EXHIBIT 10.3

 

MONACO COACH CORPORATION

 

1993 INCENTIVE STOCK OPTION PLAN

 

(as amended and restated May 16, 2002, as further amended October 23, 2002, and
as further amended on November 9, 2005)

 

1.                                       PURPOSES OF THE PLAN.  THE PURPOSES OF
THIS STOCK PLAN ARE:

 

•                                          to attract and retain the best
available personnel for positions of substantial responsibility,

 

•                                          to provide additional incentive to
Employees, Directors and Consultants, and

 

•                                          to promote the success of the
Company’s business.

 

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant.  Stock
Purchase Rights and Restricted Stock Units may also be granted under the Plan.

 

2.                                       APPLICABILITY OF MAY 2002 AMENDMENTS. 
OPTIONS OR, AS THE CASE MAY BE, RESTRICTED STOCK GRANTED ON OR PRIOR TO MAY 16,
2002 SHALL NOT BE SUBJECT TO SECTION 11(E) OF THE PLAN.  OPTIONS OR, AS THE CASE
MAY BE, RESTRICTED STOCK GRANTED SUBSEQUENT TO MAY 16, 2002 SHALL BE SUBJECT TO
SECTION 11(E) OF THE PLAN.

 

3.                                       DEFINITIONS.  AS USED HEREIN, THE
FOLLOWING DEFINITIONS SHALL APPLY:

 

(A)                                  “ADMINISTRATOR” MEANS THE BOARD OR ANY OF
ITS COMMITTEES AS SHALL BE ADMINISTERING THE PLAN, IN ACCORDANCE WITH SECTION 5
OF THE PLAN.

 

(B)                                 “APPLICABLE LAWS” MEANS THE REQUIREMENTS
RELATING TO THE ADMINISTRATION OF EQUITY INCENTIVE PLANS UNDER U.S. STATE
CORPORATE LAWS, U.S. FEDERAL AND STATE SECURITIES LAWS, THE CODE, ANY STOCK
EXCHANGE OR QUOTATION SYSTEM ON WHICH THE COMMON STOCK IS LISTED OR QUOTED AND
THE APPLICABLE LAWS OF ANY FOREIGN COUNTRY OR JURISDICTION WHERE OPTIONS OR
STOCK PURCHASE RIGHTS ARE, OR WILL BE, GRANTED UNDER THE PLAN.

 

(C)                                  “BOARD” MEANS THE BOARD OF DIRECTORS OF THE
COMPANY.

 

(D)                                 “CHANGE IN CONTROL” MEANS THE OCCURRENCE OF
ANY OF THE FOLLOWING EVENTS:

 

(I)                                     ANY “PERSON” (AS SUCH TERM IS USED IN
SECTIONS 13(D) AND 14(D) OF THE EXCHANGE ACT) BECOMES THE “BENEFICIAL OWNER” (AS
DEFINED IN RULE 13D-3 OF THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF
SECURITIES OF THE COMPANY REPRESENTING FIFTY PERCENT (50%) OR MORE OF THE TOTAL
VOTING POWER REPRESENTED BY THE COMPANY’S THEN OUTSTANDING VOTING SECURITIES; OR

 

(II)                                  THE CONSUMMATION OF THE SALE OR
DISPOSITION BY THE COMPANY OF ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS;

 

(III)                               A CHANGE IN THE COMPOSITION OF THE BOARD
OCCURRING WITHIN A TWO-YEAR PERIOD, AS A RESULT OF WHICH FEWER THAN A MAJORITY
OF THE DIRECTORS ARE INCUMBENT DIRECTORS.  “INCUMBENT

 

--------------------------------------------------------------------------------

 

DIRECTORS” MEANS DIRECTORS WHO EITHER (A) ARE DIRECTORS AS OF THE EFFECTIVE DATE
OF THE PLAN, OR (B) ARE ELECTED, OR NOMINATED FOR ELECTION, TO THE BOARD WITH
THE AFFIRMATIVE VOTES OF AT LEAST A MAJORITY OF THE INCUMBENT DIRECTORS AT THE
TIME OF SUCH ELECTION OR NOMINATION (BUT WILL NOT INCLUDE AN INDIVIDUAL WHOSE
ELECTION OR NOMINATION IS IN CONNECTION WITH AN ACTUAL OR THREATENED PROXY
CONTEST RELATING TO THE ELECTION OF DIRECTORS TO THE COMPANY); OR

 

(IV)                              THE CONSUMMATION OF A MERGER OR CONSOLIDATION
OF THE COMPANY WITH ANY OTHER CORPORATION, OTHER THAN A MERGER OR CONSOLIDATION
WHICH WOULD RESULT IN THE VOTING SECURITIES OF THE COMPANY OUTSTANDING
IMMEDIATELY PRIOR THERETO CONTINUING TO REPRESENT (EITHER BY REMAINING
OUTSTANDING OR BY BEING CONVERTED INTO VOTING SECURITIES OF THE SURVIVING ENTITY
OR ITS PARENT) AT LEAST FIFTY PERCENT (50%) OF THE TOTAL VOTING POWER
REPRESENTED BY THE VOTING SECURITIES OF THE COMPANY OR SUCH SURVIVING ENTITY OR
ITS PARENT OUTSTANDING IMMEDIATELY AFTER SUCH MERGER OR CONSOLIDATION.

 

(E)                                  “CODE” MEANS THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.

 

(F)                                    “COMMITTEE” MEANS A COMMITTEE OF
DIRECTORS APPOINTED BY THE BOARD IN ACCORDANCE WITH SECTION 5 OF THE PLAN.

 

(G)                                 “COMMON STOCK” MEANS THE COMMON STOCK OF THE
COMPANY.

 

(H)                                 “COMPANY” MEANS MONACO COACH CORPORATION, A
DELAWARE CORPORATION.

 

(I)                                     “CONSULTANT” MEANS ANY NATURAL PERSON,
INCLUDING AN ADVISOR, ENGAGED BY THE COMPANY OR A PARENT OR SUBSIDIARY TO RENDER
SERVICES TO SUCH ENTITY.

 

(J)                                     “DIRECTOR” MEANS A MEMBER OF THE BOARD.

 

(K)                                  “DISABILITY” MEANS TOTAL AND PERMANENT
DISABILITY AS DEFINED IN SECTION 22(E)(3) OF THE CODE.

 

(L)                                     “EMPLOYEE” MEANS ANY PERSON, INCLUDING
OFFICERS AND DIRECTORS, EMPLOYED BY THE COMPANY OR ANY PARENT OR SUBSIDIARY OF
THE COMPANY.  A SERVICE PROVIDER SHALL NOT CEASE TO BE AN EMPLOYEE IN THE CASE
OF (I) ANY LEAVE OF ABSENCE APPROVED BY THE COMPANY OR (II) TRANSFERS BETWEEN
LOCATIONS OF THE COMPANY OR BETWEEN THE COMPANY, ITS PARENT, ANY SUBSIDIARY, OR
ANY SUCCESSOR.  FOR PURPOSES OF INCENTIVE STOCK OPTIONS, NO SUCH LEAVE MAY
EXCEED NINETY DAYS, UNLESS REEMPLOYMENT UPON EXPIRATION OF SUCH LEAVE IS
GUARANTEED BY STATUTE OR CONTRACT.  IF REEMPLOYMENT UPON EXPIRATION OF A LEAVE
OF ABSENCE APPROVED BY THE COMPANY IS NOT SO GUARANTEED, THEN THREE (3) MONTHS
FOLLOWING THE 91ST DAY OF SUCH LEAVE ANY INCENTIVE STOCK OPTION HELD BY THE
OPTIONEE SHALL CEASE TO BE TREATED AS AN INCENTIVE STOCK OPTION AND SHALL BE
TREATED FOR TAX PURPOSES AS A NONSTATUTORY STOCK OPTION.  NEITHER SERVICE AS A
DIRECTOR NOR PAYMENT OF A DIRECTOR’S FEE BY THE COMPANY SHALL BE SUFFICIENT TO
CONSTITUTE “EMPLOYMENT” BY THE COMPANY.

