Exhibit 10.1

GILEAD SCIENCES, INC.

2004 EQUITY INCENTIVE PLAN1

1. Purpose of the Plan. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company by offering them an
opportunity to participate in the Company’s future performance. If this Plan is
approved by stockholders at the 2004 annual meeting of stockholders, it will
replace the Gilead Sciences, Inc. 1991 Stock Option Plan and the Gilead
Sciences, Inc. 1995 Non-Employee Directors’ Stock Option Plan, no further option
grants will be made under those plans, and the remaining shares available for
issuance under those plans will be available for issuance under this Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or any of the Committees appointed to
administer the Plan.

(b) “Affiliate” and “Associate” shall have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.

(c) “Applicable Acceleration Period” means: (i) 24 months, in the case of the
Chief Executive Officer, (ii) 18 months, in the case of an Executive Vice
President or Senior Vice President, and (iii) 12 months, in the case of all
other Grantees.

(d) “Applicable Laws” means the legal requirements relating to the Plan and the
Awards under applicable provisions of federal securities laws, state corporate
and securities laws, the Code, the rules of any applicable stock exchange or
national market system, and the rules of any non-U.S. jurisdiction applicable to
Awards granted to residents therein.

(e) “Award” means the grant of an Option, SAR, Dividend Equivalent Right,
Restricted Stock, Performance Unit, Performance Share, Phantom Share, or other
right or benefit under the Plan.

(f) “Award Agreement” means the written agreement evidencing the grant of an
Award executed by the Company and the Grantee, including any amendments thereto.

(g) “Board” means the Board of Directors of the Company.

(h) “Cause” means with respect to the termination by the Company or a Related
Entity of the Grantee’s Continuous Active Service, that such termination is for
“Cause” as such term is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee’s: (i) performance of any act or
failure to perform any act in bad faith and to the detriment of the Company or a
Related Entity; (ii) dishonesty, intentional misconduct, material violation of
any applicable Company or Related Entity policy, or material breach of any
agreement with the Company or a Related Entity; or (iii) commission of a crime
involving dishonesty, breach of trust, or physical or emotional harm to any
person.

(i) “Change in Control” means a change in ownership or control of the Company
effected through any of the following transactions:

(i) a dissolution or liquidation of the Company;

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Includes amendments through May 9, 2007. Includes share adjustment to reflect
two-for-one stock split effective September 3, 2004.

 

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(ii) a merger or consolidation in which the Company is not the surviving
corporation;

(iii) a reverse merger in which the Company is the surviving corporation but the
shares of the Company’s common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or

(iv) any other capital reorganization in which more than 50% of the shares of
the Company entitled to vote are exchanged.

(j) “Code” means the Internal Revenue Code of 1986, as amended.

(k) “Committee” means any committee composed of members of the Board appointed
by the Board to administer the Plan.

(l) “Common Stock” means the common stock of the Company.

(m) “Company” means Gilead Sciences, Inc., a Delaware corporation.

(n) “Consultant” means any person including an advisor, who is engaged by the
Company or any Related Entity to render services to the Company or such Related
Entity and who is compensated for such services, provided that the term
“Consultant” shall not include Directors who are paid only a director’s fee by
the Company or who are not otherwise compensated by the Company for their
services as Directors. The term “Consultant” shall include a member of the Board
of Directors of a Related Entity.

