Exhibit 10.1

 

THORATEC CORPORATION

AMENDED AND RESTATED 2006 INCENTIVE STOCK PLAN

Approved by the Shareholders on May 25, 2006
Amended and Restated by the Board on May 25, 2006 and April 7, 2008
Approved by the Shareholders on May 20, 2008
Amended and Restated by the Board on May 20, 2008 and March 2, 2010
Approved by the Shareholders on May 19, 2010

Amended and Restated by the Board on December 7, 2011 and March 8, 2012

Approved by the Shareholders on May 23, 2012

Termination Date: May 24, 2016

 

ARTICLE 1.  PURPOSES

 

1.1                                 Eligible Stock Award Recipients. The persons
eligible to receive Stock Awards are the Employees, Directors, and Consultants
of the Company and its Affiliates.

 

1.2                                 Available Stock Awards. The types of stock
awards that may be granted under this Plan shall be: (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Bonuses,
(iv) Restricted Stock Purchase Rights, (v) Stock Appreciation Rights,
(vi) Phantom Stock Units, (vii) Restricted Stock Units, (viii) Performance Share
Bonuses, and (ix) Performance Share Units.

 

1.3                                 General Purpose. The Company, by means of
this Plan, which amends and restates in its entirety the Thoratec Corporation
2006 Incentive Stock Plan approved by the shareholders of the Company as of May
19, 2010 and continues to serve as the successor to the Company’s 1997 Stock
Option Plan (“1997 Plan”), the Company’s 1996 Stock Option Plan (“1996 Plan”),
and the Company’s Nonemployee Directors Stock Option Plan (“Directors 1996
Plan”), seeks to create incentives for eligible Employees (including officers),
Directors, and Consultants of the Company, through their participation in the
growth in value of the Common Stock of the Company, to accept or continue their
employment or other service relationship with the Company, increase their
interest in the Company’s welfare, and improve the operations and increase the
profits of the Company. The Plan serves as a replacement for the 1997 Plan, the
1996 Plan, and the Directors 1996 Plan. Stock awards granted under any of these
plans shall continue to be governed by the terms of the plan under which the
stock award was granted that were in effect on the date of grant of such award.

 

ARTICLE 2.  DEFINITIONS

 

2.1                                 “Affiliate” means a parent or subsidiary of
the Company, with “parent” meaning an entity that controls the Company directly
or indirectly, through one or more intermediaries, and “subsidiary” meaning an
entity that is controlled by the Company directly or indirectly, through one or
more intermediaries. Solely with respect to the granting of any Incentive Stock
Options, Affiliate means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

 

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2.2                                 “Beneficial Owner” means the definition
given in Rule 13d-3 promulgated under the Exchange Act.

 

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

 

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

 

(a)                                  Any person or group is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total voting
power of the voting stock of the Company, including by way of merger,
consolidation or otherwise;

 

(b)                                 The sale, exchange, lease or other
disposition of all or substantially all of the assets of the Company to a person
or group of related persons, as such terms are defined or described in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act;

 

(c)                                  A merger or consolidation or similar
transaction involving the Company;

 

(d)                                 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; or

 

(e)                                  A dissolution or liquidation of the
Company.

 

2.5                                 “Code” means the Internal Revenue Code of
1986, as amended.

 

2.6                                 “Committee” means a committee of one or more
members of the Board (or officers who are not members of the Board to the extent
allowed by law) appointed by the Board in accordance with Section 3.3 of the
Plan.

 

2.7                                 “Common Stock” means the common shares of
the Company.

 

2.8                                 “Company” means Thoratec Corporation, a
California corporation.

 

2.9                                 “Consultant” means any person, including an
advisor, (i) engaged by the Company or an Affiliate to render consulting or
advisory services and who is compensated for such services or (ii) who is a
member of the board of directors of an Affiliate. However, the term “Consultant”
shall not include either Directors who are not compensated by the Company for
their services as a Director or Directors who are compensated by the Company
solely for their services as a Director.

 

2.10                           “Continuous Service” means that the Participant’s
service with the Company or an Affiliate, whether as an Employee, Director, or
Consultant is not interrupted or terminated. The Participant’s Continuous
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or an Affiliate
as an Employee, Consultant, or Director, or a change in the entity for which the
Participant renders such service, provided that there is no interruption or
termination of the Participant’s Continuous Service. For example, a change in
status from an Employee of the Company to a Consultant of an Affiliate or a
Director will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party’s

 

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sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by the Company or an
Affiliate, including sick leave, military leave, or any other personal leave.

 

2.11                           “Covered Employee” means the chief executive
officer and the four (4) other highest compensated officers of the Company for
whom total compensation is required to be reported to shareholders under the
Exchange Act, as determined for purposes of Section 162(m) of the Code.

 

2.12                           “Director” means a member of the Board of
Directors of the Company.

 

2.13                           “Disability” means the permanent and total
disability of a person within the meaning of Section 22(e)(3) of the Code for
all Incentive Stock Options. For all other Stock Awards, “Disability” means
physical or mental incapacitation such that for a period of six (6) consecutive
months or for an aggregate of nine (9) months in any twenty-four
(24) consecutive month period, a person is unable to substantially perform his
or her duties. Any question as to the existence of that person’s physical or
mental incapacitation as to which the person or person’s representative and the
Company cannot agree shall be determined in writing by a qualified independent
physician mutually acceptable to the person and the Company. If the person and
the Company or an Affiliate cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two (2) physicians
shall select a third (3rd) who shall make such determination in writing. The
determination of Disability made in writing to the Company or an Affiliate and
the person shall be final and conclusive for all purposes of the Stock Awards.

 

2.14                           “Employee” means any person employed by the
Company or an Affiliate. Service as a Director or compensation by the Company or
an Affiliate solely for services as a Director shall not be sufficient to
constitute “employment” by the Company or an Affiliate.

 

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

 

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

 

(a)                                  If the Common Stock is listed on any
established stock exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no such sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;

 

(b)                                 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 shall 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 Board deems
reliable; or

 

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(c)                                  In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board.

 

2.17                           “Full-Value Stock Award” shall mean any of a
Restricted Stock Bonus, Restricted Stock Units, Phantom Stock Units, Performance
Share Bonus, or Performance Share Units.