 

(M)                               “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

 

(N)                                 “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

 

2

--------------------------------------------------------------------------------

 

THE CLOSING BID, IF NO SALES WERE REPORTED) AS QUOTED ON SUCH EXCHANGE OR SYSTEM
ON THE DAY OF DETERMINATION, AS REPORTED IN THE WALL STREET JOURNAL OR SUCH
OTHER SOURCE AS THE ADMINISTRATOR DEEMS RELIABLE;

 

(II)                                  IF THE COMMON STOCK IS REGULARLY QUOTED BY
A RECOGNIZED SECURITIES DEALER BUT SELLING PRICES ARE NOT REPORTED, THE FAIR
MARKET VALUE OF A SHARE OF COMMON STOCK SHALL BE THE MEAN BETWEEN THE HIGH BID
AND LOW ASKED PRICES FOR THE COMMON STOCK ON THE DAY OF DETERMINATION, AS
REPORTED IN THE WALL STREET JOURNAL OR SUCH OTHER SOURCE AS THE ADMINISTRATOR
DEEMS RELIABLE; OR

 

(III)                               IN THE ABSENCE OF AN ESTABLISHED MARKET FOR
THE COMMON STOCK, THE FAIR MARKET VALUE SHALL BE DETERMINED IN GOOD FAITH BY THE
ADMINISTRATOR.

 

(O)                                 “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.

 

(P)                                 “LIMITED NUMBER” MEANS A NUMBER OF SHARES
NOT TO EXCEED 10% OF THE TOTAL SHARES AUTHORIZED FOR ISSUANCE UNDER THE PLAN.

 

(Q)                                 “NONSTATUTORY STOCK OPTION” MEANS AN OPTION
NOT INTENDED TO QUALIFY AS AN INCENTIVE STOCK OPTION.

 

(R)                                    “NOTICE OF GRANT” MEANS A WRITTEN OR
ELECTRONIC NOTICE EVIDENCING CERTAIN TERMS AND CONDITIONS OF AN INDIVIDUAL
OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT GRANT.  THE NOTICE OF
GRANT IS PART OF THE OPTION AGREEMENT.

 

(S)                                  “OFFICER” MEANS A PERSON WHO IS AN OFFICER
OF THE COMPANY WITHIN THE MEANING OF SECTION 16 OF THE EXCHANGE ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.

 

(T)                                    “OPTION” MEANS A STOCK OPTION GRANTED
PURSUANT TO THE PLAN.

 

(U)                                 “OPTION AGREEMENT” MEANS AN AGREEMENT
BETWEEN THE COMPANY AND AN OPTIONEE EVIDENCING THE TERMS AND CONDITIONS OF AN
INDIVIDUAL OPTION GRANT.  THE OPTION AGREEMENT IS SUBJECT TO THE TERMS AND
CONDITIONS OF THE PLAN.

 

(V)                                 “OPTION EXCHANGE PROGRAM” MEANS A PROGRAM
WHEREBY OUTSTANDING OPTIONS ARE REPRICED OR SURRENDERED IN EXCHANGE FOR OTHER
OPTIONS.

 

(W)                               “OPTIONED STOCK” MEANS THE COMMON STOCK
SUBJECT TO AN OPTION OR STOCK PURCHASE RIGHT.

 

(X)                                   “OPTIONEE” MEANS THE HOLDER OF AN
OUTSTANDING OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT GRANTED UNDER
THE PLAN.

 

(Y)                                 “PARENT” MEANS A “PARENT CORPORATION,”
WHETHER NOW OR HEREAFTER EXISTING, AS DEFINED IN SECTION 424(E) OF THE CODE.

 

(Z)                                   “PLAN” MEANS THIS 1993 INCENTIVE STOCK
OPTION PLAN, AS AMENDED.

 

(AA)                            “RESTRICTED STOCK” MEANS SHARES OF COMMON STOCK
ACQUIRED PURSUANT TO A GRANT OF STOCK PURCHASE RIGHTS UNDER SECTION 12 OF THE
PLAN.

 

3

--------------------------------------------------------------------------------

 

(BB)                          “RESTRICTED STOCK PURCHASE AGREEMENT” MEANS A
WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE OPTIONEE EVIDENCING THE TERMS AND
RESTRICTIONS APPLYING TO STOCK PURCHASED UNDER A STOCK PURCHASE RIGHT.  THE
RESTRICTED STOCK PURCHASE AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF
THE PLAN AND THE NOTICE OF GRANT.

 

(CC)                            “RESTRICTED STOCK UNIT” MEANS A BOOKKEEPING
ENTRY REPRESENTING AN AMOUNT EQUAL TO THE FAIR MARKET VALUE OF ONE SHARE,
GRANTED PURSUANT TO SECTION 13.  EACH RESTRICTED STOCK UNIT REPRESENTS AN
UNFUNDED AND UNSECURED OBLIGATION OF THE COMPANY.

 

(DD)                          RESTRICTED STOCK UNIT AGREEMENT” MEANS A WRITTEN
OR ELECTRONIC AGREEMENT BETWEEN THE COMPANY AND THE OPTIONEE EVIDENCING THE
TERMS AND RESTRICTIONS APPLYING TO AN AWARD OF RESTRICTED STOCK UNITS.  THE
RESTRICTED STOCK UNIT AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE
PLAN AND THE NOTICE OF GRANT.

 

(EE)                            “RETIREMENT” MEANS A SERVICE PROVIDER WHO
RETIRES FROM THE COMPANY ON OR AFTER AGE SIXTY-TWO (62) AND SUCH SERVICE
PROVIDER HAS AT LEAST FIVE (5) YEARS OF SERVICE WITH THE COMPANY AT THE DATE OF
RETIREMENT; PROVIDED, THAT, THE ADMINISTRATOR, NOTWITHSTANDING THE FOREGOING,
HAS THE DISCRETION TO DETERMINE WHEN A SERVICE PROVIDER RETIRES SO LONG AS SUCH
DETERMINATION IS NOT LESS FAVORABLE THAN PROVIDED FOR IN THE FOREGOING
DEFINITION.

 

(FF)                                “RULE 16B-3” MEANS RULE 16B-3 OF THE
EXCHANGE ACT OR ANY SUCCESSOR TO RULE 16B-3, AS IN EFFECT WHEN DISCRETION IS
BEING EXERCISED WITH RESPECT TO THE PLAN.

 

(GG)                          “SECTION 16(B)” MEANS SECTION 16(B) OF THE
EXCHANGE ACT.

 

(HH)                          “SERVICE PROVIDER” MEANS AN EMPLOYEE, DIRECTOR OR
CONSULTANT, IN ALL CASES EXCLUDING DIRECTORS WHO ARE NOT EMPLOYEES.

 

(II)                                  “SHARE” MEANS A SHARE OF THE COMMON STOCK,
AS ADJUSTED IN ACCORDANCE WITH SECTION 15 OF THE PLAN.

 

(JJ)                                  “STOCK PURCHASE RIGHT” MEANS THE RIGHT TO
PURCHASE COMMON STOCK PURSUANT TO SECTION 12 OF THE PLAN, AS EVIDENCED BY A
NOTICE OF GRANT.

 

(KK)                            “SUBSIDIARY” MEANS A “SUBSIDIARY CORPORATION”,
WHETHER NOW OR HEREAFTER EXISTING, AS DEFINED IN SECTION 424(F) OF THE CODE.

 

4.                                       STOCK SUBJECT TO THE PLAN.  SUBJECT TO
THE PROVISIONS OF SECTION 15 OF THE PLAN, THE MAXIMUM AGGREGATE NUMBER OF SHARES
THAT MAY BE OPTIONED AND SOLD UNDER THE PLAN IS 3,257,813 SHARES.  THE SHARES
MAY BE AUTHORIZED, BUT UNISSUED, OR REACQUIRED COMMON STOCK.