(o) “Continuous Active Service” means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant
is not interrupted or terminated; provided, however, that if the entity for
which a Grantee is rendering services ceases to qualify as a Related Entity, as
determined by the Board in its sole discretion, such Grantee’s Continuous Active
Service shall be considered to have terminated on the date such entity ceases to
qualify as a Related Entity. In jurisdictions requiring notice in advance of an
effective termination as an Employee, Director or Consultant, Continuous Active
Service shall be deemed terminated upon the actual cessation of providing
services to the Company or a Related Entity notwithstanding any required notice
period that must be fulfilled before a termination as an Employee, Director or
Consultant can be effective under Applicable Laws. Continuous Active Service
shall not be considered interrupted or terminated in the case of (i) the first
three consecutive months of an approved personal leave of absence, (ii) the
first twelve consecutive months of a bona fide leave of absence (other than an
approved personal leave), (iii) a bona fide leave of absence exceeding twelve
consecutive months, as long as the right to re-employment is provided either by
statute or contract, or (iv) transfers among the Company, any Related Entity, or
any successor, provided that any such transfer does not result in a change in
status or capacity as an Employee, Director or Consultant (except as otherwise
provided in the Award Agreement or authorized by the Board). Continuous Active
Service shall be considered terminated (i) on the first day immediately
following the first three consecutive months of an approved personal leave of
absence, (ii) on the first day immediately following the first twelve
consecutive months of a bona fide leave of absence where the right to
re-employment after the twelve-month period is not provided either by statute or
contract, (iii) on the first day immediately following the end of a bona fide
leave of absence exceeding twelve consecutive months for which the right to
re-employment is no longer provided either by statute or contract, or (iv) upon
the effective date of any change in status or capacity as an Employee, Director
or Consultant (except as otherwise provided in the Award Agreement or authorized
by the Board). Notwithstanding the foregoing, the Board or the chief executive
officer of the Company, in that party’s sole discretion, may determine whether
Continuous Active Service shall be considered interrupted in the case of any
leave of absence approved by the Board or the chief executive officer of the
Company including sick leave, military leave, or any other personal leave. For
purposes of each Incentive Stock Option granted under the Plan, if Continuous
Active Service is considered terminated according to this Section 2(n), then the
Incentive Stock Option shall be treated as a Nonstatutory Stock Option if
exercised more than three months following termination of Continuous Active
Service.

 

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(p) “Covered Employee” means an Employee who is a “covered employee” under
Section 162(m)(3) of the Code.

(q) “Director” means a member of the Board or the board of directors of any
Related Entity.

(r) “Dividend Equivalent Right” means a right entitling the Grantee to
compensation measured by dividends paid with respect to Common Stock.

(s) “Domestic Partner” means a person who meets and continues to meet all of the
criteria detailed in the Gilead Sciences Affidavit of Domestic Partnership when
the Domestic Partnership has been internally registered with the Company by
filing with the Company an original, properly completed, notarized Gilead
Sciences Affidavit of Domestic Partnership.

(t) “Employee” means any person, including an Officer or Director, who is in the
employ of the Company or any Related Entity, subject to the control and
direction of the Company or any Related Entity as to both the work to be
performed and the manner and method of performance. Neither service as a
Director nor payment of a director’s fee by the Company or a Related Entity
shall be sufficient to constitute “employment” by the Company.

(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation The Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the date of determination (or, if no closing sales price or closing bid was
reported on that date, as applicable, on the last trading date such closing
sales price or closing bid was reported), as reported in The Wall Street Journal
or such other source as the Board deems reliable; or

(ii) If the Common Stock is regularly quoted on an automated quotation system
(including the OTC Bulletin Board) or 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 high asked prices for the
Common Stock on the last market trading day prior to the date of determination
(or, if no such prices were reported on that date, on the last date such prices
were reported), as reported in The Wall Street Journal or such other source as
the Board deems reliable; or

(iii) In the absence of an established market for the Common Stock of the type
described in (i) and (ii), above, the Fair Market Value thereof shall be
determined by the Board in good faith.

(w) “Grantee” means an Employee, Director or Consultant who receives an Award
under the Plan.

(x) “Immediate Family” means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, Domestic Partner, a trust in
which these persons (or the Grantee) have more than 50% of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.

(y) “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.

 

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(z) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

(aa) “Officer” means a person who is an officer of the Company or a Related
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

(bb) “Option” means an option to purchase Shares pursuant to an Award Agreement
granted under the Plan.

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

(dd) “Performance-Based Compensation” means compensation qualifying as
“performance-based compensation” under Section 162(m) of the Code.

(ee) “Performance Shares” means Shares or an Award denominated in Shares which
may be earned in whole or in part upon attainment of performance criteria
established by the Administrator.

(ff) “Performance Units” means an Award denominated in U.S. dollars which may be
earned in whole or in part based upon attainment of performance criteria
established by the Administrator and which may be settled for cash, Shares or
other securities or a combination of cash, Shares or other securities as
established by the Administrator.

(gg) “Phantom Share” means an Award denominated in Shares in which the Grantee
has the right to receive an amount equal to the value of a specified number of
Shares over a specified period of time and which will be payable in cash or
Shares as established by the Administrator.

(hh) “Plan” means this Gilead Sciences, Inc. 2004 Equity Incentive Plan.

(ii) “Related Entity” means any Parent or Subsidiary of the Company and any
business, corporation, partnership, limited liability company or other entity in
which the Company or a Parent or a Subsidiary of the Company holds a substantial
ownership interest, directly or indirectly.

