARENT OR SUBSIDIARY) AND (II) DID NOT JOIN THE BOARD PRIOR
TO SEPTEMBER 30, 1993.  IF ANY SUCH INDIVIDUAL PREVIOUSLY RECEIVED AN AUTOMATIC
OPTION GRANT FOR 28,800 SHARES OF COMMON STOCK AT THE TIME OF HIS OR HER INITIAL
ELECTION OR APPOINTMENT TO THE BOARD, THEN THAT OPTION WAS AUTOMATICALLY
CANCELLED UPON STOCKHOLDER APPROVAL OF THE REVISED AUTOMATIC OPTION GRANT
PROGRAM AT THE 1996 ANNUAL MEETING.

 

2.                                       EACH INDIVIDUAL WHO IS FIRST ELECTED OR
APPOINTED AS A NON-EMPLOYEE BOARD MEMBER AFTER THE DATE OF THE 1996 ANNUAL
STOCKHOLDERS MEETING SHALL AUTOMATICALLY BE GRANTED, ON THE DATE OF SUCH INITIAL
ELECTION OR APPOINTMENT, A NON-STATUTORY STOCK OPTION TO PURCHASE 12,000 SHARES
OF COMMON STOCK UPON THE TERMS AND CONDITIONS OF THIS ARTICLE THREE, PROVIDED
SUCH INDIVIDUAL HAS NOT PREVIOUSLY BEEN IN THE EMPLOY OF THE CORPORATION (OR ANY
PARENT OR SUBSIDIARY).

 

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3.                                       ON THE DATE OF EACH ANNUAL STOCKHOLDERS
MEETING, BEGINNING WITH THE 1996 ANNUAL STOCKHOLDERS MEETING, EACH INDIVIDUAL
WHO IS TO CONTINUE TO SERVE AS A NON-EMPLOYEE BOARD MEMBER, WHETHER OR NOT HE OR
SHE IS STANDING FOR RE-ELECTION TO THE BOARD AT THAT PARTICULAR ANNUAL MEETING,
SHALL AUTOMATICALLY BE GRANTED A NON-STATUTORY OPTION TO PURCHASE 4,000 SHARES
OF COMMON STOCK (8,000-SHARES OF COMMON STOCK FOR GRANTS MADE ON OR AFTER THE
DATE OF THE 2003 ANNUAL MEETING), PROVIDED SUCH INDIVIDUAL DID NOT RECEIVE ANY
OTHER OPTION GRANTS UNDER THIS AUTOMATIC OPTION GRANT PROGRAM WITHIN THE
PRECEDING SIX (6) MONTHS.  THERE SHALL BE NO LIMIT ON THE NUMBER OF SUCH
4,000-SHARE OPTION GRANTS (8,000-SHARE OPTION GRANTS FOR OPTIONS GRANTED ON OR
AFTER THE DATE OF THE 2003 ANNUAL MEETING) ANY ONE ELIGIBLE DIRECTOR MAY RECEIVE
OVER HIS OR HER PERIOD OF BOARD SERVICE, AND INDIVIDUALS WHO HAVE PREVIOUSLY
BEEN IN THE EMPLOY OF THE CORPORATION (OR ANY PARENT OR SUBSIDIARY) SHALL BE
ELIGIBLE TO RECEIVE SUCH ANNUAL OPTION GRANTS OVER THEIR PERIOD OF CONTINUED
BOARD SERVICE.

 

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 (AS SUCH
TERM IS DEFINED BELOW); 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)                              TO THE EXTENT THE OPTION IS EXERCISED FOR
VESTED SHARES, FULL PAYMENT THROUGH A SALE AND REMITTANCE PROCEDURE PURSUANT TO
WHICH THE NON-EMPLOYEE BOARD MEMBER (I) SHALL PROVIDE IRREVOCABLE WRITTEN
INSTRUCTIONS TO A CORPORATION-DESIGNATED BROKERAGE FIRM TO EFFECT THE IMMEDIATE
SALE OF THE PURCHASED SHARES AND REMIT TO THE CORPORATION, OUT OF THE SALE
PROCEEDS AVAILABLE ON THE SETTLEMENT DATE, SUFFICIENT FUNDS TO COVER THE
AGGREGATE EXERCISE PRICE PAYABLE FOR THE PURCHASED SHARES AND SHALL (II)
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.