 

If an Option or Stock Purchase Right expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, or, with respect to Shares of Restricted Stock or Restricted Stock
Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or
the forfeited or repurchased Shares) which were subject thereto will become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that if unvested Shares of Restricted Stock or
Restricted Stock Units are repurchased by the Company or are forfeited to the
Company, such Shares will become available for future grant under the Plan.

 

4

--------------------------------------------------------------------------------

 

5.                                       ADMINISTRATION OF THE PLAN.

 

(A)                                  PROCEDURE.

 

(I)                                     MULTIPLE ADMINISTRATIVE BODIES. 
DIFFERENT COMMITTEES WITH RESPECT TO DIFFERENT GROUPS OF SERVICE PROVIDERS MAY
ADMINISTER THE PLAN.

 

(II)                                  SECTION 162(M).  TO THE EXTENT THAT THE
ADMINISTRATOR DETERMINES IT TO BE DESIRABLE TO QUALIFY OPTIONS GRANTED HEREUNDER
AS “PERFORMANCE-BASED COMPENSATION” WITHIN THE MEANING OF SECTION 162(M) OF THE
CODE, THE PLAN SHALL BE ADMINISTERED BY A COMMITTEE OF TWO OR MORE “OUTSIDE
DIRECTORS” WITHIN THE MEANING OF SECTION 162(M) OF THE CODE.

 

(III)                               RULE 16B-3.  TO THE EXTENT DESIRABLE TO
QUALIFY TRANSACTIONS HEREUNDER AS EXEMPT UNDER RULE 16B-3, THE TRANSACTIONS
CONTEMPLATED HEREUNDER SHALL BE STRUCTURED TO SATISFY THE REQUIREMENTS FOR
EXEMPTION UNDER RULE 16B-3.

 

(IV)                              OTHER ADMINISTRATION.  OTHER THAN AS PROVIDED
ABOVE, THE PLAN SHALL BE ADMINISTERED BY (A) THE BOARD OR (B) A COMMITTEE, WHICH
COMMITTEE SHALL BE CONSTITUTED TO SATISFY APPLICABLE LAWS.

 

(B)                                 POWERS OF THE ADMINISTRATOR.  SUBJECT TO THE
PROVISIONS OF THE PLAN, AND IN THE CASE OF A COMMITTEE, SUBJECT TO THE SPECIFIC
DUTIES DELEGATED BY THE BOARD TO SUCH COMMITTEE, THE ADMINISTRATOR SHALL HAVE
THE AUTHORITY, IN ITS DISCRETION:

 

(I)                                     TO DETERMINE THE FAIR MARKET VALUE;

 

(II)                                  TO SELECT THE SERVICE PROVIDERS TO WHOM
OPTIONS, STOCK PURCHASE RIGHTS AND RESTRICTED STOCK UNITS MAY BE GRANTED
HEREUNDER;

 

(III)                               TO DETERMINE THE NUMBER OF SHARES OF COMMON
STOCK TO BE COVERED BY EACH OPTION, STOCK PURCHASE RIGHT OR AWARD OF RESTRICTED
STOCK UNITS GRANTED HEREUNDER;

 

(IV)                              TO APPROVE FORMS OF AGREEMENT FOR USE UNDER
THE PLAN;

 

(V)                                 TO DETERMINE THE TERMS AND CONDITIONS, NOT
INCONSISTENT WITH THE TERMS OF THE PLAN, OF ANY OPTION, STOCK PURCHASE RIGHT OR
RESTRICTED STOCK UNIT GRANTED HEREUNDER.  SUCH TERMS AND CONDITIONS INCLUDE, BUT
ARE NOT LIMITED TO, THE EXERCISE PRICE, THE TIME OR TIMES WHEN OPTIONS, STOCK
PURCHASE RIGHTS OR RESTRICTED STOCK UNITS MAY BE EXERCISED (WHICH MAY BE BASED
ON PERFORMANCE CRITERIA), ANY VESTING ACCELERATION OR WAIVER OF FORFEITURE
RESTRICTIONS, AND ANY RESTRICTION OR LIMITATION REGARDING ANY OPTION, STOCK
PURCHASE RIGHT, RESTRICTED STOCK UNIT OR THE SHARES OF COMMON STOCK RELATING
THERETO, BASED IN EACH CASE ON SUCH FACTORS AS THE ADMINISTRATOR, IN ITS SOLE
DISCRETION, SHALL DETERMINE;

 

(VI)                              TO CONSTRUE AND INTERPRET THE TERMS OF THE
PLAN AND AWARDS GRANTED PURSUANT TO THE PLAN;

 

(VII)                           TO PRESCRIBE, AMEND AND RESCIND RULES AND
REGULATIONS RELATING TO THE PLAN, INCLUDING RULES AND REGULATIONS RELATING TO
SUB-PLANS ESTABLISHED FOR THE PURPOSE OF SATISFYING APPLICABLE FOREIGN LAWS;

 

5

--------------------------------------------------------------------------------

 

(VIII)                        TO MODIFY OR AMEND EACH OPTION, STOCK PURCHASE
RIGHT OR RESTRICTED STOCK UNIT (SUBJECT TO SECTION 17(C) OF THE PLAN), INCLUDING
THE DISCRETIONARY AUTHORITY TO EXTEND THE POST-TERMINATION EXERCISABILITY PERIOD
OF OPTIONS LONGER THAN IS OTHERWISE PROVIDED FOR IN THE PLAN;

 

(IX)                                TO ALLOW OPTIONEES TO SATISFY WITHHOLDING
TAX OBLIGATIONS BY ELECTING TO HAVE THE COMPANY WITHHOLD FROM THE SHARES TO BE
ISSUED UPON EXERCISE OR SETTLEMENT OF AN OPTION, STOCK PURCHASE RIGHT OR
RESTRICTED STOCK UNIT THAT NUMBER OF SHARES HAVING A FAIR MARKET VALUE EQUAL TO
THE MINIMUM AMOUNT REQUIRED TO BE WITHHELD.  THE FAIR MARKET VALUE OF THE SHARES
TO BE WITHHELD SHALL BE DETERMINED ON THE DATE THAT THE AMOUNT OF TAX TO BE
WITHHELD IS TO BE DETERMINED.  ALL ELECTIONS BY AN OPTIONEE TO HAVE SHARES
WITHHELD FOR THIS PURPOSE SHALL BE MADE IN SUCH FORM AND UNDER SUCH CONDITIONS
AS THE ADMINISTRATOR MAY DEEM NECESSARY OR ADVISABLE;

 

(X)                                   TO AUTHORIZE ANY PERSON TO EXECUTE ON
BEHALF OF THE COMPANY ANY INSTRUMENT REQUIRED TO EFFECT THE GRANT OF AN OPTION ,
STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT PREVIOUSLY GRANTED BY THE
ADMINISTRATOR;

 

(XI)                                TO MAKE ALL OTHER DETERMINATIONS DEEMED
NECESSARY OR ADVISABLE FOR ADMINISTERING THE PLAN.

 

(C)                                  EFFECT OF ADMINISTRATOR’S DECISION.  THE
ADMINISTRATOR’S DECISIONS, DETERMINATIONS AND INTERPRETATIONS SHALL BE FINAL AND
BINDING ON ALL OPTIONEES AND ANY OTHER HOLDERS OF OPTIONS, STOCK PURCHASE RIGHTS
OR RESTRICTED STOCK UNITS.