(jj) “Restricted Stock” means Shares or an Award denominated in Shares issued
under the Plan to the Grantee for such consideration, if any, and subject to
such restrictions on transfer, rights of first refusal, repurchase provisions,
forfeiture provisions, and other terms and conditions as established by the
Administrator.

(kk) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor thereto, as in effect when discretion is being exercised with respect
to the Plan.

(ll) “SAR” means a stock appreciation right entitling the Grantee to Shares or
cash compensation, as established by the Administrator, measured by appreciation
in the value of Common Stock.

(mm) “Share” means a share of the Common Stock.

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

3. Stock Subject to the Plan.

(a) Subject to the provisions of Section 10 below, the maximum aggregate number
of Shares which may be issued pursuant to all Awards (including, without
limitation, Restricted Stock, Performance Shares,

 

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Options, SARs, Dividend Equivalent Rights, and Phantom Shares) is 30,200,0002
Shares, plus the number of shares previously authorized for issuance under the
Gilead Sciences, Inc. 1991 Stock Option Plan and the Gilead Sciences, Inc. 1995
Non-Employee Directors’ Stock Option Plan which are not required to be issued
upon the exercise of options under those plans outstanding on May 25, 2004.
Notwithstanding the foregoing, no more than 2,500,000 of such Shares may be
issued pursuant to all Awards of Restricted Stock, Performance Shares, SARs, and
Phantom Shares, in total.3 The Shares to be issued pursuant to Awards may be
authorized, but unissued, or reacquired Common Stock. Performance Units that by
their terms may only be settled in cash shall not reduce the maximum aggregate
number of shares that may be issued under the Plan.

(b) Any Shares covered by an Award (or portion of an Award) which is forfeited,
canceled or expires (whether voluntarily or involuntarily) shall be deemed not
to have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. Shares that actually have been issued
under the Plan pursuant to an Award shall not be returned to the Plan and shall
not become available for future issuance under the Plan, except that if unvested
Shares are forfeited, or repurchased by the Company at the lower of their
original purchase price or their Fair Market Value at the time of repurchase,
such Shares shall become available for future grant under the Plan.

4. Administration of the Plan.

(a) Plan Administrator:

(i) Administration with Respect to Directors and Officers. With respect to
grants of Awards to Directors or Employees who are also Officers or Directors of
the Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be constituted in such a manner
as to satisfy the Applicable Laws and to permit such grants and related
transactions under the Plan to be exempt from Section 16(b) of the Exchange Act
in accordance with Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. With
respect to the grant of an Award to a Director who is not an Employee and which
is not a scheduled Award under predetermined rules established by the Board or
Committee, such grant shall be made only by a Committee (or subcommittee of the
Committee) which is comprised solely of two or more Non-Employee Directors, as
this term is defined in Rule 16b-3, none of whom are the recipient of the Award.

(ii) Administration With Respect to Consultants and Other Employees. With
respect to grants of Awards to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. The Board may authorize one or more Officers to
grant such Awards and may limit such authority as the Board determines from time
to time.

(iii) Administration With Respect to Covered Employees. Notwithstanding the
foregoing, grants of Awards to any Covered Employee intended to qualify as
Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more Directors
eligible to serve on a committee making Awards qualifying as Performance-Based
Compensation. In the case of such Awards granted to Covered Employees,
references to the “Administrator” or to a “Committee” shall be deemed to be
references to such Committee or subcommittee.

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Maximum number of Shares consists of 3,600,000 Shares authorized coincident with
the adoption of the 2004 Equity Incentive Plan at the 2004 annual stockholders
meeting, another 3,600,000 Shares due to the share adjustment for the
two-for-one stock split effective September 3, 2004, an additional 10,000,000
Shares authorized and approved at the 2005 annual stockholders meeting, an
additional 10,000,000 Shares authorized and approved at the 2006 annual
stockholders meeting, and an additional 3,000,000 Shares authorized and approved
at the 2007 annual stockholders meeting.

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The 2,500,000 limit includes Performance Units to the extent these Awards are
settled in shares. The Company has never declared nor paid a cash dividend and
does not intend to grant any dividend equivalent rights in the foreseeable
future; however, if a dividend equivalent right was to be granted in the future,
the Company would consider the dividend equivalent right subject to the
2,500,000 limit.