 

For purposes of this subparagraph C, 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 specified above is
utilized in connection with the exercise of the option for vested shares,
payment of the option price for the purchased shares must accompany the exercise
notice.  However, if the option is exercised for any unvested shares, then the
optionee

 

18

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must also execute and deliver to the Corporation a stock purchase agreement for
those unvested shares which provides the Corporation with the right to
repurchase, at the exercise price paid per share, any unvested shares held by
the optionee at the time of cessation of Board service and which precludes the
sale, transfer or other disposition of any shares purchased under the option, to
the extent those shares are subject to the Corporation’s repurchase right.

 

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.

 

E.                                      EXERCISABILITY/VESTING.  EACH AUTOMATIC
GRANT SHALL BE IMMEDIATELY EXERCISABLE FOR ANY OR ALL OF THE OPTION SHARES. 
HOWEVER, ANY SHARES PURCHASED UNDER THE OPTION SHALL BE SUBJECT TO REPURCHASE BY
THE CORPORATION, AT THE EXERCISE PRICE PAID PER SHARE, UPON THE OPTIONEE’S
CESSATION OF BOARD SERVICE PRIOR TO VESTING IN THOSE SHARES.  THE SHARES SUBJECT
TO EACH 12,000-SHARE INITIAL AUTOMATIC OPTION GRANT SHALL VEST AS FOLLOWS:  (I)
FIFTY PERCENT (50%) OF THE SHARES SHALL VEST UPON THE OPTIONEE’S COMPLETION OF
ONE (1) YEAR OF BOARD SERVICE MEASURED FROM THE GRANT DATE, AND (II) THE
REMAINING SHARES SHALL VEST IN THREE (3) SUCCESSIVE EQUAL ANNUAL INSTALLMENTS
UPON THE OPTIONEE’S COMPLETION OF EACH OF THE NEXT THREE (3) YEARS OF BOARD
SERVICE THEREAFTER.  THE SHARES SUBJECT TO EACH 4,000-SHARE ANNUAL AUTOMATIC
OPTION GRANT (8,000-SHARE ANNUAL AUTOMATIC OPTION GRANT FOR GRANTS MADE ON OR
AFTER THE DATE OF THE 2003 ANNUAL MEETING) SHALL VEST UPON THE EARLIER OF (I)
THE OPTIONEE’S COMPLETION OF ONE (1) YEAR OF BOARD SERVICE MEASURED FROM THE
GRANT DATE AND (II) THE OPTIONEE’S CONTINUATION IN BOARD SERVICE THROUGH THE DAY
IMMEDIATELY PRECEDING THE DATE OF THE FIRST ANNUAL STOCKHOLDERS MEETING
FOLLOWING THE GRANT DATE OF SUCH OPTION.(2)  VESTING OF THE OPTION SHARES SHALL
BE SUBJECT TO ACCELERATION AS PROVIDED IN SECTION II.G AND SECTION III OF THIS
ARTICLE THREE.

 

F.                                      LIMITED TRANSFERABILITY.  EACH OPTION
GRANTED UNDER THIS AUTOMATIC OPTION GRANT PROGRAM PRIOR TO THE 1997 ANNUAL
STOCKHOLDERS MEETING SHALL, DURING THE LIFETIME OF THE OPTIONEE, BE EXERCISABLE
ONLY BY THE OPTIONEE AND SHALL NOT BE ASSIGNABLE OR TRANSFERABLE BY THE OPTIONEE
OTHERWISE THAN BY WILL OR THE BY THE LAWS OF DESCENT AND DISTRIBUTION FOLLOWING
THE OPTIONEE’S DEATH.  HOWEVER, EACH OPTION GRANTED UNDER THIS  AUTOMATIC OPTION
GRANT PROGRAM ON OR AFTER THE 1997 ANNUAL STOCKHOLDERS MEETING SHALL BE
ASSIGNABLE IN WHOLE OR IN PART BY THE OPTIONEE DURING HIS OR HER LIFETIME, BUT
ONLY TO THE EXTENT SUCH ASSIGNMENT IS MADE IN CONNECTION WITH THE OPTIONEE’S
ESTATE PLAN 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.

 

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(2)  The shares subject to each automatic annual option grant made prior to June
3, 2004 will vest upon the optionee’s completion of one (1) year of Board
service measured from the grant date.

 

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G.                                     EFFECT OF TERMINATION OF BOARD SERVICE.

 

1.                                       SHOULD THE OPTIONEE CEASE TO SERVE AS A
BOARD MEMBER FOR ANY REASON (OTHER THAN DEATH OR PERMANENT DISABILITY) WHILE
HOLDING AN AUTOMATIC OPTION GRANT 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 SUCH OPTION FOR ANY OR ALL OF THE OPTION SHARES IN
WHICH THE OPTIONEE IS VESTED AT THE TIME OF SUCH CESSATION OF BOARD SERVICE. 
THE OPTION SHALL IMMEDIATELY TERMINATE AND CEASE TO BE OUTSTANDING, AT THE TIME
OF SUCH CESSATION OF BOARD SERVICE, WITH RESPECT TO ANY OPTION SHARES IN WHICH
THE OPTIONEE IS NOT OTHERWISE AT THAT TIME VESTED.