 

(D)                                 ADMINISTRATOR’S DISCRETION.  NOTWITHSTANDING
ANY CONTRARY PROVISION OF THE PLAN, THE ADMINISTRATOR MAY, IN ITS SOLE AND
ABSOLUTE DISCRETION, (I) GRANT A LIMITED NUMBER OF OPTIONS OR RESTRICTED STOCK
THAT DO NOT CONFORM TO THE REQUIREMENTS OF GENERAL LIMITATION IMPOSED BY THE
PLAN (SUCH AS THE TERM OF THE OPTION, THE LAPSE OF ANY RESTRICTION RIGHT OR THE
EXERCISE PRICE OR PURCHASE PRICE) PROVIDED SUCH OPTIONS OR RESTRICTED STOCK ARE
GRANTED BY A COMMITTEE COMPOSED ENTIRELY OF DIRECTORS WHO ARE NOT EMPLOYEES;
(II) IMPLEMENT AN OPTION EXCHANGE PROGRAM PROVIDED SUCH PROGRAM IS AUTHORIZED BY
A COMMITTEE COMPOSED ENTIRELY OF DIRECTORS WHO ARE NOT EMPLOYEES, SUCH PROGRAM
IS RARELY USED (AND THEN ONLY TO MAINTAIN OPTION VALUE DUE TO CIRCUMSTANCES
BEYOND THE COMPANY’S CONTROL), AND SUCH PROGRAM IS LIMITED TO A LIMITED NUMBER
OF SHARES.

 

6.                                       ELIGIBILITY.  NONSTATUTORY STOCK
OPTIONS, STOCK PURCHASE RIGHTS AND RESTRICTED STOCK UNITS MAY BE GRANTED TO
SERVICE PROVIDERS.  INCENTIVE STOCK OPTIONS MAY BE GRANTED ONLY TO EMPLOYEES.

 

7.                                       LIMITATIONS.

 

(A)                                  EACH OPTION SHALL BE DESIGNATED IN THE
OPTION AGREEMENT AS EITHER AN INCENTIVE STOCK OPTION OR A NONSTATUTORY STOCK
OPTION.  HOWEVER, NOTWITHSTANDING SUCH DESIGNATION, TO THE EXTENT THAT THE
AGGREGATE FAIR MARKET VALUE OF THE SHARES WITH RESPECT TO WHICH INCENTIVE STOCK
OPTIONS ARE EXERCISABLE FOR THE FIRST TIME BY THE OPTIONEE DURING ANY CALENDAR
YEAR (UNDER ALL PLANS OF THE COMPANY AND ANY PARENT OR SUBSIDIARY) EXCEEDS
$100,000, SUCH OPTIONS SHALL BE TREATED AS NONSTATUTORY STOCK OPTIONS.  FOR
PURPOSES OF THIS SECTION 7(A), INCENTIVE STOCK OPTIONS SHALL BE TAKEN INTO
ACCOUNT IN THE ORDER IN WHICH THEY WERE GRANTED.  THE FAIR MARKET VALUE OF THE
SHARES SHALL BE DETERMINED AS OF THE TIME THE OPTION WITH RESPECT TO SUCH SHARES
IS GRANTED.

 

(B)                                 NEITHER THE PLAN NOR ANY OPTION OR STOCK
PURCHASE RIGHT SHALL CONFER UPON AN OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUING THE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER WITH THE

 

6

--------------------------------------------------------------------------------

 

COMPANY, NOR SHALL THEY INTERFERE IN ANY WAY WITH THE OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE SUCH RELATIONSHIP AT ANY TIME, WITH OR WITHOUT
CAUSE.

 

(C)                                  THE FOLLOWING LIMITATIONS SHALL APPLY TO
GRANTS OF OPTIONS:

 

(I)                                     NO SERVICE PROVIDER SHALL BE GRANTED, IN
ANY FISCAL YEAR OF THE COMPANY, OPTIONS TO PURCHASE MORE THAN 100,000 SHARES.

 

(II)                                  THE FOREGOING LIMITATIONS SHALL BE
ADJUSTED PROPORTIONATELY IN CONNECTION WITH ANY CHANGE IN THE COMPANY’S
CAPITALIZATION AS DESCRIBED IN SECTION 15.

 

(III)                               IF AN OPTION IS CANCELLED IN THE SAME FISCAL
YEAR OF THE COMPANY IN WHICH IT WAS GRANTED (OTHER THAN IN CONNECTION WITH A
TRANSACTION DESCRIBED IN SECTION 15), THE CANCELLED OPTION WILL BE COUNTED
AGAINST THE LIMITS SET FORTH IN SUBSECTIONS (I) AND (II) ABOVE.  FOR THIS
PURPOSE, IF THE EXERCISE PRICE OF AN OPTION IS REDUCED, THE TRANSACTION WILL BE
TREATED AS A CANCELLATION OF THE OPTION AND THE GRANT OF A NEW OPTION.

 

8.                                       TERM OF PLAN.  SUBJECT TO SECTION 21 OF
THE PLAN, THE PLAN SHALL BECOME EFFECTIVE UPON ITS ADOPTION BY THE BOARD.  IT
SHALL CONTINUE IN EFFECT FOR A TERM OF TEN (10) YEARS UNLESS TERMINATED EARLIER
UNDER SECTION 17 OF THE PLAN.

 

9.                                       TERM OF OPTION.  THE TERM OF EACH
OPTION SHALL BE STATED IN THE OPTION AGREEMENT.  IN THE CASE OF AN INCENTIVE
STOCK OPTION, THE TERM SHALL BE TEN (10) YEARS FROM THE DATE OF GRANT OR SUCH
SHORTER TERM AS MAY BE PROVIDED IN THE OPTION AGREEMENT.  MOREOVER, IN THE CASE
OF AN INCENTIVE STOCK OPTION GRANTED TO AN OPTIONEE WHO, AT THE TIME THE
INCENTIVE STOCK OPTION IS GRANTED, OWNS STOCK REPRESENTING MORE THAN TEN PERCENT
(10%) OF THE TOTAL COMBINED VOTING POWER OF ALL CLASSES OF STOCK OF THE COMPANY
OR ANY PARENT OR SUBSIDIARY, THE TERM OF THE INCENTIVE STOCK OPTION SHALL BE
FIVE (5) YEARS FROM THE DATE OF GRANT OR SUCH SHORTER TERM AS MAY BE PROVIDED IN
THE OPTION AGREEMENT.

 

10.                                 OPTION EXERCISE PRICE AND CONSIDERATION.

 

(A)                                  EXERCISE PRICE.  THE PER SHARE EXERCISE
PRICE FOR THE SHARES TO BE ISSUED PURSUANT TO EXERCISE OF AN OPTION SHALL BE
DETERMINED BY THE ADMINISTRATOR, SUBJECT TO THE FOLLOWING:

 

(I)                                     IN THE CASE OF AN INCENTIVE STOCK OPTION

 

(A)                              GRANTED TO AN EMPLOYEE WHO, AT THE TIME THE
INCENTIVE STOCK OPTION IS GRANTED, OWNS STOCK REPRESENTING MORE THAN TEN PERCENT
(10%) OF THE VOTING POWER OF ALL CLASSES OF STOCK OF THE COMPANY OR ANY PARENT
OR SUBSIDIARY, THE PER SHARE EXERCISE PRICE SHALL BE NO LESS THAN 110% OF THE
FAIR MARKET VALUE PER SHARE ON THE DATE OF GRANT.

 

(B)                                GRANTED TO ANY EMPLOYEE OTHER THAN AN
EMPLOYEE DESCRIBED IN PARAGRAPH (A) IMMEDIATELY ABOVE, THE PER SHARE EXERCISE
PRICE SHALL BE NO 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 NOT BE LESS THAN 100% OF THE FAIR
MARKET VALUE PER SHARE ON THE DATE OF GRANT; PROVIDED, HOWEVER, THAT OPTIONS MAY
BE GRANTED WITH AN EXERCISE PRICE EQUAL TO OR GREATER THAN 85% OF THE FAIR
MARKET VALUE ON THE DATE OF GRANT PROVIDED SUCH “DISCOUNT” IS GRANTED IN LIEU OF
A REASONABLE AMOUNT OF CASH COMPENSATION OR CASH BONUS PAYABLE BY THE COMPANY TO
A SERVICE PROVIDER.  IN THE CASE OF A NONSTATUTORY STOCK OPTION INTENDED TO

 

7

--------------------------------------------------------------------------------

 

QUALIFY AS “PERFORMANCE-BASED COMPENSATION” WITHIN THE MEANING OF SECTION 162(M)
OF THE CODE, THE PER SHARE EXERCISE PRICE SHALL BE NO LESS THAN 100% OF THE FAIR
MARKET VALUE PER SHARE ON THE DATE OF GRANT.