 

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(b) Powers of the Administrator. Subject to Applicable Laws and the provisions
of the Plan (including any other powers given to the Administrator hereunder),
and except as otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:

(i) to select the Employees, Directors and Consultants to whom Awards may be
granted from time to time hereunder;

(ii) to determine whether and to what extent Awards are granted hereunder;

(iii) to determine the number of Shares or the amount of other consideration to
be covered by each Award granted hereunder;

(iv) to approve forms of Award Agreements for use under the Plan;

(v) to determine the terms and conditions of any Award granted hereunder;

(vi) to amend the terms of any outstanding Award granted under the Plan,
provided that (A) any amendment that would adversely affect the Grantee’s rights
under an outstanding Award shall not be made without the Grantee’s written
consent, (B) the reduction of the exercise price of any Option awarded under the
Plan shall be subject to stockholder approval as provided in Section 7(b), and
(C) canceling an Option at a time when its exercise price exceeds the Fair
Market Value of the underlying Shares, in exchange for another Option,
Restricted Stock, or other Award shall be subject to stockholder approval as
provided in Section 7(b), unless the cancellation and exchange occurs in
connection with a Change in Control as provided in Section 11;

(vii) to construe and interpret the terms of the Plan and Awards, including
without limitation, any notice of award or Award Agreement, granted pursuant to
the Plan;

(viii) to establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable non-U.S. jurisdictions and to afford
Grantees favorable treatment under such rules or laws; provided, however, that
no Award shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan; and

(ix) to take such other action, not inconsistent with the terms of the Plan, as
the Administrator deems appropriate.

(c) Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board or as Officers or Employees of the Company or a
Related Entity, members of the Board and any Officers or Employees of the
Company or a Related Entity to whom authority to act for the Board, the
Administrator or the Company is delegated shall be defended and indemnified by
the Company to the extent permitted by law on an after-tax basis against all
reasonable expenses (including attorneys’ fees), actually and necessarily
incurred in connection with the defense of any claim, investigation, action,
suit or proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any Award granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by the Company) or paid by them in satisfaction of a judgment in any such claim,
investigation, action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such claim, investigation, action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct; provided, however, that within 30 days after the
institution of such claim, investigation, action, suit or proceeding, such
person shall offer to the Company, in writing, the opportunity at the Company’s
expense to handle and defend the same.

5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company or a Parent or a

 

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Subsidiary of the Company. An Employee, Director or Consultant who has been
granted an Award may, if otherwise eligible, be granted additional Awards.
Awards may be granted to such Employees, Directors or Consultants who are
residing in non-U.S. jurisdictions as the Administrator may determine.

6. Terms and Conditions of Awards.

(a) Type of Awards. The Administrator is authorized under the Plan to award any
type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR,
or similar right with a fixed or variable price related to the Fair Market Value
of the Shares and with an exercise or conversion privilege related to the
passage of time, the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions. Such awards include, without
limitation, Options, SARs, Restricted Stock, Dividend Equivalent Rights,
Performance Units, Performance Shares, or Phantom Shares. An Award may consist
of one such security or benefit, or two or more of them in any combination or
alternative.

(b) Designation of Award. Each Award shall be designated in the Award Agreement.
In the case of an Option, the Option shall be designated as either an Incentive
Stock Option or a Nonstatutory Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary of the Company) exceeds
$100,000, such excess Options, to the extent of the Shares covered thereby in
excess of the foregoing limitation, shall be treated as Nonstatutory Stock
Options. For this purpose, Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the grant date of the relevant Option.

(c) Conditions of Award. Subject to the terms of the Plan, the Administrator
shall determine the provisions, terms, and conditions of each Award including,
but not limited to, the Award vesting schedule, repurchase provisions, rights of
first refusal, forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, the
following: (i) revenue, (ii) achievement of specified milestones in the
discovery and development of one or more of the Company’s products,
(iii) achievement of specified milestones in the commercialization of one or
more of the Company’s products, (iv) achievement of specified milestones in the
manufacturing of one or more of the Company’s products, (v) expense targets,
(vi) personal management objectives, (vii) share price (including, but not
limited to, growth measures and total shareholder return), (viii) earnings per
share, (ix) operating efficiency, (x) operating margin, (xi) gross margin,
(xii) return measures (including, but not limited to, return on assets, capital,
equity, or sales), (xiii) net sales growth, (xiv) productivity ratios,
(xv) operating income, (xvi) net operating profit, (xvii) net earnings or net
income (before or after taxes), (xviii) cash flow (including, but not limited
to, operating cash flow, free cash flow, and cash flow return on capital),
(xix) earnings before or after interest, taxes, depreciation, and/or
amortization, (xx) economic value added, (xxi) market share, (xxii) customer
satisfaction, (xxiii) working capital targets, and (xxiv) other measures of
performance selected by the Administrator. Partial achievement of the specified
criteria may result in a payment or vesting corresponding to the degree of
achievement as specified in the Award Agreement.