 

2.18                           “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.

 

2.19                           “Incumbent Directors” shall mean Directors who
either (i) are Directors of the Company as of the date the Plan first becomes
effective pursuant to Article XVI hereof or (ii) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of
those Directors whose election or nomination was not in connection with any
transaction described in subsections (a), (b), or (c) of Section 2.4, or in
connection with an actual or threatened proxy contest relating to the election
of Directors to the Company.

 

2.20                           “Non-Employee Director” means a Director who
either (i) is not a current Employee or Officer of the Company or its parent or
a subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a “non-employee director” for purposes of
Rule 16b-3.

 

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

 

2.22                           “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.

 

2.23                           “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.

 

2.24                           “Option Agreement” means a written agreement
between the Company and an Optionholder evidencing the terms and conditions of
an individual Option grant. Each Option Agreement shall be subject to the terms
and conditions of the Plan.

 

2.25                           “Optionholder” means a person to whom an Option
is granted pursuant to the Plan or, if applicable, such other person who holds
an outstanding Option.

 

2.26                           “Outside Director” means a Director who either
(i) is not a current employee of the Company or an “affiliated corporation”
(within the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or

 

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an “affiliated corporation” receiving compensation for prior services (other
than benefits under a tax qualified pension plan), was not an officer of the
Company or an “affiliated corporation” at any time and is not currently
receiving direct or indirect remuneration from the Company or an “affiliated
corporation” for services in any capacity other than as a Director; or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the
Code.

 

2.27                           “Participant” means a person to whom a Stock
Award is granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Stock Award.

 

2.28                           “Performance Share Bonus” means a grant of shares
of the Company’s Common Stock not requiring a Participant to pay any amount of
monetary consideration, and which grant is subject to the provisions of
Section 8.6 of the Plan.

 

2.29                           “Performance Share Unit” means the right to
receive the value of one (1) share of the Company’s Common Stock at the time the
Performance Share Unit vests, with the further right to elect to defer receipt
of that value otherwise deliverable upon the vesting of an award of Performance
Share Units to the extent permitted in the Participant’s Stock Award Agreement.
These Performance Share Units are subject to the provisions of Section 8.7 of
the Plan.

 

2.30                           “Phantom Stock Unit” means the right to receive
the value of one (1) share of the Company’s Common Stock, subject to the
provisions of Section 8.4 of the Plan.

 

2.31                           “Plan” means this Thoratec Corporation Amended
and Restated 2006 Incentive Stock Plan, as it may be amended from time to time.

 

2.32                           “Restricted Stock Bonus” means a grant of shares
of the Company’s Common Stock not requiring a Participant to pay any amount of
monetary consideration, and which grant is subject to the provisions of
Section 8.1 of the Plan.

 

2.33                           “Restricted Stock Purchase Right” means the right
to acquire shares of the Company’s Common Stock upon the payment of the
agreed-upon monetary consideration, subject to the provisions of Section 8.2 of
the Plan.

 

2.34                           “Restricted Stock Unit” means the right to
receive the value of one (1) share of the Company’s Common Stock at the time the
Restricted Stock Unit vests, with the further right to elect to defer receipt of
that value otherwise deliverable upon the vesting of an award of restricted
stock to the extent permitted in the Participant’s agreement. These Restricted
Stock Units are subject to the provisions of Section 8.5 of the Plan.

 

2.35                           “Rule 16b-3” means Rule 16b-3 promulgated under
the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

2.36                           “Securities Act” means the Securities Act of
1933, as amended.

 

2.37                           “Stock Appreciation Right” means the right to
receive an amount equal to the Fair Market Value of one (1) share of the
Company’s Common Stock on the day the Stock

 

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Appreciation Right is redeemed, reduced by the deemed exercise price or base
price of such right, subject to the provisions of Section 8.3 of the Plan.

 

2.38                           “Stock Award” means any Option award, Restricted
Stock Bonus award, Restricted Stock Purchase Right award, Stock Appreciation
Right award, Phantom Stock Unit award, Restricted Stock Unit award, Performance
Share Bonus award, Performance Share Unit award, or other stock-based award.
These Awards may include, but are not limited to those listed in Section 1.2.

 

2.39                           “Stock Award Agreement” means a written
agreement, including an Option Agreement, between the Company and a holder of a
Stock Award setting forth the terms and conditions of an individual Stock Award
grant. Each Stock Award Agreement shall be subject to the terms and conditions
of the Plan.

 

2.40                           “Ten Percent Shareholder” means a person who owns
(or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates.

 

ARTICLE 3.  ADMINISTRATION

 

3.1                                 Administration by Board. The Board shall
administer the Plan unless and until the Board delegates administration to a
Committee, as provided in Section 3.3.

 

3.2                                 Powers of Board. The Board shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:

 

(a)                                  To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; what type or combination of types of Stock Award
shall be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

 

(b)                                 To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.

 

(c)                                  To amend the Plan or a Stock Award as
provided in Section 14 of the Plan.

 

(d)                                 Generally, to exercise such powers and to
perform such acts as the Board deems necessary, desirable, convenient or
expedient to promote the best interests of the Company that are not in conflict
with the provisions of the Plan.

 

(e)                                  To adopt sub-plans and/or special
provisions applicable to Stock Awards regulated by the laws of a jurisdiction
other than and outside of the United States. Such sub-plans

 

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and/or special provisions may take precedence over other provisions of the Plan,
with the exception of Section 4 of the Plan, but unless otherwise superseded by
the terms of such sub-plans and/or special provisions, the provisions of the
Plan shall govern.

 

(f)                                    To authorize any person to execute on
behalf of the Company any instrument required to effect the grant of a Stock
Award previously granted by the Board.

 

(g)                                 To determine whether Stock Awards will be
settled in shares of Common Stock, cash or in any combination thereof.

 

(h)                                 To determine whether Stock Awards will be
adjusted for Dividend Equivalents, with “Dividend Equivalents” meaning a credit,
made at the discretion of the Board, to the account of a Participant in an
amount equal to the cash dividends paid on one share of Common Stock for each
share of Common Stock represented by a Stock Award held by such Participant.

 

(i)                                     To establish a program whereby
Participants designated by the Board can reduce compensation otherwise payable
in cash in exchange for Stock Awards under the Plan.