 

2.                                       SHOULD THE OPTIONEE DIE WITHIN SIX (6)
MONTHS AFTER CESSATION OF BOARD SERVICE, THEN ANY AUTOMATIC OPTION GRANT HELD BY
THE OPTIONEE AT THE TIME OF DEATH MAY SUBSEQUENTLY BE EXERCISED, FOR ANY OR ALL
OF THE OPTION SHARES IN WHICH THE OPTIONEE IS VESTED AT THE TIME OF HIS OR HER
CESSATION OF BOARD SERVICE (LESS ANY VESTED 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.  ANY SUCH EXERCISE MUST OCCUR WITHIN TWELVE (12) MONTHS AFTER THE
DATE OF THE OPTIONEE’S DEATH.

 

3.                                       SHOULD THE OPTIONEE DIE OR BECOME
PERMANENT DISABLED WHILE SERVING AS A BOARD MEMBER, THEN THE SHARES OF COMMON
STOCK AT THE TIME SUBJECT TO EACH AUTOMATIC OPTION GRANT HELD BY SUCH OPTIONEE
UNDER THIS ARTICLE THREE SHALL IMMEDIATELY VEST IN FULL, AND THE OPTIONEE (OR
THE REPRESENTATIVE OF THE OPTIONEE’S ESTATE OR THE PERSON OR PERSONS TO WHOM THE
OPTION IS TRANSFERRED UPON 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 SUCH OPTION FOR ANY OR ALL OF THOSE VESTED SHARES OF COMMON STOCK.

 

4.                                       IN NO EVENT SHALL ANY AUTOMATIC GRANT
UNDER THIS ARTICLE THREE REMAIN EXERCISABLE AFTER THE EXPIRATION DATE OF THE TEN
(10)-YEAR OPTION TERM.  UPON THE EXPIRATION OF THE APPLICABLE POST-SERVICE
EXERCISE PERIOD UNDER SUBPARAGRAPH 1, 2 OR 3 ABOVE OR (IF EARLIER) UPON THE
EXPIRATION OF THE TEN (10)—YEAR OPTION TERM, THE AUTOMATIC GRANT SHALL TERMINATE
AND CEASE TO BE OUTSTANDING FOR ANY OPTION SHARES IN WHICH THE OPTIONEE WAS
VESTED AT THE TIME OF HIS OR HER CESSATION OF BOARD SERVICE BUT WHICH WERE NOT
OTHERWISE PURCHASED THEREUNDER.

 

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 FORM
NON-STATUTORY STOCK OPTION AGREEMENT ATTACHED AS EXHIBIT A.

 

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

 

A.                                   IN THE EVENT OF ANY CORPORATE TRANSACTION,
THE SHARES OF COMMON STOCK AT THE TIME SUBJECT TO EACH OUTSTANDING OPTION UNDER
THIS ARTICLE THREE BUT NOT OTHERWISE VESTED SHALL AUTOMATICALLY VEST IN FULL SO
THAT EACH SUCH OPTION SHALL, IMMEDIATELY PRIOR TO THE SPECIFIED EFFECTIVE DATE
FOR THE CORPORATE TRANSACTION, BECOME FULLY EXERCISABLE FOR ALL OF THE SHARES OF
COMMON STOCK AT THE TIME SUBJECT TO THAT OPTION AND MAY BE EXERCISED FOR ALL OR
ANY PORTION OF SUCH SHARES AS FULLY-VESTED SHARES OF COMMON STOCK.  IMMEDIATELY
FOLLOWING THE CONSUMMATION OF THE CORPORATE TRANSACTION, ALL AUTOMATIC OPTION
GRANTS UNDER THIS ARTICLE THREE SHALL TERMINATE AND CEASE TO BE OUTSTANDING,
UNLESS ASSUMED BY THE SUCCESSOR CORPORATION OR ITS PARENT COMPANY.