(d) Acquisitions and Other Transactions. The Administrator may issue Awards
under the Plan in settlement, assumption or substitution for, outstanding awards
or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

(e) Deferral of Award Payment. The Administrator may establish one or more
programs under the Plan to permit selected Grantees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Grantee to payment or receipt of Shares or other consideration under an Award.
The Administrator may establish the election procedures, the timing of such
elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.

 

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(f) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.

(g) Individual Limitations on Awards. The maximum number of Shares with respect
to which Options may be granted to any Grantee in any fiscal year of the Company
shall be 1,250,000 Shares. The maximum number of Shares with respect to which
Restricted Stock, Performance Shares, Performance Units, SARs, or Phantom
Shares, in the aggregate, may be granted to any Grantee in any fiscal year of
the Company shall be 200,000 Shares. In connection with an Employee’s or
Consultant’s (i) commencement of Continuous Active Service or (ii) promotion, an
Employee or Consultant may be granted Options for up to an additional 500,000
Shares or Restricted Stock, Performance Shares, Performance Units, SARs, or
Phantom Shares, in the aggregate, for up to an additional 100,000 shares which
shall not count against the limit set forth in the preceding sentence. The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization pursuant to Section 10, below. The value
of all Awards denominated in U.S. dollars granted in any single calendar year to
any Grantee shall not exceed $7,000,000. For this purpose, the value of an Award
denominated in U.S. dollars shall be determined on the date of grant without
regard to any conditions imposed on the Award. To the extent required by
Section 162(m) of the Code or the regulations thereunder, in applying the
foregoing limitations with respect to a Grantee, if any Awards are canceled, the
canceled Awards shall continue to count against the maximum number of Shares
with respect to which Awards may be granted to the Grantee. For this purpose,
the repricing of an Option (or in the case of a SAR, the base amount on which
the stock appreciation is calculated is reduced to reflect a reduction in the
Fair Market Value of the Common Stock), if such repricing is approved by the
stockholders of the Company, shall be treated as the cancellation of the
existing Option or SAR and the grant of a new Option or SAR. If the vesting or
receipt of Shares under the Award is deferred to a later date, any amount
(whether denominated in Shares or U.S. dollars) paid in addition to the original
number of Shares subject to the Award will not be treated as an increase in the
number of Shares subject to the Award if the additional amount is based either
on a reasonable rate of interest or on one or more predetermined actual
investments such that the amount payable by the Company at the later date will
be based on the actual rate of return of a specific investment (including any
decrease as well as any increase in the value of an investment).

(h) Early Exercise. The Award Agreement may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or
Consultant to exercise any part or all of the Award prior to full vesting of the
Award. Any unvested Shares received pursuant to such exercise may be subject to
a repurchase right in favor of the Company or a Related Entity or to any other
restriction the Administrator determines to be appropriate.

(i) Term of Award. The term of each Award shall be the term stated in the Award
Agreement, provided, however, that the term of an Award shall be no more than
ten years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to a Grantee who, at the time the Option is granted, owns
stock representing more than 10% of the voting power of all classes of stock of
the Company or any Parent or Subsidiary of the Company, the term of the
Incentive Stock Option shall be five years from the date of grant thereof or
such shorter term as may be provided in the Award Agreement.

(j) Transferability of Awards. Incentive Stock Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable
by will and by the laws of descent and distribution, and during the lifetime of
the Grantee, by gift or pursuant to a domestic relations order to members of the
Grantee’s Immediate Family to the extent and in the manner determined by the
Administrator. Notwithstanding the foregoing, the Grantee may designate a
beneficiary of the Grantee’s Award in the event of the Grantee’s death on a
beneficiary designation form provided by the Administrator.

(k) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to grant
such Award, or such later date as is determined by the Administrator.

 

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7. Award Exercise or Purchase Price; Consideration and Taxes.