 

(j)                                     To impose such restrictions, conditions
or limitations as it determines appropriate as to the timing and manner of any
resales by a Participant or other subsequent transfers by the Participant of any
shares of Common Stock issued as a result of or under a Stock Award, including,
without limitation, (A) restrictions under an insider trading policy and
(B) restrictions as to the use of a specified brokerage firm for such resales or
other transfers.

 

(k)                                  To provide, either at the time a Stock
Award is granted or by subsequent action, that a Stock Award shall contain as a
term thereof, a right, either in tandem with the other rights under the Stock
Award or as an alternative thereto, of the Participant to receive, without
payment to the Company, a number of shares of Common Stock, cash or a
combination thereof, the amount of which is determined by reference to the value
of the Stock Award.

 

3.3                                 Delegation to Committee.

 

(a)                                  General. The Board may delegate
administration of the Plan to a Committee or Committees consisting of one or
more members of the Board or one or more officers of the Company who are not
members of the Board (to the extent allowed by law), and the term “Committee”
shall apply to any person or persons to whom such authority has been delegated.
If administration is delegated to a Committee, the Committee also may exercise,
in connection with the administration of the Plan, any of the powers and
authority granted to the Board under the Plan, and the Committee may delegate to
a subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee, as applicable), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.

 

(b)                                 Committee Composition when Common Stock is
Publicly Traded. At such time as the Common Stock is publicly traded, in the
discretion of the Board, a Committee may

 

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consist solely of two or more Outside Directors, in accordance with Section
162(m) of the Code, and/or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (1) delegate to a committee of one or more individuals who are not
Outside Directors the authority to grant Stock Awards to eligible persons who
are either (a) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award
or (b) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (2) delegate to a committee of one or more
individuals who are not Non-Employee Directors the authority to grant Stock
Awards to eligible persons who are either (a) not then subject to Section 16 of
the Exchange Act or (b) receiving a Stock Award as to which the Board or
Committee elects not to comply with Rule 16b-3 by having two or more
Non-Employee Directors grant such Stock Award.

 

3.4                                 Effect of Board’s Decision. All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

3.5                                 Compliance with Section 16 of Exchange Act.
With respect to persons subject to Section 16 of the Exchange Act, transactions
under this Plan are intended to comply with the applicable conditions of
Rule 16b-3, or any successor rule thereto. To the extent any provision of this
Plan or action by the Board fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Board.
Notwithstanding the above, it shall be the responsibility of such persons, not
of the Company or the Board, to comply with the requirements of Section 16 of
the Exchange Act; and neither the Company nor the Board shall be liable if this
Plan or any transaction under this Plan fails to comply with the applicable
conditions of Rule 16b-3 or any successor rule thereto, or if any person incurs
any liability under Section 16 of the Exchange Act.

 

ARTICLE 4.  SHARES SUBJECT TO THE PLAN

 

4.1                                 Share Reserve. Subject to the provisions of
Section 13 of the Plan relating to adjustments upon changes in Common Stock, the
maximum aggregate number of shares of Common Stock that may be issued pursuant
to Stock Awards shall not exceed Twelve Million Three Hundred Fifty Thousand
(12,350,000) shares of Common Stock (“Share Reserve”); provided that from
May 20, 2008 until May 18, 2010, (i) each share of Common Stock issued pursuant
to a Full-Value Stock Award shall reduce the Share Reserve by one and
seventy-four hundredths (1.74) shares and (ii) each share of Common Stock issued
pursuant to a Stock Award other than a Full-Value Stock Award shall reduce the
Share Reserve by one (1) share; and provided further that from and after May 19,
2010, (i) each share of Common Stock issued pursuant to a Full-Value Stock Award
shall reduce the Share Reserve by one and seven tenths (1.7) shares and
(ii) each share of Common Stock issued pursuant to a Stock Award other than a
Full-Value Stock Award shall reduce the Share Reserve by one (1) share. To the
extent that a distribution pursuant to a Stock Award is made in cash, the Share
Reserve shall be reduced by the number of shares of Common Stock subject to the
redeemed or exercised portion of the Stock Award. Notwithstanding any other
provision of the Plan to the contrary, the maximum aggregate number of shares of
Common Stock that may be issued under the Plan pursuant to Incentive Stock
Options is Twelve Million Three Hundred Fifty Thousand (12,350,000) shares

 

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of Common Stock (“ISO Limit”), subject to the adjustments provided for in
Section 13 of the Plan. No more than an aggregate of five percent (5%) of the
initial Share Reserve at the time of the adoption of this Plan and five percent
(5%) of any increase in the Share Reserve as may be approved by the shareholders
of the Company from time to time may be granted under Accelerated Vesting
Restricted Stock Bonuses and Accelerated Vesting Restricted Stock Units (as
defined in Sections 8.1(b) and 8.5(b), respectively).

 

4.2                                 Reversion of Shares to the Share Reserve.

 

(a)                                  If any Stock Award granted under this Plan
shall for any reason (A) expire, be cancelled or otherwise terminate, in whole
or in part, without having been exercised or redeemed in full, (B) be reacquired
by the Company prior to vesting, or (C) be repurchased at cost by the Company
prior to vesting, the shares of Common Stock not acquired by Participant under
such Stock Award shall revert or be added to the Share Reserve and become
available for issuance under the Plan; provided, however, that shares of Common
Stock shall not revert or be added to the Share Reserve that are (a) tendered in
payment of an Option, (b) withheld by the Company to satisfy any tax withholding
obligation, or (c) repurchased by the Company with Option proceeds, and
provided, further, that shares of Common Stock covered by a Stock Appreciation
Right, to the extent that it is exercised and settled in shares of Common Stock,
and whether or not shares of Common Stock are actually issued to the Participant
upon exercise of the Stock Appreciation Right, shall be considered issued or
transferred pursuant to the Plan. For shares that revert or are added to the
Share Reserve as provided above, the Share Reserve shall be increased by (i) one
and seven tenths (1.7) shares for each share of Common Stock underlying a
Full-Value Stock Award and (ii) one (1) share for each share of Common Stock
underlying a Stock Award other than a Full-Value Stock Award.

