Exhibit 10.2

 

BORLAND SOFTWARE CORPORATION

2003 SUPPLEMENTAL STOCK OPTION PLAN

 

ARTICLE ONE

GENERAL PROVISIONS

 

           I.        PURPOSE OF THE PLAN  

 

                      This 2003 Supplemental Stock Option Plan is intended to
promote the interests of Borland Software Corporation, a Delaware corporation,
by providing eligible persons in the Corporation’s service with the opportunity
to acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in such service.
The Plan is intended to be exempt from shareholder approval requirements of Rule
4350 of the Quantitative Listing Requirements of the Nasdaq National Market as
provided under the “inducement grant exception” of Rule 4350(i)(1)(A)(iv).   

 

                      Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix. Should any relevant date under the Plan fall on
a date on which there is no trading on the securities exchange or Nasdaq
National Market (as applicable) on which the Common Stock is at that time
traded, then the relevant date for purposes of the Plan shall be the immediately
preceding trading date.

 

           II.       ADMINISTRATION OF THE PLAN

 

                      A.     The Board shall appoint the Plan Administrator. The
Plan Administrator shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. Notwithstanding the
foregoing, stock option grants may be made under the Plan only by the
compensation committee of the Board or a majority of the Corporation’s
Independent Directors.

 

                      B.     The Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the provisions of
the Plan and any outstanding options thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in any stock option thereunder.

 

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

 

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           III.      ELIGIBILITY

 

                      A.     The persons eligible to receive stock option grants
under this Plan are Employees (i) who were not previously an Employee or
Director of the Corporation or who have had a bona fide period of non-employment
since last being employed by the Corporation and (ii) where the stock option
grant is an inducement material to that person entering into employment with the
Corporation. Persons who become Employees as a result of a merger or acquisition
shall be eligible to receive a stock option grant under this Plan.

 

                      B.     The Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority to
determine, with respect to the option grants under the Plan, which eligible
persons are to receive such grants, the time or times when those grants are to
be made, the number of shares to be covered by each such grant, the time or
times when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding.

 

                      C.     The Plan Administrator shall have the absolute
discretion to grant options in accordance with the Plan.

 

           IV.      STOCK SUBJECT TO THE PLAN

 

                      A.     The stock issuable under the Plan shall be shares
of authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The number of shares of
Common Stock initially reserved for issuance over the term of the Plan shall not
exceed one million five hundred thousand (1,500,000) shares.

 

                      B.     Shares of Common Stock subject to outstanding
options shall be available for subsequent issuance under the Plan to the extent
(i) those options expire or terminate for any reason prior to exercise in full
or (ii) the options are cancelled in accordance with the cancellation-regrant
provisions of Article Two. Unvested shares issued under the Plan and
subsequently cancelled or repurchased by the Corporation, at a price per share
not greater than the original issue price paid per share, pursuant to the
Corporation’s repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, should the exercise price of an option under the
Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an option
or the vesting of stock issued upon the exercise of an option under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.

 

                      C.    If any change is made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation’s receipt of consideration, appropriate
adjustments shall be made by the Plan Administrator to (i) the

 

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maximum number and/or class of securities issuable under the Plan, (ii) the
maximum number and/or class of securities for which any one person may be
granted stock options under the Plan per calendar year and (iii) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option under the Plan. Such adjustments to the outstanding options
are to be effected in a manner which shall preclude the enlargement or dilution
of rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.

 

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ARTICLE TWO 

 

DISCRETIONARY OPTION GRANTS

 

           I.        OPTION TERMS

 

                      Options granted under the Plan are not intended to qualify
as “incentive stock options”within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. Each option shall be evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
that each such document shall comply with the terms specified below.

 

                      A.   Exercise Price.

 

                                 1.  The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than one hundred percent (100%)
of the Fair Market Value per share of Common Stock on the option grant date.   

 

                                 2.  The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of
Section I of Article Three and the documents evidencing the option, be payable
in one or more of the forms specified below:    

 

                                 (i)     cash or check made payable to the
Corporation,

 

                                 (ii)    shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation’s earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date, or

 

                                 (iii)   to the extent the option is exercised
for vested shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable income and
employment taxes required to be withheld by the Corporation by reason of such
exercise and (b) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.

 

                      Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

 

                      B.  Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.

 

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                      C.   Effect of Termination of Service.

 

                                 1.   The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:

 

                                 (i)     Any option outstanding at the time of
the Optionee’s cessation of Service for any reason shall remain exercisable for
such period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option shall
be exercisable after the expiration of the option term.