 

B.                                     IN CONNECTION WITH ANY CHANGE IN CONTROL
OF THE CORPORATION, THE SHARES OF COMMON STOCK AT THE TIME SUBJECT TO EACH
OUTSTANDING OPTION UNDER THIS ARTICLE THREE BUT NOT OTHERWISE VESTED SHALL
AUTOMATICALLY VEST IN FULL SO THAT EACH SUCH OPTION SHALL, IMMEDIATELY PRIOR TO
THE SPECIFIED EFFECTIVE DATE FOR THE CHANGE IN CONTROL, BECOME FULLY EXERCISABLE
FOR ALL OF THE SHARES OF COMMON STOCK AT THE TIME SUBJECT TO THAT OPTION AND MAY
BE EXERCISED FOR ALL OR ANY PORTION OF SUCH SHARES AS FULLY-VESTED SHARES OF
COMMON STOCK.  EACH SUCH OPTION SHALL REMAIN FULLY EXERCISABLE FOR THE OPTION
SHARES WHICH VEST IN CONNECTION WITH THE CHANGE IN CONTROL UNTIL THE EXPIRATION
OR SOONER TERMINATION OF THE OPTION TERM.

 

C.                                     UPON THE OCCURRENCE OF A HOSTILE
TAKE-OVER, THE OPTIONEE SHALL HAVE A THIRTY (30)-DAY PERIOD IN WHICH 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 OPTIONEE IS OTHERWISE AT THE TIME VESTED IN THOSE 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 THIS MARCH 1997 RESTATEMENT OF
THE PLAN SHALL CONSTITUTE PRE-APPROVAL OF EACH OPTION SUBSEQUENTLY GRANTED WITH
A SURRENDER PROVISION AND THE SUBSEQUENT SURRENDER OF THAT OPTION IN ACCORDANCE
WITH THE TERMS AND PROVISIONS OF THIS SECTION III.C.  NO ADDITIONAL APPROVAL OF
THE PLAN ADMINISTRATOR OR THE BOARD SHALL BE REQUIRED AT THE TIME OF THE ACTUAL
OPTION CANCELLATION AND CASH DISTRIBUTION.

 

D.                                    THE SHARES OF COMMON STOCK SUBJECT TO EACH
OPTION SURRENDERED IN CONNECTION WITH THE HOSTILE TAKE-OVER SHALL NOT BE
AVAILABLE FOR SUBSEQUENT ISSUANCE UNDER THIS PLAN.

 

E.                                      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 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 CASH EQUIVALENTS (SUCH AS A
PERSONAL CHECK OR BANK DRAFT) PAID THE CORPORATION;

 

(II)                                  A PROMISSORY NOTE PAYABLE TO THE
CORPORATION’S ORDER IN ONE OR MORE INSTALLMENTS, WHICH MAY BE SUBJECT TO
CANCELLATION IN WHOLE OR IN PART UPON TERMS AND CONDITIONS ESTABLISHED BY THE
PLAN ADMINISTRATOR; OR

 

(III)                               PAST SERVICES RENDERED TO THE CORPORATION OR
ANY PARENT OR SUBSIDIARY CORPORATION.

 

2.                                       THE CONSIDERATION FOR ANY NEWLY ISSUED
SHARES ISSUED UNDER THIS STOCK ISSUANCE PROGRAM SHALL HAVE A VALUE DETERMINED BY
THE PLAN ADMINISTRATOR TO BE NOT LESS THAN ONE-HUNDRED PERCENT (100%) OF THE
FAIR MARKET VALUE OF THOSE 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, WHETHER SUCH CONSIDERATION IS IN AN AMOUNT
LESS THAN, EQUAL TO, OR GREATER 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.

 

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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 UPON 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:

 

(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 UPON 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, RECLASSIFICATION OF COMMON STOCK OR OTHER SIMILAR CHANGE
IN THE CORPORATION’S CAPITAL STRUCTURE 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
PLAN, 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
(INCLUDING THE PARTICIPANT’S PURCHASE-MONEY PROMISSORY NOTE), THE CORPORATION
SHALL REPAY TO THE PARTICIPANT THE CASH CONSIDERATION PAID FOR THE SURRENDERED
SHARES AND SHALL CANCEL THE UNPAID PRINCIPAL BALANCE OF ANY OUTSTANDING
PURCHASE-MONEY NOTE OF THE PARTICIPANT ATTRIBUTABLE TO SUCH 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.

 

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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 UPON 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.

 

II.                                     CORPORATE TRANSACTIONS/CHANGE IN CONTROL

 

A.                                   UPON THE OCCURRENCE OF ANY CORPORATE
TRANSACTION, ALL UNVESTED SHARES OF COMMON STOCK AT THE TIME OUTSTANDING UNDER
THE STOCK ISSUANCE PROGRAM SHALL IMMEDIATELY VEST IN FULL, EXCEPT TO THE EXTENT
THE PLAN ADMINISTRATOR IMPOSES LIMITATIONS IN THE ISSUANCE AGREEMENT WHICH
PRECLUDE SUCH ACCELERATED VESTING IN WHOLE OR IN PART.