 

(III)                               NOTWITHSTANDING THE FOREGOING, OPTIONS MAY
BE GRANTED WITH A PER SHARE EXERCISE PRICE OF LESS THAN 100% OF THE FAIR MARKET
VALUE PER SHARE ON THE DATE OF GRANT PURSUANT TO A CHANGE IN CONTROL.

 

(B)                                 WAITING PERIOD AND EXERCISE DATES.  AT THE
TIME AN OPTION IS GRANTED, THE ADMINISTRATOR SHALL FIX THE PERIOD WITHIN WHICH
THE OPTION MAY BE EXERCISED AND SHALL DETERMINE ANY CONDITIONS THAT MUST BE
SATISFIED BEFORE THE OPTION MAY BE EXERCISED.

 

(C)                                  FORM OF CONSIDERATION.  THE ADMINISTRATOR
SHALL DETERMINE THE ACCEPTABLE FORM OF CONSIDERATION FOR EXERCISING AN OPTION,
INCLUDING THE METHOD OF PAYMENT.  IN THE CASE OF AN INCENTIVE STOCK OPTION, THE
ADMINISTRATOR SHALL DETERMINE THE ACCEPTABLE FORM OF CONSIDERATION AT THE TIME
OF GRANT.  SUCH CONSIDERATION MAY CONSIST ENTIRELY OF:

 

(I)                                     CASH;

 

(II)                                  CHECK;

 

(III)                               PROMISSORY NOTE;

 

(IV)                              OTHER SHARES WHICH, IN THE CASE OF SHARES
ACQUIRED DIRECTLY OR INDIRECTLY FROM THE COMPANY, (A) HAVE BEEN OWNED BY THE
OPTIONEE FOR MORE THAN SIX (6) MONTHS ON THE DATE OF SURRENDER, AND (B) HAVE A
FAIR MARKET VALUE ON THE DATE OF SURRENDER EQUAL TO THE AGGREGATE EXERCISE PRICE
OF THE SHARES AS TO WHICH SAID OPTION SHALL BE EXERCISED;

 

(V)                                 CONSIDERATION RECEIVED BY THE COMPANY UNDER
A CASHLESS EXERCISE PROGRAM IMPLEMENTED BY THE COMPANY IN CONNECTION WITH THE
PLAN;

 

(VI)                              A REDUCTION IN THE AMOUNT OF ANY COMPANY
LIABILITY TO THE OPTIONEE, INCLUDING ANY LIABILITY ATTRIBUTABLE TO THE
OPTIONEE’S PARTICIPATION IN ANY COMPANY-SPONSORED DEFERRED COMPENSATION PROGRAM
OR ARRANGEMENT;

 

(VII)                           ANY COMBINATION OF THE FOREGOING METHODS OF
PAYMENT; OR

 

(VIII)                        SUCH OTHER CONSIDERATION AND METHOD OF PAYMENT FOR
THE ISSUANCE OF SHARES TO THE EXTENT PERMITTED BY APPLICABLE LAWS.

 

11.                                 EXERCISE OF OPTION.

 

(A)                                  PROCEDURE FOR EXERCISE; RIGHTS AS A
STOCKHOLDER.  ANY OPTION GRANTED HEREUNDER SHALL BE EXERCISABLE ACCORDING TO THE
TERMS OF THE PLAN AND AT SUCH TIMES AND UNDER SUCH CONDITIONS AS DETERMINED BY
THE ADMINISTRATOR AND SET FORTH IN THE OPTION AGREEMENT.  UNLESS THE
ADMINISTRATOR PROVIDES OTHERWISE, VESTING OF OPTIONS GRANTED HEREUNDER SHALL BE
SUSPENDED DURING ANY UNPAID LEAVE OF ABSENCE.  AN OPTION MAY NOT BE EXERCISED
FOR A FRACTION OF A SHARE.

 

An Option shall be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised.  Full payment may consist of

 

8

--------------------------------------------------------------------------------

 

any consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan.  Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse.  Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.  The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised.  No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 15 of the Plan.

 

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

 

(B)                                 TERMINATION OF RELATIONSHIP AS A SERVICE
PROVIDER.  IF AN OPTIONEE CEASES TO BE A SERVICE PROVIDER, OTHER THAN UPON THE
OPTIONEE’S DEATH, DISABILITY, OR RETIREMENT THE OPTIONEE MAY EXERCISE HIS OR HER
OPTION WITHIN SUCH PERIOD OF TIME AS IS SPECIFIED IN THE OPTION AGREEMENT TO THE
EXTENT THAT THE OPTION IS VESTED ON THE DATE OF TERMINATION (BUT IN NO EVENT
LATER THAN THE EXPIRATION OF THE TERM OF SUCH OPTION AS SET FORTH IN THE OPTION
AGREEMENT).  IN THE ABSENCE OF A SPECIFIED TIME IN THE OPTION AGREEMENT, THE
OPTION SHALL REMAIN EXERCISABLE FOR THREE (3) MONTHS FOLLOWING THE OPTIONEE’S
TERMINATION.  IF, ON THE DATE OF TERMINATION, THE OPTIONEE IS NOT VESTED AS TO
HIS OR HER ENTIRE OPTION, THE SHARES COVERED BY THE UNVESTED PORTION OF THE
OPTION SHALL REVERT TO THE PLAN.  IF, AFTER TERMINATION, THE OPTIONEE DOES NOT
EXERCISE HIS OR HER OPTION WITHIN THE TIME SPECIFIED BY THE ADMINISTRATOR, THE
OPTION SHALL TERMINATE, AND THE SHARES COVERED BY SUCH OPTION SHALL REVERT TO
THE PLAN.

 

(C)                                  DISABILITY OF OPTIONEE.  IF AN OPTIONEE
CEASES TO BE A SERVICE PROVIDER AS A RESULT OF THE OPTIONEE’S DISABILITY, THE
OPTION GRANTED HEREUNDER TO SUCH OPTIONEE SHALL BECOME VESTED AND EXERCISABLE
FOR THE FULL NUMBER OF SHARES COVERED BY THE OPTION.  THE OPTIONEE MAY EXERCISE
HIS OR HER OPTION AT ANY TIME WITHIN TWELVE (12) MONTHS FROM THE DATE OF SUCH
TERMINATION (BUT IN NO EVENT LATER THAN THE EXPIRATION OF THE TERM OF SUCH
OPTION AS SET FORTH IN THE NOTICE OF GRANT).  IF, AFTER TERMINATION, THE
OPTIONEE DOES NOT EXERCISE HIS OR HER OPTION WITHIN THE TIME SPECIFIED HEREIN,
THE OPTION SHALL TERMINATE, AND THE SHARES COVERED BY SUCH OPTION SHALL REVERT
TO THE PLAN.