 

                                 (ii)    Any option held by the Optionee at the
time of death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee’s estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee’s will or the laws of inheritance or by the Optionee’s designated
beneficiary or beneficiaries of that option.

 

                                 (iii)   Should the Optionee’s Service be
terminated for Misconduct or should the Optionee otherwise engage in Misconduct
while holding one or more outstanding options under this Article Two, then all
those options shall terminate immediately and cease to be outstanding.

 

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

 

                                 2.  The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

 

                                 (i)     extend the period of time for which the
option is to remain exercisable following the Optionee’s cessation of Service
from the limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term, and/or

 

                                 (ii)    permit the option to be exercised,
during the applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is exercisable at
the time of the Optionee’s cessation of Service but also with respect to one or
more additional installments in which the Optionee would have vested had the
Optionee continued in Service.

 

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                      D.  Stockholder Rights. The holder of an option shall have
no stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and become
a holder of record of the purchased shares.

 

                      E.  Repurchase Rights. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right, but not the obligation, to
repurchase any or all of those unvested shares at a price per share equal to the
lower of (i) the exercise price paid per share or (ii) the Fair Market Value per
share of Common Stock at the time of the Optionee’s cessation of Service. The
terms upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the document evidencing such repurchase right.

 

                      F.  Limited Transferability of Options. Except as
otherwise provided in this section, during the lifetime of the Optionee, options
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or the laws of inheritance following the
Optionee’s death. The Plan Administrator may structure one or more options under
the Plan so that each such option may be assigned in whole or in part during the
Optionee’s lifetime to one or more members of the Optionee’s family or to a
trust established exclusively for one or more such family members or to
Optionee’s former spouse, to the extent such assignment is in connection with
the Optionee’s estate plan or pursuant to a domestic relations order. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee’s death.

 

           II.       CHANGE IN CONTROL/HOSTILE TAKE-OVER

 

                      A.  Except as otherwise provided in this Section II, none
of the outstanding options under the Plan shall vest in whole or in part on an
accelerated basis upon the occurrence of a Change in Control, and those options
shall be assumable by any successor corporation in the Change in Control.
However, the Plan Administrator shall have the discretionary authority to
structure one or more options grants under the Plan so that each of those
particular options shall automatically accelerate in whole or in part,
immediately prior to the effective date of that Change in Control, and become
exercisable for all the shares of Common Stock at the time subject to the
accelerated portion of such option and may be exercised for any or all of those
accelerated shares as fully vested shares of Common Stock.

 

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                      B.  Except as otherwise provided in this Section II, none
of the outstanding repurchase rights under the Plan shall terminate on an
accelerated basis upon the occurrence of a Change in Control, and those rights
shall be assignable to any successor corporation in the Change in Control.
However, the Plan Administrator shall have the discretionary authority to
structure one or more repurchase rights under the Plan so that those particular
rights shall automatically terminate in whole or in part, and the shares of
Common Stock subject to those terminated rights shall immediately vest, in the
event of a Change in Control.

 

                      C.  Immediately following the consummation of the Change
in Control, all outstanding options under the Plan shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
terms of the Change in Control transaction.

 

                      D.  Each option which is assumed in connection with a
Change in Control or otherwise continued in effect shall be appropriately
adjusted, immediately after such Change in Control, to apply to the number and
class of securities which would have been issuable to the Optionee in
consummation of such Change in Control had the option been exercised immediately
prior to such Change in Control. Appropriate adjustments to reflect such Change
in Control shall also be made to (i) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan and (iii)
the maximum number and/or class of securities for which any one person may be
granted stock options under the Plan per calendar year. To the extent the actual
holders of the Corporation’s outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Change in Control, the successor
corporation may, in connection with the assumption of the outstanding options
under the Plan, substitute one or more shares of its own common stock with a
fair market value equivalent to the cash consideration paid per share of Common
Stock in such Change in Control transaction.

 

                      E.  The Plan Administrator shall have full power and
authority to structure one or more outstanding options under the Plan so that
those options shall become exercisable for all the shares of Common Stock at the
time subject to those options in the event the Optionee’s Service is
subsequently terminated by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control transaction in which those options do not
otherwise accelerate. In addition, the Plan Administrator may structure one or
more of the Corporation’s repurchase rights so that those rights shall
immediately terminate with respect to any shares held by the Optionee at the
time of such Involuntary Termination, and the shares subject to those terminated
repurchase rights shall accordingly vest in full at that time.