 

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 UPON THE SUBSEQUENT
TERMINATION OF THE PARTICIPANT’S SERVICE WITHIN A SPECIFIED PERIOD FOLLOWING THE
CHANGE IN CONTROL.

 

III.                                 TRANSFER RESTRICTIONS/SHARE ESCROW

 

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                           199   , A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.”

 

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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. 
UPON ANY SUCH ATTEMPTED TRANSFER, THE UNVESTED SHARES SHALL IMMEDIATELY BE
CANCELLED, AND NEITHER THE PARTICIPANT NOR THE PROPOSED TRANSFEREE SHALL HAVE
ANY RIGHTS WITH RESPECT TO THOSE 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.                                         LOANS OR INSTALLMENT PAYMENTS

 

A.                                   THE PLAN ADMINISTRATOR MAY, IN ITS
DISCRETION, ASSIST ANY OPTIONEE OR PARTICIPANT (INCLUDING AN OPTIONEE OR
PARTICIPANT WHO IS AN OFFICER OF THE CORPORATION) IN THE EXERCISE OF ONE OR MORE
OPTIONS GRANTED TO SUCH OPTIONEE UNDER THE DISCRETIONARY OPTION GRANT PROGRAM OR
THE PURCHASE OF ONE OR MORE SHARES ISSUED TO SUCH PARTICIPANT UNDER THE STOCK
ISSUANCE PROGRAM, INCLUDING THE SATISFACTION OF ANY FEDERAL AND STATE INCOME AND
EMPLOYMENT TAX OBLIGATIONS ARISING THEREFROM, BY (I) AUTHORIZING THE EXTENSION
OF A LOAN FROM THE CORPORATION TO SUCH OPTIONEE OR PARTICIPANT OR (II)
PERMITTING THE OPTIONEE OR PARTICIPANT TO PAY THE OPTION PRICE OR PURCHASE PRICE
FOR THE PURCHASED COMMON STOCK IN INSTALLMENTS OVER A PERIOD OF YEARS.  THE
TERMS OF ANY LOAN OR INSTALLMENT METHOD OF PAYMENT (INCLUDING THE INTEREST RATE
AND TERMS OF REPAYMENT) SHALL BE UPON SUCH TERMS AS THE PLAN ADMINISTRATOR
SPECIFIES IN THE APPLICABLE OPTION OR ISSUANCE AGREEMENT OR OTHERWISE DEEMS
APPROPRIATE UNDER THE CIRCUMSTANCES.  LOANS OR INSTALLMENT PAYMENTS MAY BE
AUTHORIZED WITH OR WITHOUT SECURITY OR COLLATERAL.  HOWEVER, THE MAXIMUM CREDIT
AVAILABLE TO THE OPTIONEE OR PARTICIPANT MAY NOT EXCEED THE OPTION OR PURCHASE
PRICE OF THE ACQUIRED SHARES (LESS THE PAR VALUE OF SUCH SHARES) PLUS ANY
FEDERAL AND STATE INCOME AND EMPLOYMENT TAX LIABILITY INCURRED BY THE OPTIONEE
OR PARTICIPANT IN CONNECTION WITH THE ACQUISITION OF SUCH SHARES.

 

B.                                     THE PLAN ADMINISTRATOR MAY, IN ITS
ABSOLUTE DISCRETION, DETERMINE THAT ONE OR MORE LOANS EXTENDED UNDER THIS
FINANCIAL ASSISTANCE PROGRAM SHALL BE SUBJECT TO FORGIVENESS BY THE CORPORATION
IN WHOLE OR IN PART UPON SUCH TERMS AND CONDITIONS AS THE PLAN ADMINISTRATOR MAY
DEEM APPROPRIATE.

 

II.                                     AMENDMENT OF THE PLAN AND AWARDS

 

A.                                   THE BOARD HAS COMPLETE AND EXCLUSIVE POWER
AND AUTHORITY TO AMEND OR MODIFY THE PLAN (OR ANY COMPONENT THEREOF) IN ANY OR
ALL RESPECTS WHATSOEVER.  HOWEVER, 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.  IN
ADDITION, CERTAIN AMENDMENTS MAY REQUIRE STOCKHOLDER APPROVAL PURSUANT TO
APPLICABLE LAWS OR REGULATIONS.

 

B.                                     (I) OPTIONS TO PURCHASE SHARES OF COMMON
STOCK MAY BE GRANTED UNDER THE DISCRETIONARY OPTION GRANT PROGRAM AND (II)
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

 

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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.