 

(b)                                 Shares of Common Stock that are not acquired
by a holder of a stock award granted under the 1997 Plan, the 1996 Plan, or the
Directors 1996 Plan shall not revert or be added to the Share Reserve or become
available for issuance under the Plan.

 

4.3                                 Source of Shares. The shares of Common Stock
subject to the Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.

 

ARTICLE 5.  ELIGIBILITY

 

5.1                                 Eligibility for Specific Stock Awards.
Incentive Stock Options may be granted only to Employees. Stock Awards other
than Incentive Stock Options may be granted to Employees, Directors, and
Consultants.

 

5.2                                 Ten Percent Shareholders. A Ten Percent
Shareholder shall not be granted an Incentive Stock Option unless the exercise
price of such Option is at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock on the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.

 

5.3                                 Annual Section 162(m) Limitation. Subject to
the provisions of Section 13 of the Plan relating to adjustments upon changes in
the shares of Common Stock, no Employee shall be eligible to be granted
Incentive Stock Options, Nonstatutory Stock Options, or Stock Appreciation
Rights covering more than Three Hundred Fifty Thousand (350,000) shares of

 

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Common Stock during any fiscal year; provided that in connection with his or her
initial service, an Employee may be granted Incentive Stock Options,
Nonstatutory Stock Options, or Stock Appreciation Rights covering not more than
an additional Two Hundred Fifty Thousand (250,000) shares of Common Stock, which
shall not count against the limit set forth in the preceding sentence.

 

5.4                                 Consultants.

 

(a)                                  A Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to register
either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the
Company, or because the Consultant is not a natural person, or as otherwise
provided by the rules governing the use of Form S-8, unless the Company
determines both (1) that such grant (A) shall be registered in another manner
under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (2) that such
grant complies with the securities laws of all other relevant jurisdictions.

 

(b)                                 Form S-8 generally is available to
consultants and advisors only if (A) they are natural persons; (B) they provide
bona fide services to the issuer, its parents, or its majority owned
subsidiaries; and (C) the services are not in connection with the offer or sale
of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the issuer’s securities.

 

ARTICLE 6.  OPTION PROVISIONS

 

 Each Option shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate. All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and,
if certificates are issued, a separate certificate or certificates will be
issued for shares of Common Stock purchased upon exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

 

6.1                                 Term. Subject to the provisions of
Section 5.2 of the Plan regarding grants of Incentive Stock Options to Ten
Percent Shareholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

 

6.2                                 Exercise Price of an Incentive Stock Option.
Subject to the provisions of Section 5.2 of the Plan regarding Ten Percent
Shareholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted. Notwithstanding
the foregoing, an Incentive Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

 

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6.3           Exercise Price of a Nonstatutory Stock Option. The exercise price
of each Nonstatutory Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted.

 

Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

 

6.4           Consideration. The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash or by check at the time the Option
is exercised or (ii) at the discretion of the Board at the time of the grant of
the Option (or subsequently in the case of a Nonstatutory Stock Option): (1) by
delivery to the Company of other Common Stock, (2) pursuant to a “same day sale”
program to the extent permitted by law, (3) reduction of the Company’s liability
to the Optionholder, (4) a reduction in the number of shares of Common Stock
otherwise issuable upon the exercise of the Option, (5) by any other form of
consideration permitted by law, but in no event shall a promissory note or other
form of deferred payment constitute a permissible form of consideration for an
Option granted under the Plan, or (6) by some combination of the foregoing. In
the absence of a provision to the contrary in the individual Optionholder’s
Option Agreement, payment for Common Stock pursuant to an Option may only be
made in the form of cash, check, or pursuant to a “same day sale” program.

 

6.5           Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

 

6.6           Transferability of a Nonstatutory Stock Option. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

 

6.7           Vesting Generally. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may be determined
by the Board. The vesting provisions of individual Options may vary. If vesting
is based on the Participant’s Continuous Service, such Options shall not fully
vest in less than three (3) years. If vesting is based on the achievement of
performance criteria, such Options shall not fully vest in less than one
(1) year. The provisions of this Section 6.7 are subject to any Option
provisions governing the minimum number of shares of Common Stock as to which an
Option may be exercised. Notwithstanding the foregoing provisions of this
Section 6.7, Options granted in recognition of a Participant’s

 

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long-term Continuous Service may vest fully in periods shorter than those
described above or may be fully vested upon grant.

 

6.8           Termination of Continuous Service. In the event an Optionholder’s
Continuous Service terminates (other than upon the Optionholder’s death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time as is specified in the Option
Agreement (and in no event later than the expiration of the term of such Option
as set forth in the Option Agreement). If, after termination, the Optionholder
does not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate. In the absence of a provision to the
contrary in the individual Optionholder’s Option Agreement, the Option shall
remain exercisable for three (3) months following the termination of the
Optionholder’s Continuous Service.

 

6.9           Extension of Termination Date. An Optionholder’s Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder’s Continuous Service (other than upon the Optionholder’s death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act or other applicable securities law, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the Option Agreement or (ii) the expiration of a period of three
(3) months after the termination of the Optionholder’s Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements or other applicable securities law. The provisions of this
Section 6.9 notwithstanding, in the event that a sale of the shares of Common
Stock received upon exercise of his or her Option would subject the Optionholder
to liability under Section 16(b) of the Exchange Act, then the Option will
terminate on the earlier of (1) the fifteenth (15th) day after the last date
upon which such sale would result in liability, or (2) two hundred ten
(210) days following the date of termination of the Optionholder’s employment or
other service to the Company (and in no event later than the expiration of the
term of the Option).

 

6.10         Disability of Optionholder. In the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination, but only
within such period of time as is specified in the Option Agreement (and in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement). If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate. In the absence of a provision to the contrary in the individual
Optionholder’s Option Agreement, the Option shall remain exercisable for twelve
(12) months following such termination.

 

6.11         Death of Optionholder. In the event (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death or
(ii) the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder’s Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder’s estate, by a person who acquired the right to exercise the
Option by bequest or

 

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inheritance or by a person designated to exercise the Option upon the
Optionholder’s death pursuant to Section 6.5 or 6.6 of the Plan, but only within
such period of time as is specified in the Option Agreement (and in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). If, after death, the Option is not exercised within the time
specified in the Option Agreement, the Option shall terminate. In the absence of
a provision to the contrary in the individual Optionholder’s Option Agreement,
the Option shall remain exercisable for twelve (12) months following the
Optionholder’s death.