 

                      F.  The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the Plan so that
those options shall, immediately prior to the effective date of a Hostile
Take-Over, become exercisable for all the shares of Common Stock at the time
subject to those options and may be exercised for any or all of those shares as
fully vested shares of Common Stock. In addition, the Plan Administrator shall
have the discretionary authority to structure one or more of the Corporation’s
repurchase rights under the Plan so that those rights shall terminate
automatically upon the consummation of such Hostile Take-Over,

 

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and the shares subject to those terminated rights shall thereupon vest in full.
Alternatively, the Plan Administrator may condition the automatic acceleration
of one or more outstanding options under the Plan and the termination of one or
more of the Corporation’s outstanding repurchase rights upon the subsequent
termination of the Optionee’s Service by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of such Hostile Take-Over.

 

                      G.  The outstanding options shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

 

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ARTICLE THREE 

 

MISCELLANEOUS

 

           I.         FINANCING

 

                      The Plan Administrator may permit any Optionee to pay the
option exercise price by delivering a full-recourse, interest-bearing promissory
note payable in one or more installments. The terms of any such promissory note
(including the interest rate, which must be at market, and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. In no event may the maximum credit available to the Optionee exceed
the sum of (i) the aggregate option exercise price or purchase price payable for
the purchased shares (less the par value of such shares) plus (ii) any
applicable income and employment tax liability incurred by the Optionee in
connection with the option exercise or share purchase.

 

           II.      TAX WITHHOLDING

 

                      A.   The Corporation’s obligation to deliver shares of
Common Stock upon the exercise of options or the vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable income and
employment tax withholding requirements. The Corporation shall also make
appropriate arrangements to satisfy all applicable foreign tax withholding
requirements which may be imposed in connection with the grant or exercise of
options under the Plan or the vesting of shares of Common Stock under the Plan.

 

                      B.   The Plan Administrator may, in its discretion,
provide any or all Optionees under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Withholding Taxes to which
such individuals may become subject in connection with the grant or exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:

 

                                 1.  Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of options or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.

 

                                 2.  Stock Delivery: The election to deliver to
the Corporation, at the time the option is granted or exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting triggering
the Withholding Taxes) with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%))
designated by the holder.

 

           III.     EFFECTIVE DATE AND TERM OF THE PLAN

 

                      A.   The Plan shall become effective immediately on the
Plan Effective Date. Options may be granted under the Plan at any time on or
after the Plan Effective Date.

 

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                      B.   The Plan shall terminate upon the earliest to occur
of (i) the date on which all shares available for issuance under the Plan shall
have been issued as fully vested shares; (ii) the termination of all outstanding
options in connection with a Change in Control; or (iii) the termination of the
Plan by the Board. Should the Board terminate the Plan, then all option grants
and unvested stock issuances outstanding at that time shall continue to have
force and effect in accordance with the provisions of the documents evidencing
such grants or issuances.

 

           IV.      AMENDMENT OF THE PLAN

 

                      The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee consents to such amendment or modification.
In addition, certain amendments may require stockholder approval pursuant to
applicable laws or regulations.

 

           V.       USE OF PROCEEDS

 

                      Any cash proceeds received by the Corporation from the
sale of shares of Common Stock under the Plan shall be used for general
corporate purposes.

 

           VI.      REGULATORY APPROVALS

 

                      A.   The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock upon
the exercise of any granted option shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the stock options granted under it and the
shares of Common Stock issued pursuant to it.

 

                      B.   No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of applicable securities laws,
including the filing and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

 

           VII.    NO EMPLOYMENT/SERVICE RIGHTS

 

                      Nothing in the Plan shall confer upon the Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee,
which rights are hereby expressly reserved by each, to terminate such person’s
Service at any time for any reason, with or without cause.

 

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APPENDIX

 

                      The following definitions shall be in effect under the
Plan:

 

                      A.  Board shall mean the Corporation’s Board of Directors.

 

                      B.  Code shall mean the U.S. Internal Revenue Code of
1986, as amended.

 

                      C.  Change in Control shall mean a change in ownership or
control of the Corporation effected through any of the following transactions:

 

                      (i)     there is consummated a merger, consolidation or
other reorganization, unless securities representing more than fifty percent
(50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation’s outstanding voting securities immediately
prior to such transaction, or     

 

                      (ii)    the sale, transfer or other disposition of all or
substantially all of the Corporation’s assets in complete liquidation or
dissolution of the Corporation other than a sale or disposition by the
Corporation of all or substantially all of the Corporation’s assets to an
entity, at least 50% of the combined voting power of the voting securities of
which are owned by stockholders of the Corporation in substantially the same
proportions as their ownership of the Corporation immediately prior to such
sale, or  

 

                      (iii)   the acquisition, directly or indirectly by any
Person or related group of Persons (other than the Corporation or a Person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than thirty percent (30%)
of the total combined voting power of the Corporation’s outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation’s
stockholders.  