 

III.                                 TAX WITHHOLDING

 

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

 

The Plan Administrator may, in its discretion and in accordance with the
provisions of this Section III of Article Five and such supplemental rules as
the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of SEC Rule 16b-3), 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 Common Stock in satisfaction of all or part of the Federal, State
and local income and employment withholding taxes to which such holders may
become subject in connection with the exercise of their options or the vesting
of their shares (the “Withholding Taxes”).  Such right may be provided to any
such holder in either or both of the following formats:

 

(A)                                  STOCK WITHHOLDING:  THE HOLDER OF THE
NON-STATUTORY OPTION OR UNVESTED SHARES MAY BE PROVIDED WITH THE ELECTION TO
HAVE THE CORPORATION WITHHOLD, FROM THE SHARES OF COMMON STOCK OTHERWISE
ISSUABLE UPON THE EXERCISE OF SUCH NON-STATUTORY OPTION OR THE VESTING OF 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.

 

(B)                                 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.

 

IV.                                EFFECTIVE DATE AND TERM OF PLAN

 

A.                                   THE PLAN WAS ADOPTED BY THE BOARD ON
JULY 23, 1993, AND WAS APPROVED BY THE STOCKHOLDERS ON THE SAME DATE.  THE PLAN
BECAME EFFECTIVE ON SEPTEMBER 29, 1993, THE DATE ON WHICH THE SHARES OF THE
CORPORATION’S COMMON STOCK WERE FIRST REGISTERED UNDER THE 1934 ACT.  NO FURTHER
OPTION GRANTS OR STOCK ISSUANCES SHALL BE MADE UNDER THE PREDECESSOR PLANS FROM
AND AFTER THE EFFECTIVE DATE.

 

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B.                                     EACH STOCK OPTION GRANT OUTSTANDING UNDER
THE PREDECESSOR PLANS 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.  EACH
UNVESTED SHARE OF COMMON STOCK OUTSTANDING UNDER THE PREDECESSOR PLANS ON THE
EFFECTIVE DATE OF THE STOCK ISSUANCE PROGRAM SHALL CONTINUE TO BE GOVERNED
SOLELY BY THE TERMS AND CONDITIONS OF THE INSTRUMENT EVIDENCING SUCH SHARE
ISSUANCE, AND NOTHING IN THIS PLAN SHALL BE DEEMED TO AFFECT OR OTHERWISE MODIFY
THE RIGHTS OR OBLIGATIONS OF THE HOLDER OF SUCH UNVESTED SHARES.

 

C.                                     THE OPTION/VESTING ACCELERATION
PROVISIONS OF SECTION III OF ARTICLE TWO AND SECTION II OF ARTICLE FOUR RELATING
TO CORPORATE TRANSACTIONS AND CHANGES IN CONTROL MAY, IN THE PLAN
ADMINISTRATOR’S DISCRETION, BE EXTENDED TO ONE OR MORE STOCK OPTIONS OR UNVESTED
SHARE ISSUANCES WHICH ARE OUTSTANDING UNDER THE PREDECESSOR PLANS ON THE
EFFECTIVE DATE OF THE DISCRETIONARY OPTION GRANT AND STOCK ISSUANCE PROGRAMS BUT
WHICH DO NOT OTHERWISE PROVIDE FOR SUCH ACCELERATION.

 

D.                                    ON MARCH 16, 1995, THE BOARD ADOPTED AN
AMENDMENT TO THE PLAN WHICH (I) INCREASED THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE FOR ISSUANCE UNDER THE PLAN BY AN ADDITIONAL 600,000 SHARES (AS
ADJUSTED FOR THE MAY 1995 STOCK SPLIT), (II) PROVIDED FOR AN AUTOMATIC ANNUAL
INCREASE TO THE EXISTING SHARE RESERVE ON THE FIRST TRADING DAY IN EACH OF THE
NEXT FIVE (5) FISCAL YEARS, BEGINNING WITH THE 1996 FISCAL YEAR AND CONTINUING
THROUGH FISCAL YEAR 2000, EQUAL TO 1.4% OF THE TOTAL NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING ON THE LAST TRADING DAY OF THE FISCAL YEAR IMMEDIATELY
PRECEDING THE FISCAL YEAR OF EACH SUCH SHARE INCREASE AND (III) IMPOSED CERTAIN
LIMITATIONS REQUIRED UNDER APPLICABLE FEDERAL TAX LAWS WITH RESPECT TO INCENTIVE
OPTION GRANTS.  THE AMENDMENT WAS APPROVED BY THE STOCKHOLDERS AT THE 1995
ANNUAL MEETING ON MAY 17, 1995.