(a) Exercise or Purchase Price. The exercise or purchase price, if any, for an
Award shall be as follows:

(i) In the case of an Incentive Stock Option:

(A) granted to an Employee who, at the time of the grant of such Incentive Stock
Option owns stock representing more than 10% of the voting power of all classes
of stock of the Company or any Parent or Subsidiary of the Company, the per
Share exercise price shall be not less than 110% of the Fair Market Value per
Share on the date of grant; or

(B) granted to any Employee other than an Employee described in the preceding
paragraph, the per Share exercise price shall be not less than 100% of the Fair
Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price
shall be not less than 100% of the Fair Market Value per Share on the date of
grant.

(iii) In the case of a SAR, the base amount on which the stock appreciation is
calculated shall be not less than 100% of the Fair Market Value per Share on the
date of grant.

(iv) In the case of other Awards, such price as is determined by the
Administrator.

(v) Notwithstanding the foregoing provisions of this Section 7(a), in the case
of an Award issued pursuant to Section 6(d), above, the exercise or purchase
price for the Award shall be determined in accordance with the provisions of the
relevant instrument evidencing the agreement to issue such Award.

(b) No Authority to Reprice. Without the consent of stockholders of the Company,
no Award may be repriced, replaced, regranted through cancellation, or modified
(except as provided in Section 10) if the effect is to reduce the exercise or
purchase price for the Shares underlying such Award. In addition, the
replacement or substitution of one Award for another Award is prohibited, absent
stockholder consent, to the extent it has the effect of reducing the exercise or
purchase price of the underlying Shares.

(c) Consideration. Subject to Applicable Laws, the consideration to be paid for
the Shares to be issued upon exercise or purchase of an Award including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following, provided that the portion of the consideration
equal to the par value of the Shares must be paid in cash or other legal
consideration permitted by the Delaware General Corporation Law:

(i) cash;

(ii) check;

(iii) surrender of Shares or delivery of a properly executed form of attestation
of ownership of Shares as the Administrator may require (including withholding
of Shares otherwise deliverable upon exercise of the Award) which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
exercise price of the Shares as to which said Award shall be exercised,
provided, however, that Shares acquired under the Plan or any other equity
compensation plan or agreement of the Company must have been held by the Grantee
for a period of more than six months;

(iv) with respect to Options, payment through a traditional broker-dealer sale
and remittance procedure pursuant to which the Grantee (A) shall provide written
instructions to a Company designated brokerage firm to effect the immediate sale
of some or all of the purchased Shares and remit to the Company

 

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sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall provide written directives to the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm in order
to complete the sale transaction;

(v) with respect to Options, payment through an internet-based broker-dealer
sale and remittance procedure pursuant to which the Grantee (A) shall establish
and maintain an account with the internet-based broker-dealer to effect the sale
of some or all of the purchased Shares and ensure that such account contains
sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall execute the transaction with the internet-based
broker-dealer who will then cause the purchased Shares to be deposited into the
Grantee’s account in order to complete the sale transaction; or

(vi) any combination of the foregoing methods of payment.

(d) Taxes. No Shares shall be delivered under the Plan to any Grantee or other
person until such Grantee or other person has made arrangements acceptable to
the Administrator for the satisfaction of any federal, state, local or non-U.S.
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.

8. Exercise of Award.

(a) Procedure for Exercise; Rights as a Stockholder.

(i) Any Award granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator under the terms of the Plan
and specified in the Award Agreement. Notwithstanding any other provision of the
Plan to the contrary, except with respect to a maximum of 5% of the Shares
authorized for issuance under Section 3(a), any Awards of Restricted Stock which
vest on the basis of the Grantee’s Continuous Active Service with the Company or
a Related Entity shall not provide for vesting which is any more rapid than
annual pro rata vesting over a three-year period and any Awards of Restricted
Stock which provide for vesting upon the attainment of performance goals shall
provide for a performance period of at least 12 months.

(ii) An Award shall be deemed to be exercised when written notice of such
exercise has been given to the Company or its designee in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to pay
the purchase price as provided in Section 7(c)(iv).

(b) Exercise of Award Following Termination of Continuous Active Service.

(i) An Award may not be exercised after the termination date of such Award set
forth in the Award Agreement and may be exercised following the termination of a
Grantee’s Continuous Active Service only to the extent provided in the Award
Agreement.

(ii) Where the Award Agreement permits a Grantee to exercise an Award following
the termination of the Grantee’s Continuous Active Service for a specified
period, the Award shall terminate to the extent not exercised on the last day of
the specified period or the last day of the original term of the Award,
whichever occurs first.