 

                      Notwithstanding the foregoing, a “Change in Control” shall
not be deemed to have occurred by virtue of the consummation of any transaction
or series of integrated transactions immediately following which the record
holders of the Common Stock immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Corporation
immediately following such transaction or series of transactions.

 

                      D.  Common Stock shall mean the Corporation’s common
stock.

 

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                      E.  Corporation shall mean Borland Software Corporation, a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Borland Software Corporation which shall by
appropriate action adopt the Plan.

 

                      F.  Director shall mean a member of the Board.

 

                      G.  Employee shall mean an individual who is in the employ
of the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.

 

                      H.  Exercise Date shall mean the date on which the
Corporation shall have received written notice of the option exercise.

 

                      I.  Fair Market Value per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:

 

                      (i)     If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the last sale price
per share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National Market and
published in The Wall Street Journal. If there is no sale price for the Common
Stock on the date in question, then the Fair Market Value shall be the last sale
price on the last preceding date for which such quotation exists.

 

                      (ii)     If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the last sale price per
share of Common Stock on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange and published in The Wall Street Journal. If there is no sale price for
the Common Stock on the date in question, then the Fair Market Value shall be
the last sale price on the last preceding date for which such quotation exists.

 

                      J.  Hostile Take-Over shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:

 

                      (i)     a change in the composition of the Board such that
the following individuals cease for any reason to constitute a majority of the
number of Directors then serving: individuals who, on the date hereof,
constitute the Board and any new Director (other than a Director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of Directors) whose appointment or election by the Board or nomination
for election by the Corporation’s stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the Directors then still in office who
either were Directors on

 

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the date hereof or whose appointment, election or nomination for election was
previously so approved or recommended, or

 

                      (ii)     the acquisition, directly or indirectly, by any
Person or related group of Persons (other than the Corporation or a Person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than thirty percent (30%) of the
total combined voting power of the Corporation’s outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation’s stockholders
which the Board does not recommend such stockholders to accept.

 

                      K.  Independent Director shall have the meaning defined in
the Quantitative Listing Requirements for the Nasdaq National Market or the
rules of such Stock Exchange on which the Corporation’s common stock is
primarily traded.

 

                      L.  Involuntary Termination shall mean the termination of
the Service of any individual which occurs by reason of:

 

                      (i)     such individual’s involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or

 

                      (ii)     such individual’s voluntary resignation following
(A) a change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of management to
which he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonus under any
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual’s place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual’s consent.

 

                      M.  Misconduct shall mean the commission of any act of
fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not in any way preclude or restrict the right of the Corporation (or any
Parent or Subsidiary) to discharge or dismiss any Optionee or other person in
the Service of the Corporation (or any Parent or Subsidiary) for any other acts
or omissions, but such other acts or omissions shall not be deemed, for purposes
of the Plan, to constitute grounds for termination for Misconduct.

 

                      N.  1934 Act shall mean the Securities Exchange Act of
1934, as amended or any successor statute.

 

                      O.  Optionee shall mean any person to whom an option is
granted under the Plan.

 

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

 

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

 

                      R.  Person shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as modified and use in Sections 13(d)
and 14(d) thereof, except that such term shall not include (i) the Corporation
or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or any of its Affiliates,
(iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation.

 

                      S.  Plan shall mean the Corporation’s 2003 Supplemental
Stock Option Plan, as set forth in this document.

 

                      T.  Plan Administrator shall mean the compensation
committee of the Board, a majority of the Independent Directors of the Board to
the extent such entity is carrying out its administrative functions under the
Plan. For purposes of the Plan the definition of compensation committee shall be
determined under the Quantitative Listing Requirements for the Nasdaq National
Market or such Stock Exchange on which the Corporation’s common stock is
primarily traded.

 

                      U.  Plan Effective Date shall mean the date the Plan
becomes effective and shall be coincidental with the date the Plan is approved
by the Board.

 

                      V.  Service shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, or a consultant or independent advisor, except to the extent otherwise
specifically provided in the documents evidencing the option grant. Service
shall not be deemed to cease during a period of military leave, sick leave or
other personal leave approved by the Corporation. Unless otherwise required by
law, no Service credit shall be given for vesting purposes for any period the
Optionee is on a leave of absence.

 

                      W.  Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.

 

                      X.  Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock

 

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possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

 

                      Y.  Withholding Taxes shall mean the applicable income and
employment withholding taxes to which the holder of an option or shares of
Common Stock under the Plan may become subject in connection with the grant or
exercise of those options or the issuance or vesting of those shares.

 

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