 

E.                                      ON MARCH 21, 1996, THE BOARD ADOPTED AN
AMENDMENT TO THE PLAN WHICH (I) INCREASED THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE FOR ISSUANCE UNDER THE PLAN BY AN ADDITIONAL 600,000 SHARES, (II)
INCREASED THE LIMIT ON THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK ISSUABLE
UNDER THE 1993 PLAN PRIOR TO THE REQUIRED CESSATION OF FURTHER INCENTIVE OPTION
GRANTS TO 3,780,000 SHARES PLUS AN ADDITIONAL INCREASE OF 277,000 SHARES PER
FISCAL YEAR OVER EACH OF THE NEXT FOUR (4) FISCAL YEARS, BEGINNING WITH THE 1997
FISCAL YEAR, (III) REVISED THE AUTOMATIC OPTION GRANT PROGRAM TO ELIMINATE THE
SPECIAL ONE-TIME OPTION GRANT FOR 28,800 SHARES OF COMMON STOCK TO EACH
NEWLY-ELECTED OR NEWLY-APPOINTED NON-EMPLOYEE BOARD MEMBER AND IMPLEMENT A NEW
OPTION GRANT PROGRAM PURSUANT TO WHICH ALL ELIGIBLE NON-EMPLOYEE BOARD MEMBERS
WILL RECEIVE A SERIES OF AUTOMATIC OPTION GRANTS OVER THEIR PERIOD OF CONTINUED
BOARD SERVICE.  THE AMENDMENT WAS APPROVED BY THE STOCKHOLDERS AT THE 1996
ANNUAL MEETING.

 

F.                                      ON MARCH 18, 1997, THE BOARD ADOPTED A
SERIES OF AMENDMENTS TO THE PLAN WHICH (I) INCREASED THE NUMBER OF SHARES OF
COMMON STOCK RESERVED FOR ISSUANCE OVER THE TERM OF THE PLAN BY AN ADDITIONAL
450,000 SHARES, (II) RENDERED ALL NON-EMPLOYEE BOARD MEMBERS ELIGIBLE TO RECEIVE
OPTION GRANTS AND DIRECT STOCK ISSUANCES UNDER THE DISCRETIONARY OPTION GRANT
AND STOCK ISSUANCE PROGRAMS, (III) ALLOWED UNVESTED SHARES ISSUED UNDER THE PLAN
AND

 

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subsequently repurchased by the Corporation at the option exercise price or
direct issue price paid per share to be reissued under the Plan, (iv) eliminated
the plan limitation which precluded the grant of additional Incentive Options
once the number of shares of Common Stock issued under the Plan, whether as
vested or unvested shares, exceeded a certain level, (v) removed certain
restrictions on the eligibility of non-employee Board members to serve as Plan
Administrator, and (vi) effected a series of additional changes to the
provisions of the Plan (including the stockholder approval requirements) in
order to take advantage of the recent amendments to Rule 16b-3 of the 1934 Act
which exempts certain officer and director transactions under the Plan from the
short-swing liability provisions of the federal securities laws.  The March 18,
1997 amendments were approved by the stockholders at the 1997 Annual Meeting.

 

G.                                     ON MARCH 14, 2001, THE BOARD ADOPTED AN
AMENDMENT TO THE PLAN WHICH (I) ESTABLISHED AN AUTOMATIC SHARE INCREASE FEATURE
PURSUANT TO WHICH THE SHARE RESERVE UNDER THE PLAN WILL AUTOMATICALLY INCREASE
ON THE FIRST TRADING DAY IN JANUARY OF EACH OF THE NEXT FIVE (5) CALENDAR YEARS,
BEGINNING WITH THE 2002 CALENDAR YEAR AND CONTINUING THROUGH THE 2006 CALENDAR
YEAR, BY AN AMOUNT EQUAL TO 4% OF THE TOTAL NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING ON THE LAST TRADING DAY OF THE CALENDAR YEAR IMMEDIATELY PRECEDING
THE CALENDAR YEAR OF EACH SUCH SHARE INCREASE AND (II) EXTENDED THE TERMINATION
DATE OF THE PLAN FROM JUNE 30, 2003 TO FEBRUARY 28, 2011.  THE MARCH 14, 2001
AMENDMENT WAS APPROVED BY THE STOCKHOLDERS AT THE 2001 ANNUAL MEETING.