 

(D)                                 DEATH OF OPTIONEE.  IF AN OPTIONEE DIES
WHILE A SERVICE PROVIDER, THE OPTION SHALL BECOME VESTED AND EXERCISABLE FOR THE
FULL NUMBER OF SHARES COVERED BY THE OPTION.  THE OPTION HELD BY THE OPTIONEE AT
THE TIME OF DEATH MAY BE EXERCISED AT ANY TIME WITHIN TWELVE (12) MONTHS
FOLLOWING THE DATE OF DEATH OF OPTIONEE BY THE OPTIONEE’S DESIGNATED
BENEFICIARY, PROVIDED SUCH BENEFICIARY HAS BEEN DESIGNATED PRIOR TO OPTIONEE’S
DEATH IN A FORM ACCEPTABLE TO THE ADMINISTRATOR.  IN NO EVENT SHALL AN OPTION BE
EXERCISED LATER THAN THE EXPIRATION OF THE TERM OF THE OPTION, AS SET FORTH IN
THE OPTION AGREEMENT.  IF NO SUCH BENEFICIARY HAS BEEN DESIGNATED BY THE
OPTIONEE, THEN SUCH OPTION MAY BE EXERCISED BY THE PERSONAL REPRESENTATIVE OF
THE OPTIONEE’S ESTATE OR BY THE PERSON(S) TO WHOM THE OPTION IS TRANSFERRED
PURSUANT TO THE OPTIONEE’S WILL OR IN ACCORDANCE WITH THE LAWS OF DESCENT AND
DISTRIBUTION.  IF THE OPTION IS NOT SO EXERCISED WITHIN THE TIME SPECIFIED
HEREIN, THE OPTION SHALL TERMINATE, AND THE SHARES COVERED BY SUCH OPTION SHALL
REVERT TO THE PLAN.

 

(E)                                  RETIREMENT OF OPTIONEE.  IN THE EVENT OF AN
OPTIONEE’S RETIREMENT WHILE A SERVICE PROVIDER, THE OPTION SHALL BECOME VESTED
AND EXERCISABLE FOR THE FULL NUMBER OF SHARES COVERED BY THE OPTION.  THE OPTION
HELD BY THE OPTIONEE AT THE TIME OF RETIREMENT MAY BE EXERCISED AT ANY TIME
WITHIN TWELVE (12) MONTHS FOLLOWING THE DATE OF RETIREMENT; PROVIDED, HOWEVER,
THAT (I) THIS SUBSECTION (E) SHALL NOT APPLY TO GRANTS MADE ON OR BEFORE MAY 16,
2002, AND (II) THIS SUBSECTION (E) SHALL APPLY TO GRANTS MADE ON OR AFTER MAY

 

9

--------------------------------------------------------------------------------

 

17, 2002.  IN NO EVENT SHALL AN OPTION BE EXERCISED LATER THAN THE EXPIRATION OF
THE TERM OF THE OPTION, AS SET FORTH IN THE OPTION AGREEMENT.  IF THE OPTION IS
NOT SO EXERCISED WITHIN THE TIME SPECIFIED HEREIN, THE OPTION SHALL TERMINATE,
AND THE SHARES COVERED BY SUCH OPTION SHALL REVERT TO THE PLAN.

 

12.                                 STOCK PURCHASE RIGHTS.

 

(A)                                  RIGHTS TO PURCHASE.  STOCK PURCHASE RIGHTS
MAY BE ISSUED EITHER ALONE, IN ADDITION TO, OR IN TANDEM WITH OTHER AWARDS
GRANTED UNDER THE PLAN AND/OR CASH AWARDS MADE OUTSIDE OF THE PLAN.  AFTER THE
ADMINISTRATOR DETERMINES THAT IT WILL OFFER STOCK PURCHASE RIGHTS UNDER THE
PLAN, IT SHALL ADVISE THE OFFEREE IN WRITING OR ELECTRONICALLY, BY MEANS OF A
NOTICE OF GRANT, OF THE TERMS, CONDITIONS AND RESTRICTIONS RELATED TO THE OFFER,
INCLUDING THE NUMBER OF SHARES THAT THE OFFEREE SHALL BE ENTITLED TO PURCHASE,
THE PRICE TO BE PAID, AND THE TIME WITHIN WHICH THE OFFEREE MUST ACCEPT SUCH
OFFER.  THE OFFER SHALL BE ACCEPTED BY EXECUTION OF A RESTRICTED STOCK PURCHASE
AGREEMENT IN THE FORM DETERMINED BY THE ADMINISTRATOR.

 

(B)                                 REPURCHASE OPTION.  UNLESS THE ADMINISTRATOR
DETERMINES OTHERWISE, THE RESTRICTED STOCK PURCHASE AGREEMENT SHALL GRANT THE
COMPANY A REPURCHASE OPTION EXERCISABLE UPON THE VOLUNTARY OR INVOLUNTARY
TERMINATION OF THE PURCHASER’S SERVICE WITH THE COMPANY FOR ANY REASON
(INCLUDING DEATH OR DISABILITY).  THE PURCHASE PRICE FOR SHARES REPURCHASED
PURSUANT TO THE RESTRICTED STOCK PURCHASE AGREEMENT SHALL BE THE ORIGINAL PRICE
PAID BY THE PURCHASER AND MAY BE PAID BY CANCELLATION OF ANY INDEBTEDNESS OF THE
PURCHASER TO THE COMPANY.  THE REPURCHASE OPTION SHALL LAPSE AT A RATE
DETERMINED BY THE ADMINISTRATOR, BUT GENERALLY SUCH REPURCHASE OPTION SHALL NOT
LAPSE AT AN ANNUAL RATE GREATER THAN 33% OF THE TOTAL NUMBER OF NUMBER OF SHARES
SUBJECT TO THE RESTRICTED STOCK PURCHASE AGREEMENT.

 

(C)                                  OTHER PROVISIONS.  THE RESTRICTED STOCK
PURCHASE AGREEMENT SHALL CONTAIN SUCH OTHER TERMS, PROVISIONS AND CONDITIONS NOT
INCONSISTENT WITH THE PLAN AS MAY BE DETERMINED BY THE ADMINISTRATOR IN ITS SOLE
DISCRETION.

 

(D)                                 RIGHTS AS A STOCKHOLDER.  ONCE THE STOCK
PURCHASE RIGHT IS EXERCISED, THE PURCHASER SHALL HAVE THE RIGHTS EQUIVALENT TO
THOSE OF A STOCKHOLDER, AND SHALL BE A STOCKHOLDER WHEN HIS OR HER PURCHASE IS
ENTERED UPON THE RECORDS OF THE DULY AUTHORIZED TRANSFER AGENT OF THE COMPANY. 
NO ADJUSTMENT WILL BE MADE FOR A DIVIDEND OR OTHER RIGHT FOR WHICH THE RECORD
DATE IS PRIOR TO THE DATE THE STOCK PURCHASE RIGHT IS EXERCISED, EXCEPT AS
PROVIDED IN SECTION 15 OF THE PLAN.

 

13.                                 RESTRICTED STOCK UNITS.

 

(A)                                  GRANT OF RESTRICTED STOCK UNITS.  SUBJECT
TO THE TERMS AND PROVISIONS OF THE PLAN, THE ADMINISTRATOR, AT ANY TIME AND FROM
TIME TO TIME, MAY GRANT AWARDS OF RESTRICTED STOCK UNITS TO SERVICE PROVIDERS IN
SUCH AMOUNTS AS THE ADMINISTRATOR, IN ITS SOLE DISCRETION, WILL DETERMINE.

 

(B)                                 RESTRICTED STOCK UNIT AGREEMENT.  EACH AWARD
OF RESTRICTED STOCK UNITS WILL BE EVIDENCED BY A RESTRICTED STOCK UNIT AGREEMENT
THAT WILL SPECIFY THE NUMBER OF RESTRICTED STOCK UNITS GRANTED AND SUCH OTHER
TERMS AND CONDITIONS AS THE ADMINISTRATOR, IN ITS SOLE DISCRETION, WILL
DETERMINE.

 

(C)                                  VESTING CRITERIA AND OTHER TERMS.  THE
ADMINISTRATOR WILL SET VESTING CRITERIA IN ITS DISCRETION, WHICH, DEPENDING ON
THE EXTENT TO WHICH THE CRITERIA ARE MET, WILL DETERMINE THE NUMBER OF
RESTRICTED STOCK UNITS THAT WILL BE PAID OUT TO THE OPTIONEE.  THE ADMINISTRATOR
MAY SET VESTING CRITERIA BASED UPON THE ACHIEVEMENT OF COMPANY-WIDE, BUSINESS
UNIT, OR INDIVIDUAL GOALS (INCLUDING, BUT NOT LIMITED TO, CONTINUED EMPLOYMENT),
OR ANY OTHER BASIS DETERMINED BY THE ADMINISTRATOR IN ITS DISCRETION, BUT
GENERALLY BUT GENERALLY AWARDS OF RESTRICTED STOCK UNITS WILL NOT VEST AT AN
ANNUAL RATE GREATER THAN 33% OF THE TOTAL NUMBER OF RESTRICTED STOCK UNITS
SUBJECT TO THE RESTRICTED STOCK UNIT AGREEMENT.