 

6.12         Early Exercise Generally Not Permitted. The Company’s general
policy is not to allow the Optionholder to exercise the Option as to any part or
all of the shares of Common Stock subject to the Option prior to the vesting of
the Option. If, however, an Option Agreement does permit such early exercise,
any unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.

 

ARTICLE 7.  NON-EMPLOYEE DIRECTORS STOCK AWARDS

 

7.1           Non-Employee Director Stock Awards.  The Board may grant Stock
Awards to Non-Employee Directors, subject to the limitations of the Plan,
pursuant to a written non-discretionary formula established by the Committee, or
any successor committee thereto carrying out its responsibilities on the date of
grant of any such Stock Award (the “Non-Employee Director Equity Compensation
Policy”).  The Non-Employee Director Equity Compensation Policy shall set forth
the type of Stock Award(s) to be granted to Non-Employee Directors, the number
of shares of Common Stock to be subject to such Non-Employee Director Stock
Awards, the conditions on which such Stock Awards shall be granted, become
exercisable and/or payable and expire, and such other terms and conditions as
the Committee (or such other successor committee as described above) shall
determine in its discretion.

 

ARTICLE 8.  PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS

 

8.1           Restricted Stock Bonus Awards. Each Restricted Stock Bonus
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. Restricted Stock Bonuses shall be paid by the
Company in shares of the Common Stock of the Company. The terms and conditions
of Restricted Stock Bonus agreements may change from time to time, and the terms
and conditions of separate Restricted Stock Bonus agreements need not be
identical, but each Restricted Stock Bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(a)           Consideration. A Restricted Stock Bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit; provided, however, that in the case of a Restricted Stock Bonus
to be made to a new Employee, Director, or Consultant who has not performed
prior services for the Company, the Restricted Stock Bonus will not be awarded
until the Board determines that such person has rendered services to the Company
for a sufficient period of time to ensure proper issuance of the shares in
compliance with the California Corporations Code.

 

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(b)           Vesting. Vesting shall generally be based on the Participant’s
Continuous Service. Shares of Common Stock awarded under the Restricted Stock
Bonus agreement shall be subject to a share reacquisition right in favor of the
Company in accordance with a vesting schedule to be determined by the Board.
Absent a provision to the contrary in the Participant’s Restricted Stock Bonus
agreement, so long as the Participant remains in Continuous Service with the
Company, a Restricted Stock Bonus granted to the Participant shall vest as to
one fourth (1/4) of the total Restricted Stock Bonus award on each annual
anniversary of the grant date, such that the Restricted Stock Bonus is fully
vested after four (4) years of Continuous Service from the grant date. If
vesting is based on the Participant’s Continuous Service, such Restricted Stock
Bonus shall not fully vest in less than three (3) years. If vesting is based on
the achievement of performance criteria, such Restricted Stock Bonus shall not
fully vest in less than one (1) year. Notwithstanding the foregoing provisions
of this Section 8.1(b), a Restricted Stock Bonus granted in recognition of a
Participant’s long-term Continuous Service may vest fully in periods shorter
than those described above or may be fully vested upon grant (“Accelerated
Vesting Restricted Stock Bonuses”), subject to provisions of the last sentence
of Section 4.1.

 

(c)           Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Company shall automatically
reacquire without cost any or all of the shares of Common Stock held by the
Participant that have not vested as of the date of termination under the terms
of the Restricted Stock Bonus agreement.

 

(d)           Transferability. Rights to acquire shares of Common Stock under
the Restricted Stock Bonus agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the Restricted Stock
Bonus agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the Restricted Stock Bonus agreement remains subject
to the terms of the Restricted Stock Bonus agreement.

 

8.2           Restricted Stock Purchase Awards. Each Restricted Stock Purchase
Right agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and conditions of the
Restricted Stock Purchase Right agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Purchase Right agreements need
not be identical, but each Restricted Stock Purchase Right agreement shall
include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

 

(a)           Purchase Price. The purchase price under each Restricted Stock
Purchase Right agreement shall be such amount as the Board shall determine and
designate in such Restricted Stock Purchase Right agreement. The purchase price
shall not be less than one hundred percent (100%) of the Common Stock’s Fair
Market Value on the date such award is made or at the time the purchase is
consummated.

 

(b)           Consideration. The purchase price of Common Stock acquired
pursuant to the Restricted Stock Purchase Right agreement shall be paid either:
(A) in cash or by check at the time of purchase; or (B) at the discretion of the
Board, according to a deferred payment or other similar arrangement with the
Participant to the extent permitted by law.

 

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(c)           Vesting. The Board shall determine the criteria under which shares
of Common Stock under the Restricted Stock Purchase Right agreement may vest;
the criteria may or may not include performance criteria or Continuous Service.
Shares of Common Stock acquired under the Restricted Stock Purchase Right
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

 

(d)           Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Company may repurchase any or
all of the shares of Common Stock held by the Participant that have not vested
as of the date of termination under the terms of the Restricted Stock Purchase
Right agreement.

 

(e)           Transferability. Rights to acquire shares of Common Stock under
the Restricted Stock Purchase Right agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
Restricted Stock Purchase Right agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the Restricted Stock Purchase
Right agreement remains subject to the terms of the Restricted Stock Purchase
Right agreement.

 

(f)            Term. No Restricted Stock Purchase Right shall be exercisable
after the expiration of ten (10) years from the date it was granted.

 

8.3           Stock Appreciation Rights. Two types of Stock Appreciation Rights
(“SARs”) shall be authorized for issuance under the Plan: (1) stand-alone SARs
and (2) stapled SARs.

 

(a)           Stand-Alone SARs. The following terms and conditions shall govern
the grant and redeemability of stand-alone SARs:

 

(i)            The stand-alone SAR shall cover a specified number of underlying
shares of Common Stock and shall be redeemable upon such terms and conditions as
the Board may establish. Upon redemption of the stand-alone SAR, the holder
shall be entitled to receive a distribution from the Company in an amount equal
to the excess of (i) the aggregate Fair Market Value (on the redemption date) of
the shares of Common Stock underlying the redeemed right over (ii) the aggregate
base price in effect for those shares.