 

H.                                    ON JULY 16, 2002, THE BOARD ADOPTED AN
AMENDMENT TO THE PLAN WHICH REVISED THE AUTOMATIC OPTION GRANT PROGRAM TO
INCREASE THE SIZE OF THE ANNUAL OPTION GRANT TO BE RECEIVED BY ALL ELIGIBLE
NON-EMPLOYEE BOARD MEMBERS OVER THEIR PERIOD OF CONTINUED BOARD SERVICE FROM
4,000 TO 8,000 SHARES OF COMMON STOCK.  THIS AMENDMENT IS SUBJECT TO STOCKHOLDER
APPROVAL AT THE 2003 ANNUAL MEETING.

 

I.                                         THE PLAN SHALL TERMINATE UPON THE
EARLIER OF (I) FEBRUARY 28, 2011 OR (II) THE DATE ON WHICH ALL SHARES AVAILABLE
FOR ISSUANCE UNDER THE PLAN SHALL HAVE BEEN ISSUED AS VESTED SHARES OR CANCELLED
PURSUANT TO THE EXERCISE OF STOCK APPRECIATION OR OTHER CASH-OUT RIGHTS GRANTED
UNDER THE PLAN.  IF THE DATE OF THE PLAN TERMINATION IS DETERMINED UNDER CLAUSE
(I) ABOVE, THEN ALL OPTION GRANTS AND UNVESTED SHARE ISSUANCES OUTSTANDING ON
SUCH DATE SHALL THEREAFTER CONTINUE TO HAVE FORCE AND EFFECT IN ACCORDANCE WITH
THE PROVISIONS OF THE INSTRUMENTS EVIDENCING SUCH GRANTS OR ISSUANCES.

 

V.                                    USE OF PROCEEDS

 

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

 

VI.                                REGULATORY APPROVALS

 

A.                                   THE IMPLEMENTATION OF THE PLAN, THE
GRANTING OF ANY OPTION UNDER THE PLAN, THE ISSUANCE OF ANY SHARES UNDER THE
STOCK ISSUANCE PROGRAM, AND THE ISSUANCE OF COMMON STOCK UPON THE EXERCISE OR
SURRENDER OF THE OPTION GRANTS MADE HEREUNDER SHALL BE SUBJECT TO THE
CORPORATION’S PROCUREMENT OF ALL APPROVALS AND PERMITS REQUIRED BY REGULATORY
AUTHORITIES HAVING

 

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jurisdiction over the Plan, the options granted under it, and the Common Stock
issued pursuant to it.

 

B.                                     NO SHARES OF COMMON STOCK OR OTHER ASSETS
SHALL BE ISSUED OR DELIVERED UNDER THIS PLAN UNLESS AND UNTIL THERE SHALL HAVE
BEEN COMPLIANCE WITH ALL APPLICABLE REQUIREMENTS OF FEDERAL AND STATE SECURITIES
LAWS, INCLUDING THE FILING AND EFFECTIVENESS OF THE FORM S-8 REGISTRATION
STATEMENT FOR THE SHARES OF COMMON STOCK ISSUABLE UNDER THE PLAN, AND ALL
APPLICABLE LISTING REQUIREMENTS OF ANY SECURITIES EXCHANGE (OR THE NASDAQ
NATIONAL MARKET, IF APPLICABLE) ON WHICH SHARES OF THE COMMON STOCK ARE THEN
LISTED FOR TRADING.

 

VII.                            NO EMPLOYMENT/SERVICE RIGHTS

 

Neither the action of the Corporation in establishing the Plan, nor any action
taken by the Plan Administrator hereunder, nor any provision of the Plan shall
be construed so as to grant any individual the right to remain in the 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.

 

VIII.                        MISCELLANEOUS PROVISIONS

 

A.                                   THE RIGHT TO ACQUIRE COMMON STOCK OR OTHER
ASSETS UNDER THE PLAN MAY NOT BE ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED
BY ANY OPTIONEE OR PARTICIPANT.

 

B.                                     THE PROVISIONS OF THE PLAN RELATING TO
THE EXERCISE OF OPTIONS AND THE VESTING OF SHARES SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF CALIFORNIA, AS SUCH LAWS ARE APPLIED TO CONTRACTS ENTERED INTO
AND PERFORMED IN SUCH STATE.

 

C.                                     THE PROVISIONS OF THE PLAN SHALL INURE TO
THE BENEFIT OF, AND BE BINDING UPON, THE CORPORATION AND ITS SUCCESSORS OR
ASSIGNS, WHETHER BY CORPORATE TRANSACTION OR OTHERWISE, AND THE PARTICIPANTS AND
OPTIONEES AND THE LEGAL REPRESENTATIVES, HEIRS OR LEGATEES OF THEIR RESPECTIVE
ESTATES.

 

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