(iii) Any Award designated as an Incentive Stock Option to the extent not
exercised within the time permitted by law for the exercise of Incentive Stock
Options following the termination of a Grantee’s Continuous Active Service shall
convert automatically to a Nonstatutory Stock Option and thereafter shall be
exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.

 

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9. Conditions Upon Issuance of Shares.

(a) Shares shall not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all Applicable Laws, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.

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

10. Adjustments Upon Changes in Capitalization. If any change is made in the
Common Stock subject to the Plan, or subject to any Award (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Plan will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan pursuant to Section 3(a), and the maximum number of
shares subject to award to any person during any calendar year pursuant to
Section 6(g), and the outstanding Awards (other than an Award of Restricted
Stock that is outstanding at the time of the event described in this paragraph)
will be appropriately adjusted in the classes(es) and the number of shares and
price per Share subject to such outstanding Awards, including any price required
to be paid for Restricted Stock not yet outstanding at the time of the event
described in this paragraph.

11. Change in Control.

(a) Effect of Change in Control on Awards. In the event of a Change in Control,
then, at the sole discretion of the Board and to the extent permitted by
applicable law: (i) any surviving corporation shall assume any Awards
outstanding under the Plan or shall substitute similar Awards for those
outstanding under the Plan, (ii) the time during which such Awards may be
exercised shall be accelerated and the Awards terminated if not exercised prior
to the Change in Control, or (iii) such Awards shall continue in full force and
effect.

(b) Acceleration of Award Upon Change in Control. Notwithstanding any other
provisions of this Plan to the contrary, if a Change in Control occurs and if
within one month before or within the Applicable Acceleration Period after the
date of such Change in Control (1) the Continuous Active Service of an Employee
or a Consultant terminates due to an involuntary termination (not including
death or Disability) without Cause (as such term is defined below) or a
voluntary termination by the Grantee due to Constructive Termination (as such
term is defined below) or (2) the Continuous Active Service of a Director
terminates, then the vesting and exercisability of all Awards held by such
Grantee shall be accelerated, or any reacquisition or repurchase rights held by
the Company with respect to an Award shall lapse, as follows. With respect to
those Awards held by a Grantee at the time of such termination, 100% of the
unvested Shares covered by such Awards shall vest and become exercisable (or
reacquisition or repurchase rights held by the Company shall lapse with respect
to 100% of the Shares still subject to such rights, as appropriate) as of the
date of such termination.

(c) Definition of “Cause”. For the purposes of Section 11(b) only, “Cause” means
(i) conviction of, a guilty plea with respect to, or a plea of non contendere to
a charge that a Grantee has committed a felony under the laws of the United
States or of any state or a crime involving moral turpitude, including, but not
limited to, fraud, theft, embezzlement or any crime that results in or is
intended to result in personal enrichment at the expense of the Company or a
Related Entity; (ii) material breach of any agreement entered into between the
Grantee and the Company or a Related Entity that impairs the Company’s or the
Related Entity’s interest therein; (iii) willful misconduct, significant failure
of the Grantee to perform the Grantee’s duties, or gross neglect by the Grantee
of the Grantee’s duties; or (iv) engagement in any activity that constitutes a
material conflict of interest with the Company or a Related Entity.

(d) Definition of “Constructive Termination”. For purposes of Section 11(b)
only, “Constructive Termination” means the occurrence of any of the following
events or conditions: (i) (A) a change in the Grantee’s status, title, position
or responsibilities (including reporting responsibilities) which represents an
adverse change from the Grantee’s status, title, position or responsibilities as
in effect at any time within 90 days

 