 

(ii)           The number of shares of Common Stock underlying each stand-alone
SAR and the base price in effect for those shares shall be determined by the
Board in its sole discretion at the time the stand-alone SAR is granted. In no
event, however, may the base price per share be less than one hundred percent
(100%) of the Fair Market Value per underlying share of Common Stock on the
grant date.

 

(iii)          The distribution with respect to any redeemed stand-alone SAR may
be made in shares of Common Stock valued at Fair Market Value on the redemption
date, in cash, or partly in shares and partly in cash, as the Board shall in its
sole discretion deem appropriate.

 

(b)           Stapled SARs. The following terms and conditions shall govern the
grant and redemption of stapled SARs:

 

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(i)            Stapled SARs may only be granted concurrently with an Option to
acquire the same number of shares of Common Stock as the number of such shares
underlying the stapled SARs.

 

(ii)           Stapled SARs shall be redeemable upon such terms and conditions
as the Board may establish and shall grant a holder the right to elect among
(i) the exercise of the concurrently granted Option for shares of Common Stock,
whereupon the number of shares of Common Stock subject to the stapled SARs shall
be reduced by an equivalent number, (ii) the redemption of such stapled SARs in
exchange for a distribution from the Company in an amount equal to the excess of
the Fair Market Value (on the redemption date) of the number of vested shares
which the holder redeems over the aggregate base price for such vested shares,
whereupon the number of shares of Common Stock subject to the concurrently
granted Option shall be reduced by any equivalent number, or (iii) a combination
of (i) and (ii).

 

(iii)          The distribution to which the holder of stapled SARs shall become
entitled under this Section 8 upon the redemption of stapled SARs as described
in Section 8.3(b)(ii) above may be made in shares of Common Stock valued at Fair
Market Value on the redemption date, in cash, or partly in shares and partly in
cash, as the Board shall in its sole discretion deem appropriate.

 

(c)           Term. No SAR shall be exercisable after the expiration of ten
(10) years from the date it was granted.

 

8.4           Phantom Stock Units. The following terms and conditions shall
govern the grant and redeemability of Phantom Stock Units:

 

(a)           Phantom Stock Unit awards shall be redeemable by the Participant
upon such terms and conditions as the Board may establish. The value of a single
Phantom Stock Unit shall be equal to the Fair Market Value of a share of Common
Stock, unless the Board otherwise provides in the terms of the Stock Award
Agreement.

 

(b)           The distribution with respect to any exercised Phantom Stock Unit
award may be made in shares of Common Stock valued at Fair Market Value on the
redemption date, in cash, or partly in shares and partly in cash, as the Board
shall in its sole discretion deem appropriate.

 

8.5           Restricted Stock Units. The following terms and conditions shall
govern the grant and redeemability of Restricted Stock Units:

 

A Restricted Stock Unit is the right to receive the value of one (1) share of
the Company’s Common Stock at the time the Restricted Stock Unit vests. To the
extent permitted by the Board in the terms of his or her Restricted Stock Unit
agreement, a Participant may elect to defer receipt of the value of the shares
of Common Stock otherwise deliverable upon the vesting of an award of Restricted
Stock Units, so long as such deferral election complies with applicable law,
including Section 409A of the Code and, to the extent applicable, the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). An election to
defer such delivery shall be irrevocable and shall be made in writing on a form
acceptable to the Company. The election form shall be filed prior to the vesting
date of such Restricted Stock

 

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Units in a manner determined by the Board. When the Participant vests in such
Restricted Stock Units, the Participant will be credited with a number of
Restricted Stock Units equal to the number of shares of Common Stock for which
delivery is deferred. Restricted Stock Units may be paid by the Company by
delivery of shares of Common Stock, in cash, or a combination thereof, as the
Board shall in its sole discretion deem appropriate, in accordance with the
timing and manner of payment elected by the Participant on his or her election
form, or if no deferral election is made, as soon as administratively
practicable following the vesting of the Restricted Stock Unit.

 

Each Restricted Stock Unit agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate. The terms and
conditions of Restricted Stock Unit agreements may change from time to time, and
the terms and conditions of separate Restricted Stock Unit agreements need not
be identical, but each Restricted Stock Unit agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(a)           Consideration. A Restricted Stock Unit may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit. The Board shall have the discretion to provide that the
Participant pay for such Restricted Stock Unit with cash or other consideration
permissible by law.

 

(b)           Vesting. Vesting shall generally be based on the Participant’s
Continuous Service. If vesting is based on the Participant’s Continuous Service,
such Restricted Stock Unit award shall not fully vest in less than three
(3) years. If vesting is based on the achievement of performance criteria, such
Restricted Stock Unit award shall not fully vest in less than one (1) year.
Notwithstanding the foregoing provisions of this Section 8.5(b), a Restricted
Stock Unit granted in recognition of a Participant’s long-term Continuous
Service may vest fully in periods shorter than those described above
(“Accelerated Vesting Restricted Stock Units”), subject to provisions of the
last sentence of Section 4.1.

 

(c)           Termination of Participant’s Continuous Service. The unvested
portion of the Restricted Stock Unit award shall expire immediately upon the
termination of Participant’s Continuous Service.

 

(d)           Transferability. Rights to acquire the value of shares of Common
Stock under the Restricted Stock Unit agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
Restricted Stock Unit agreement, as the Board shall determine in its discretion,
so long as any Common Stock awarded under the Restricted Stock Unit agreement
remains subject to the terms of the Restricted Stock Unit agreement.

 

8.6           Performance Share Bonus Awards. Each Performance Share Bonus
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. Performance Share Bonuses shall be paid by the
Company in shares of the Common Stock of the Company. The terms and conditions
of Performance Share Bonus agreements may change from time to time, and the
terms and conditions of separate Performance Share Bonus agreements need not be
identical, but each Performance Share

 

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Bonus agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following
provisions:

 

(a)           Consideration. A Performance Share Bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit. In the event that a Performance Share Bonus is granted to a new
Employee, Director, or Consultant who has not performed prior services for the
Company, the Performance Share Bonus will not be awarded until the Board
determines that such person has rendered services to the Company for a
sufficient period of time to ensure proper issuance of the shares in compliance
with the California Corporations Code.