 

10

--------------------------------------------------------------------------------

 

(D)                                 RETIREMENT OF OPTIONEE.  NOTWITHSTANDING
ANYTHING COXHINTRARY IN THIS SECTION 13, IN THE EVENT OF A OPTIONEE’S RETIREMENT
WHILE A SERVICE PROVIDER, THE AWARD OF RESTRICTED STOCK UNITS WILL VEST IN FULL
AND ANY PERFORMANCE OBJECTIVES OR OTHER VESTING PROVISIONS WILL BE CONSIDERED TO
BE SATISFIED; PROVIDED, HOWEVER, TO THE EXTENT AN AWARD OF RESTRICTED STOCK
UNITS IS TO VEST UPON THE ACHIEVEMENT OF PERFORMANCE CRITERIA, THEN THE OPTIONEE
WILL ONLY VEST IN THE AWARD TO THE EXTENT THE PERFORMANCE CRITERIA IS ACTUALLY
ACHIEVED AND WILL ONLY VEST IN A FRACTION OF THE AWARD THAT IS SUBJECT TO THE
PERFORMANCE VESTING CRITERIA THE NUMERATOR OF WHICH WILL EQUAL THE NUMBER OF
CALENDAR DAYS BETWEEN SUCH AWARD’S DATE OF GRANT AND THE DATE OF THE OPTIONEE’S
RETIREMENT AND THE DENOMINATOR OF WHICH WILL EQUAL THE NUMBER OF CALENDAR DAYS
BETWEEN THE AWARD’S DATE OF GRANT AND THE DATE THE PERFORMANCE CRITERIA IS
ACTUALLY ACHIEVED.

 

(E)                                  EARNING RESTRICTED STOCK UNITS.  UPON
MEETING THE APPLICABLE VESTING CRITERIA, THE OPTIONEE WILL BE ENTITLED TO
RECEIVE A PAYOUT AS SPECIFIED IN THE AWARD AGREEMENT.  NOTWITHSTANDING THE
FOREGOING, AT ANY TIME AFTER THE GRANT OF RESTRICTED STOCK UNITS, THE
ADMINISTRATOR, IN ITS SOLE DISCRETION, MAY REDUCE OR WAIVE ANY VESTING CRITERIA
THAT MUST BE MET TO RECEIVE A PAYOUT.

 

(F)                                    FORM AND TIMING OF PAYMENT.  PAYMENT OF
EARNED RESTRICTED STOCK UNITS WILL BE MADE AS SOON AS PRACTICABLE AFTER THE
DATE(S) SET FORTH IN THE RESTRICTED STOCK UNIT AGREEMENT.  THE ADMINISTRATOR, IN
ITS SOLE DISCRETION, MAY PAY EARNED RESTRICTED STOCK UNITS IN CASH, SHARES, OR A
COMBINATION THEREOF.  SHARES REPRESENTED BY RESTRICTED STOCK UNITS THAT ARE
FULLY PAID IN CASH AGAIN WILL BE AVAILABLE FOR GRANT UNDER THE PLAN.

 

(G)                                 CANCELLATION.  ON THE DATE SET FORTH IN THE
RESTRICTED STOCK UNIT AGREEMENT, ALL UNEARNED RESTRICTED STOCK UNITS WILL BE
FORFEITED TO THE COMPANY.

 

14.                                 TRANSFERABILITY OF OPTIONS, STOCK PURCHASE
RIGHTS OR RESTRICTED STOCK UNITS.  UNLESS DETERMINED OTHERWISE BY THE
ADMINISTRATOR, AN OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT 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 OPTIONEE, ONLY BY THE OPTIONEE.  IF THE
ADMINISTRATOR MAKES AN OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT
TRANSFERABLE, SUCH AWARD SHALL CONTAIN SUCH ADDITIONAL TERMS AND CONDITIONS AS
THE ADMINISTRATOR DEEMS APPROPRIATE.

 

15.                                 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION,
MERGER OR CHANGE IN CONTROL.

 

(A)                                  CHANGES IN CAPITALIZATION.  SUBJECT TO ANY
REQUIRED ACTION BY THE STOCKHOLDERS OF THE COMPANY, THE NUMBER OF SHARES OF
COMMON STOCK THAT HAVE BEEN AUTHORIZED FOR ISSUANCE UNDER THE PLAN BUT AS TO
WHICH NO OPTIONS, STOCK PURCHASE RIGHTS OR RESTRICTED STOCK UNITS HAVE YET BEEN
GRANTED OR WHICH HAVE BEEN RETURNED TO THE PLAN UPON CANCELLATION OR EXPIRATION
OF AN OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT AND THE NUMBER OF
SHARES OF COMMON STOCK AS WELL AS THE PRICE PER SHARE OF COMMON STOCK COVERED BY
EACH SUCH OUTSTANDING OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT,
SHALL BE PROPORTIONATELY ADJUSTED FOR ANY INCREASE OR DECREASE IN THE NUMBER OF
ISSUED SHARES OF COMMON STOCK RESULTING FROM A STOCK SPLIT, REVERSE STOCK SPLIT,
STOCK DIVIDEND, COMBINATION OR RECLASSIFICATION OF THE COMMON STOCK, OR ANY
OTHER INCREASE OR DECREASE IN THE NUMBER OF ISSUED SHARES OF COMMON STOCK
EFFECTED WITHOUT RECEIPT OF CONSIDERATION BY THE COMPANY; PROVIDED, HOWEVER,
THAT CONVERSION OF ANY CONVERTIBLE SECURITIES OF THE COMPANY SHALL NOT BE DEEMED
TO HAVE BEEN “EFFECTED WITHOUT RECEIPT OF CONSIDERATION.”  SUCH ADJUSTMENT SHALL
BE MADE BY THE BOARD, WHOSE DETERMINATION IN THAT RESPECT SHALL BE FINAL,
BINDING AND CONCLUSIVE.  EXCEPT AS EXPRESSLY PROVIDED HEREIN, NO ISSUANCE BY THE
COMPANY OF SHARES OF STOCK OF ANY CLASS, OR SECURITIES CONVERTIBLE INTO SHARES
OF STOCK OF ANY CLASS, SHALL AFFECT, AND NO ADJUSTMENT BY REASON THEREOF SHALL
BE MADE WITH RESPECT TO, THE NUMBER OR PRICE OF SHARES OF COMMON STOCK SUBJECT
TO AN OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT.

 

11

--------------------------------------------------------------------------------

 

(B)                                 DISSOLUTION OR LIQUIDATION.  IN THE EVENT OF
THE PROPOSED DISSOLUTION OR LIQUIDATION OF THE COMPANY, THE ADMINISTRATOR SHALL
NOTIFY EACH OPTIONEE AS SOON AS PRACTICABLE PRIOR TO THE EFFECTIVE DATE OF SUCH
PROPOSED TRANSACTION.  THE ADMINISTRATOR IN ITS DISCRETION MAY PROVIDE FOR AN
OPTIONEE TO HAVE THE RIGHT TO EXERCISE HIS OR HER OPTION OR STOCK PURCHASE RIGHT
UNTIL TEN (10) DAYS PRIOR TO SUCH TRANSACTION AS TO ALL OF THE OPTIONED STOCK
COVERED THEREBY, INCLUDING SHARES AS TO WHICH THE OPTION OR STOCK PURCHASE RIGHT
WOULD NOT OTHERWISE BE EXERCISABLE.  IN ADDITION, THE ADMINISTRATOR MAY PROVIDE
THAT ANY COMPANY REPURCHASE OPTION APPLICABLE TO ANY SHARES PURCHASED UPON
EXERCISE OF AN OPTION OR STOCK PURCHASE RIGHT SHALL LAPSE AS TO ALL SUCH SHARES
AND ALL VESTING CONDITIONS WITH RESPECT TO AWARDS OF RESTRICTED STOCK UNITS WILL
LAPSE, PROVIDED THE PROPOSED DISSOLUTION OR LIQUIDATION TAKES PLACE AT THE TIME
AND IN THE MANNER CONTEMPLATED.  TO THE EXTENT IT HAS NOT BEEN PREVIOUSLY
EXERCISED, AN OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT WILL
TERMINATE IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH PROPOSED ACTION.