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preceding the date of a Change in Control or within the Applicable Acceleration
Period after the date of a Change in Control; (B) the assignment to the Grantee
of any duties or responsibilities which are inconsistent with the Grantee’s
status, title, position or responsibilities as in effect at any time within 90
days preceding the date of a Change in Control or at any time within the
Applicable Acceleration Period after the Change in Control; or (C) any removal
of the Grantee from or failure to reappoint or reelect the Grantee to any of
such offices or positions, except in connection with the termination of the
Grantee’s Continuous Active Service for Cause, as a result of the Grantee’s
Disability or death or by the Grantee other than as a result of Constructive
Termination; (ii) a reduction in the Grantee’s annual base compensation or any
failure to pay the Grantee any compensation or benefits to which the Grantee is
entitled within five days of the date due; (iii) the Company’s requiring the
Grantee to relocate to any place outside a 50 mile radius of the Grantee’s
current work site, except for reasonably required travel on the business of the
Company or a Related Entity which is not materially greater than such travel
requirements prior to the Change in Control; (iv) the failure by the Company to
(A) continue in effect (without reduction in benefit level and/or reward
opportunities) any material compensation or employee benefit plan in which the
Grantee was participating at any time within 90 days preceding the date of a
Change in Control or at any time within the Applicable Acceleration Period after
the Change in Control, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Grantee, or (B) provide
the Grantee with compensation and benefits, in the aggregate, at least equal (in
terms of benefit levels and/or reward opportunities) to those provided for under
each other employee benefit plan, program and practice in which the Grantee was
participating at any time within 90 days preceding the date of a Change in
Control or at any within the Applicable Acceleration Period after the Change in
Control; (v) any material breach by the Company of any provision of an agreement
between the Company and the Grantee, whether pursuant to this Plan or otherwise,
other than a breach which is cured by the Company within 15 days following
notice by the Grantee of such breach; or (vi) the failure of the Company to
obtain an agreement, satisfactory to the Grantee, from any successors and
assigns to assume and agree to perform the obligations created under this Plan.

(e) Effect of Acceleration on Incentive Stock Options. Any Incentive Stock
Option accelerated under this Section 11 in connection with a Change in Control
shall remain exercisable as an Incentive Stock Option under the Code only to the
extent the $100,000 dollar limitation of Section 422(d) of the Code is not
exceeded. To the extent such dollar limitation is exceeded, the excess Options
shall be treated as Nonstatutory Stock Options.

12. Effective Date and Term of Plan. The Plan shall become effective upon its
approval by the stockholders of the Company. It shall continue in effect for a
term of ten years unless sooner terminated. Subject to Applicable Laws, Awards
may be granted under the Plan upon its becoming effective.

13. Amendment, Suspension or Termination of the Plan.

(a) The Board may at any time amend, suspend or terminate the Plan; provided,
however, that no such amendment shall be made without the approval of the
Company’s stockholders to the extent such approval is required by NASD
Marketplace Rule 4350(i)(1)(A), Section 422 of the Code and regulations
promulgated thereunder, or any other Applicable Laws, or if such amendment would
change any of the provisions of Section 4(b)(vi) or this Section 13(a).

(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.

(c) No suspension or termination of the Plan (including termination of the Plan
under Section 12, above) shall adversely affect any rights under Awards already
granted to a Grantee.

14. Reservation of Shares.

(a) The Company, during the term of the Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

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

 

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15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not
confer upon any Grantee any right with respect to the Grantee’s Continuous
Active Service, nor shall it interfere in any way with his or her right or the
right of the Company or any Related Entity to terminate the Grantee’s Continuous
Active Service at any time, with or without Cause, and with or without notice.
The ability of the Company or any Related Entity to terminate the employment of
a Grantee who is employed at will is in no way affected by its determination
that the Grantee’s Continuous Active Service has been terminated for Cause for
the purposes of this Plan.

16. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company or a Related
Entity, Awards shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or a Related
Entity, and shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount of benefits is related to level of compensation. The Plan is not a
“Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security
Act of 1974, as amended.

17. Unfunded Obligation. Grantees shall have the status of general unsecured
creditors of the Company. Any amounts payable to Grantees pursuant to the Plan
shall be unfunded and unsecured obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974, as
amended. Neither the Company nor any Related Entity shall be required to
segregate any monies from its general funds, or to create any trusts, or
establish any special accounts with respect to such obligations. The Company
shall retain at all times beneficial ownership of any investments, including
trust investments, which the Company may make to fulfill its payment obligations
hereunder. Any investments or the creation or maintenance of any trust or any
Grantee account shall not create or constitute a trust or fiduciary relationship
between the Administrator, the Company or any Related Entity and a Grantee, or
otherwise create any vested or beneficial interest in any Grantee or the
Grantee’s creditors in any assets of the Company or a Related Entity. The
Grantees shall have no claim against the Company or any Related Entity for any
changes in the value of any assets that may be invested or reinvested by the
Company with respect to the Plan.

18. Governing Law. The Plan and all agreements thereunder shall be governed by
and construed in accordance with the laws of the State of California (with the
exception of its conflict of law provisions).

 

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