 

(b)           Vesting. Vesting shall be based on the achievement of certain
performance criteria, whether financial, transactional or otherwise, as
determined by the Board. A Performance Share Bonus shall not fully vest in less
than one (1) year. Vesting shall be subject to the Performance Share Bonus
agreement. Upon failure to meet performance criteria, shares of Common Stock
awarded under the Performance Share Bonus agreement shall be subject to a share
reacquisition right in favor of the Company in accordance with a vesting
schedule to be determined by the Board.

 

(c)           Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Company shall reacquire any or
all of the shares of Common Stock held by the Participant that have not vested
as of the date of termination under the terms of the Performance Share Bonus
agreement.

 

(d)           Transferability. Rights to acquire shares of Common Stock under
the Performance Share Bonus agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the Performance Share
Bonus agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the Performance Share Bonus agreement remains subject
to the terms of the Performance Share Bonus agreement.

 

8.7           Performance Share Units. The following terms and conditions shall
govern the grant and redeemability of Performance Share Units:

 

A Performance Share Unit is the right to receive the value of one (1) share of
the Company’s Common Stock at the time the Performance Share Unit vests. To the
extent permitted by the Board in the terms of his or her Performance Share Unit
agreement, a Participant may elect to defer receipt of the value of shares of
Common Stock otherwise deliverable upon the vesting of an award of performance
shares. An election to defer such delivery shall be irrevocable and shall be
made in writing on a form acceptable to the Company. The election form shall be
filed prior to the vesting date of such performance shares in a manner
determined by the Board. When the Participant vests in such performance shares,
the Participant will be credited with a number of Performance Share Units equal
to the number of shares of Common Stock for which delivery is deferred.
Performance Share Units may be paid by the Company by delivery of shares of
Common Stock, in cash, or a combination thereof, as the Board shall in its sole
discretion deem appropriate, in accordance with the timing and manner of payment
elected by the Participant on his or her election form, or if no deferral
election is made, as soon as administratively practicable following the vesting
of the Performance Share Unit.

 

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Each Performance Share Unit agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate. The terms and
conditions of Performance Share Unit agreements may change from time to time,
and the terms and conditions of separate Performance Share Unit agreements need
not be identical, but each Performance Share Unit agreement shall include
(through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:

 

(a)           Consideration. A Performance Share Unit may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit. The Board shall have the discretion to provide that the
Participant pay for such Performance Share Unit with cash or other consideration
permissible by law.

 

(b)           Vesting. Vesting shall be based on the achievement of certain
performance criteria, whether financial, transactional or otherwise, as
determined by the Board. Vesting shall be subject to the Performance Share Unit
agreement. The terms of the Performance Share Unit agreement notwithstanding, a
Performance Share Unit may not fully vest in less than one (1) year.

 

(c)           Termination of Participant’ Continuous Service. The unvested
portion of any Performance Share Unit shall expire immediately upon the
termination of Participant’s Continuous Service.

 

(d)           Transferability. Rights to acquire the value of shares of Common
Stock under the Performance Share Unit agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
Performance Share Unit agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the Performance Share Unit
agreement remains subject to the terms of the Performance Share Unit agreement.

 

ARTICLE 9.  COVENANTS OF THE COMPANY

 

9.1       Availability of Shares. During the term of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

 

9.2       Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise, redemption or satisfaction of the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act the Plan or any Stock Award or any Common Stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock related to such Stock
Awards unless and until such authority is obtained.

 

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ARTICLE 10.  USE OF PROCEEDS FROM STOCK

 

Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute
general funds of the Company.

 

ARTICLE 11.  NO REPRICING WITHOUT SHAREHOLDER APPROVAL

 

11.1     Subject to Article 13, the Board (or Committee, if so authorized by the
Board) shall not, without the approval of the stockholders of the Company,
(i) authorize the amendment of any outstanding Option or Stock Appreciation
Right to reduce its price per share, or (ii) cancel any Option or Stock
Appreciation Right in exchange for cash or another Stock Award when the Option
or Stock Appreciation Right price per share exceeds the Fair Market Value of the
underlying Common Stock.  Subject to Article 13, the Board (or Committee, if so
authorized by the Board) shall have the authority, without the approval of the
stockholders of the Company, to amend any outstanding Stock Award to increase
the price per share or to cancel and replace a Stock Award with the grant of a
Stock Award having a price per share that is greater than or equal to the price
per share of the original Stock Award. Notwithstanding the foregoing, the Board
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which Section 424(a) of the
Code applies.

 

11.2     Shares subject to an Option cancelled under this Section 11 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to Section 5.3 of the Plan. The repricing of an Option under
this Section 11, resulting in a reduction of the exercise price, shall be deemed
to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to Section 5.3 of the Plan. The provisions of this Section 11.2
shall be applicable only to the extent required by Section 162(m) of the Code.

 

ARTICLE 12.  MISCELLANEOUS

 

12.1     Acceleration of Exercisability and Vesting. The Board (or Committee, if
so authorized by the Board) shall have the power to accelerate exercisability
and/or vesting of any Stock Award granted pursuant to the Plan upon a Change of
Control or upon the death, Disability or termination of Continuous Service of
the Participant. In furtherance of such power, the Board or Committee may
accelerate the time at which a Stock Award may first be exercised or the time
during which a Stock Award or any part thereof will vest in accordance with the
Plan, notwithstanding any provisions in the Stock Award Agreement to the
contrary.

 

12.2     Shareholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares of Common
Stock subject to a Stock Award except to the extent that the Company has issued
the shares of Common Stock relating to such Stock Award.

 

12.3     No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right

 

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to continue to serve the Company or an Affiliate in the capacity in effect at
the time the Stock Award was granted or shall affect the right of the Company or
an Affiliate to terminate (i) the employment of an Employee with or without
notice and with or without cause, (ii) the service of a Consultant pursuant to
the terms of such Consultant’s agreement with the Company or an Affiliate, or
(iii) the service of a Director pursuant to the Bylaws of the Company, and any
applicable provisions of the corporate law of the state or other jurisdiction in
which the Company is domiciled, as the case may be.

 

12.4     Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds One Hundred Thousand dollars ($100,000), or such other
limit as may be set by law, the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.