 

(C)                                  MERGER OR CHANGE IN CONTROL.  IN THE EVENT
OF A MERGER OF THE COMPANY WITH OR INTO ANOTHER CORPORATION, OR A CHANGE IN
CONTROL, EACH OUTSTANDING OPTION, STOCK PURCHASE RIGHT RESTRICTED STOCK UNIT
SHALL BE ASSUMED OR AN EQUIVALENT AWARD SUBSTITUTED BY THE SUCCESSOR CORPORATION
OR A PARENT OR SUBSIDIARY OF THE SUCCESSOR CORPORATION.

 

In the event that the successor corporation refuses to assume or substitute for
the Option, Stock Purchase Right or Restricted Stock Unit, the Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will
lapse, and, with respect to Restricted Stock Units, all performance goals or
other vesting criteria will be deemed achieved at target levels and all other
terms and conditions met.  In addition, if an Option or Stock Purchase Right
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option or Stock Purchase Right
shall be fully vested and exercisable for a period of fifteen (15) days from the
date of such notice, and the Option or Stock Purchase Right shall terminate upon
the expiration of such period.

 

For the purposes of this subsection (c), the Option or Stock Purchase Right
shall be considered assumed if, following the merger or Change in Control, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or Change in Control, the consideration (whether stock, cash, or
other securities or property) or, in the case of a Restricted Stock Unit which
the Administrator can determine to pay in cash, received in the merger or Change
in Control by holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
Change in Control is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option or
Stock Purchase Right, or upon the payout of a Restricted Stock Unit, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right (or in the
case of Restricted Stock Units, the number of implied shares determined by
dividing the value of the Restricted Stock Units by the per share consideration
received by holders of Common Stock in the merger or Change in Control), to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or Change in Control.

 

16.                                 DATE OF GRANT.  THE DATE OF GRANT OF AN
OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT SHALL BE, FOR ALL
PURPOSES, THE DATE ON WHICH THE ADMINISTRATOR MAKES THE DETERMINATION GRANTING
SUCH AWARD, OR SUCH OTHER LATER DATE AS IS DETERMINED BY THE ADMINISTRATOR. 
NOTICE OF THE DETERMINATION SHALL BE PROVIDED TO EACH OPTIONEE WITHIN A
REASONABLE TIME AFTER THE DATE OF SUCH GRANT.

 

12

--------------------------------------------------------------------------------

 

17.                                 AMENDMENT AND TERMINATION OF THE PLAN.

 

(A)                                  AMENDMENT AND TERMINATION.  THE BOARD MAY
AT ANY TIME AMEND, ALTER, SUSPEND OR TERMINATE THE PLAN.

 

(B)                                 STOCKHOLDER APPROVAL.  THE COMPANY SHALL
OBTAIN STOCKHOLDER APPROVAL OF ANY PLAN AMENDMENT TO THE EXTENT NECESSARY AND
DESIRABLE TO COMPLY WITH APPLICABLE LAWS.  NOTWITHSTANDING THE FOREGOING, THE
COMPANY SHALL OBTAIN STOCKHOLDER APPROVAL OF A PLAN AMENDMENT THAT WOULD
(I) INCREASE THE NUMBER OF SECURITIES THAT MAY BE ISSUED UNDER THE PLAN,
(II) MATERIALLY MODIFY THE REQUIREMENTS FOR PARTICIPATION IN THE PLAN OTHER THAN
AMENDMENT THAT NARROWS THE CLASS OF PERSONS ELIGIBLE TO PARTICIPATE IN THE PLAN
AND (III) MATERIALLY INCREASE THE BENEFITS ACCRUING TO PARTICIPANTS IN THE PLAN.

 

(C)                                  EFFECT OF AMENDMENT OR TERMINATION.  NO
AMENDMENT, ALTERATION, SUSPENSION OR TERMINATION OF THE PLAN SHALL IMPAIR THE
RIGHTS OF ANY OPTIONEE, UNLESS MUTUALLY AGREED OTHERWISE BETWEEN THE OPTIONEE
AND THE ADMINISTRATOR, WHICH AGREEMENT MUST BE IN WRITING AND SIGNED BY THE
OPTIONEE AND THE COMPANY.  TERMINATION OF THE PLAN SHALL NOT AFFECT THE
ADMINISTRATOR’S ABILITY TO EXERCISE THE POWERS GRANTED TO IT HEREUNDER WITH
RESPECT TO OPTIONS GRANTED UNDER THE PLAN PRIOR TO THE DATE OF SUCH TERMINATION.

 

18.                                 CONDITIONS UPON ISSUANCE OF SHARES.

 

(A)                                  LEGAL COMPLIANCE.  SHARES SHALL NOT BE
ISSUED PURSUANT TO AN OPTION, STOCK PURCHASE RIGHT OR RESTRICTED STOCK UNIT,
UNLESS THE EXERCISE OF SUCH AWARD AND THE ISSUANCE AND DELIVERY OF SUCH SHARES
PURSUANT TO SUCH AWARD SHALL COMPLY WITH APPLICABLE LAWS AND SHALL BE FURTHER
SUBJECT TO THE APPROVAL OF COUNSEL FOR THE COMPANY WITH RESPECT TO SUCH
COMPLIANCE.

 

(B)                                 INVESTMENT REPRESENTATIONS.  AS A CONDITION
TO THE EXERCISE OF AN OPTION OR STOCK PURCHASE RIGHT OR THE RECEIPT OF SHARES
PURSUANT TO A RESTRICTED STOCK UNIT, THE COMPANY MAY REQUIRE THE PERSON
EXERCISING SUCH OPTION OR STOCK PURCHASE RIGHT OR RECEIVING SHARES PURSUANT TO A
RESTRICTED STOCK UNIT TO REPRESENT AND WARRANT AT THE TIME OF ANY SUCH EXERCISE
OR ISSUANCE THAT THE SHARES ARE BEING PURCHASED OR RECEIVED 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.

 

19.                                 INABILITY TO OBTAIN AUTHORITY.  THE
INABILITY OF THE COMPANY TO OBTAIN AUTHORITY FROM ANY REGULATORY BODY HAVING
JURISDICTION, WHICH AUTHORITY IS DEEMED BY THE COMPANY’S COUNSEL TO BE NECESSARY
TO THE LAWFUL ISSUANCE AND SALE OF ANY SHARES HEREUNDER, 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.

 

20.                                 RESERVATION OF SHARES.  THE COMPANY, DURING
THE TERM OF THIS PLAN, WILL AT ALL TIMES RESERVE AND KEEP AVAILABLE SUCH NUMBER
OF SHARES AS SHALL BE SUFFICIENT TO SATISFY THE REQUIREMENTS OF THE PLAN.

 

21.                                 STOCKHOLDER APPROVAL.  THE PLAN SHALL BE
SUBJECT TO APPROVAL BY THE STOCKHOLDERS OF THE COMPANY WITHIN TWELVE (12) MONTHS
AFTER THE DATE THE PLAN IS ADOPTED.  SUCH STOCKHOLDER APPROVAL SHALL BE OBTAINED
IN THE MANNER AND TO THE DEGREE REQUIRED UNDER APPLICABLE LAWS.

 

13

--------------------------------------------------------------------------------