 

12.5     Investment Assurances. The Company may require a Participant, as a
condition of exercising or redeeming a Stock Award or acquiring Common Stock
under any Stock Award, (i) to give written assurances satisfactory to the
Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of acquiring
the Common Stock; (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for the Participant’s own account and not with any present intention of
selling or otherwise distributing the Common Stock; and (iii) to give such other
written assurances as the Company may determine are reasonable in order to
comply with applicable law. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (1) the issuance of the
shares of Common Stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act or (2) as to
any particular requirement, a determination is made by counsel for the Company
that such requirement need not be met in the circumstances under the then
applicable securities laws, and in either case otherwise complies with
applicable law. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

 

12.6     Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state, local, or
foreign tax withholding obligation relating to the exercise or redemption of a
Stock Award or the acquisition, vesting, distribution, or transfer of Common
Stock under a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation or other amounts payable to
the Participant by the Company) or by a combination of such means: (i) tendering
a cash payment; (ii) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant, provided,
however, that no shares of Common Stock are withheld with a value exceeding the
minimum amount of tax

 

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required to be withheld by law; or (iii) delivering to the Company owned and
unnumbered shares of Common Stock.

 

12.7     Section 409A. Notwithstanding anything in the Plan to the contrary, it
is the intent of the Company that all Stock Awards granted under this Plan
(including, but not limited to, Restricted Stock Units, Phantom Stock Units, and
Performance Share Units) shall not cause an imposition of the additional taxes
provided for in Section 409A(a)(1)(B) of the Code; furthermore, it is the intent
of the Company that the Plan shall be administered so that the additional taxes
provided for in Section 409A(a)(1)(B) of the Code are not imposed.

 

ARTICLE 13.  ADJUSTMENTS UPON CHANGES IN STOCK

 

13.1     Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, spinoff, dividend in property
other than cash, stock split, liquidating dividend, extraordinary dividends or
distributions, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan shall be equitably adjusted in the class(es) and maximum
number of securities subject to the Plan pursuant to Section 4.1 above, the
maximum number of securities subject to award to any person pursuant to
Section 5.3 above, and the number of securities subject to Non-Employee
Directors under Article VII of the Plan, and the outstanding Stock Awards shall
be equitably adjusted in the class(es) and number of securities or other
property and price per share of the securities or other property subject to such
outstanding Stock Awards. The Board shall determine the form of such adjustments
in its sole discretion, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction “without receipt of consideration” by the
Company.)

 

13.2     Adjustments Upon a Change of Control.

 

(a)           In the event of a Change of Control as defined in
Section 2.4(a) through 2.4(d), such as an asset sale, merger, or change in Board
composition, then the Board or the board of directors of any surviving entity or
acquiring entity may provide or require that the surviving or acquiring entity
shall: (1) assume or continue all or any part of the Stock Awards outstanding
under the Plan or (2) substitute substantially equivalent stock or cash-based
awards (including an award to acquire substantially the same consideration paid
to the shareholders in the transaction by which the Change of Control occurs)
for those outstanding under the Plan. In the event any surviving entity or
acquiring entity refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the Board in its sole discretion and without liability to any person
may: (1) provide for the payment of a cash amount in exchange for the
cancellation of a Stock Award equal to the product of (x) the excess, if any, of
the Fair Market Value per share of Common Stock at such time over the exercise
or redemption price, if any, times (y) the total number of shares then subject
to such Stock Award; (2) continue the Stock Awards; or (3) notify Participants
holding an Option, Stock Appreciation Right, Phantom Stock Unit, Restricted
Stock Unit or Performance Share Unit that

 

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they must exercise or redeem any portion of such Stock Award (including, at the
discretion of the Board, any unvested portion of such Stock Award) at or prior
to the closing of the transaction by which the Change of Control occurs and that
the Stock Awards shall terminate if not so exercised or redeemed at or prior to
the closing of the transaction by which the Change of Control occurs. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised or redeemed prior to the closing of the
transaction by which the Change of Control occurs. The Board shall not be
obligated to treat all Stock Awards, even those that are of the same type, in
the same manner.

 

(b)           In the event of a Change of Control as defined in Section 2.4(e),
such as a dissolution of the Company, all outstanding Stock Awards shall
terminate immediately prior to such event.

 

ARTICLE 14.  AMENDMENT OF THE PLAN AND STOCK AWARDS

 

14.1     Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 13 of the Plan relating
to adjustments upon changes in Common Stock, no amendment shall be effective
unless approved by the shareholders of the Company to the extent shareholder
approval is necessary to satisfy the requirements of Section 422 of the Code,
any New York Stock Exchange, Nasdaq or other securities exchange listing
requirements, or other applicable law or regulation.

 

14.2     Shareholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for shareholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

 

14.3     Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

 

14.4     No Material Impairment of Rights. Rights under any Stock Award granted
before amendment of the Plan shall not be materially impaired by any amendment
of the Plan unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

 

14.5     Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards subject to and
consistent with the terms of the Plan, including Sections 14.1 and 14.2;
provided, however, that the rights of the Participant under any Stock Award
shall not be materially impaired by any such amendment unless (i) the Company
requests the consent of the Participant and (ii) the Participant consents in
writing.

 

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ARTICLE 15.  TERMINATION OR SUSPENSION OF THE PLAN

 

15.1     Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date that the Plan is approved by the shareholders of
the Company, as the adoption of the Plan by the Board is conditioned upon such
shareholder approval. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.

 

15.2     No Material Impairment of Rights. Suspension or termination of the Plan
shall not materially impair rights and obligations under any Stock Award granted
while the Plan is in effect except with the written consent of the Participant.

 

ARTICLE 16.  EFFECTIVE DATE OF PLAN

 

The Plan shall become effective immediately following its approval by the
shareholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board. If the Plan is
approved by the shareholders of the Company, the 1997 Plan, the 1996 Plan, and
the Directors 1996 Plan shall terminate on the effective date of the Plan. If
the Plan is not approved by the shareholders of the Company, the 1997 Plan, the
1996 Plan, and the Directors 1996 Plan shall continue unaffected. No Stock
Awards may be granted under the Plan prior to the time that the shareholders
have approved the Plan.

 

ARTICLE 17.  CHOICE OF LAW

 

The law of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.

 

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