**Exhibit 10.3**

**COST PLUS, INC.**

**2004 STOCK PLAN**

**(As Amended and Restated June 22, 2006)**

1. Purposes of the Plan.The purposes of this Stock Plan are: 

 

 

 

Awards granted under the Plan may be Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units, as determined by the Administrator at thetime of grant. 

2. 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 withSection 4 of the Plan. 

(b) “Annual Revenue” means the Company’s or a business unit’s netsales for the Fiscal Year, determined in accordance with generally accepted accounting principles; provided, however, that prior to the Fiscal Year, the Administrator shall determine whether any significant item(s) shall be excluded or included fromthe calculation of Annual Revenue with respect to one or more Participants. 

(c) “Applicable Laws” meansthe legal requirements relating to the administration of equity compensation plans under state corporate and securities laws and the Code. 

(d) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units.

(e) “Award Agreement” means the written agreement setting forth the terms and provisions applicable toeach Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. 

(f)“Awarded Stock” means the Common Stock subject to an Award. 

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

(h) “Cash Position” means the Company’s level of cash and cashequivalents. 

(i) “Change of Control” means the occurrence of any of the followingevents: 

(i) The acquisition by any “person” (as such term is used in Sections 13(d) and 14(d) of theExchange Act) (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of the “beneficial ownership” (as defined in Rule 13d-3 under 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; 

(ii) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of thedirectors are Incumbent Directors. “Incumbent Directors” shall mean Directors who either (A) are Directors as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at leasta majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contestrelating to the election of directors to the Company); 

(iii) A merger or consolidation of the Company with any othercorporation, 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 securitiesof the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; 

(iv) The approval by the shareholders of the Company of a plan of complete liquidation of the Company; 

(v) The sale of all or substantially all of the assets of the Company determined on a consolidated basis; or 

(vi) The complete liquidation or dissolution of the Company. 

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

(k) “Committee” means a Committee appointed by the Board in accordance with Section 4 of the Plan. 

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

(m) “Company” means Cost Plus, Inc., a California corporation. 

(n) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to renderservices and who is compensated for such services. The term Consultant shall not include Directors who are compensated by the Company only for their service as Directors. 

 

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(o) “Deferred Stock Unit” means a deferred stock unit Award granted to aParticipant pursuant to Section 13. 

(p) “Director” means a member of the Board. 

(q) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code. 

(r) “Earnings Per Share” means as to any Fiscal Year, the Company’s or a business unit’s Net Income, dividedby a weighted average number of common shares outstanding and dilutive common equivalent shares deemed outstanding, determined in accordance with generally accepted accounting principles. 

(s) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary ofthe 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 anysuccessor. 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 theCompany is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive StockOption held by the Participant 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 besufficient to constitute “employment” by the Company. 

(t) “Exchange Act” means the SecuritiesExchange Act of 1934, as amended. 

(u) “Fair Market Value” means, as of any date, the value of Common Stockdetermined 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 of the National Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) System, the Fair Market Value of a Share of Common Stock shall be the closing sales pricefor 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 day of determination, as reported in *The Wall StreetJournal* or such other source as the Administrator deems reliable; 

(ii) If the Common Stock is quoted on the NASDAQSystem (but not on the Nasdaq National Market thereof) or 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 lowasked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in *The Wall Street Journal* or such other source as the Administrator deems reliable; 

(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by theAdministrator. 

 

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(v) “Fiscal Year” means a fiscal year of the Company. 

(w) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning ofSection 422 of the Code and the regulations promulgated thereunder. 

(x) “Net Income” means as to anyFiscal Year, the income after taxes of the Company for the Fiscal Year determined in accordance with generally accepted accounting principles, provided that prior to the Fiscal Year, the Administrator shall determine whether any significant item(s)shall be included or excluded from the calculation of Net Income with respect to one or more Participants. 

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

(z)“Notice of Grant” means a written notice evidencing certain terms and conditions of an individual Award. The Notice of Grant is part of the Option Agreement. 

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

(bb) “Operating Cash Flow” means the Company’sor a business unit’s sum of Net Income plus depreciation and amortization less capital expenditures plus changes in working capital comprised of accounts receivable, inventories, other current assets, trade accounts payable, accrued expenses,product warranty, advance payments from customers and long-term accrued expenses, determined in accordance with generally acceptable accounting principles. 

(cc) “Operating Income” means the Company’s or a business unit’s income from operations but excluding any unusual items, determined in accordance with generally accepted accountingprinciples. 

(dd) “Option” means a stock option granted pursuant to the Plan. 

(ee) “Option Agreement” means a written agreement between the Company and a Participant evidencing the terms andconditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. 

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

(gg) “Participant” means the holder of an outstanding Award granted under the Plan. 

(hh) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Administrator, thePerformance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures: (a) Annual 

 

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Revenue, (b) Cash Position, (c) Earnings Per Share, (d) Net Income, (e) Operating Cash Flow, (f) Operating Income, (g) Returnon Assets, (h) Return on Equity, (i) Return on Sales, and (j) Total Shareholder Return. The Performance Goals may differ from Participant to Participant and from Award to Award. 

(ii) “Performance Share” means a performance share Award granted to a Participant pursuant to Section 11.

(jj) “Performance Unit” means a performance unit Award granted to a Participant pursuant toSection 12. 

(kk) “Per Share Strike Price” means, with respect to each Option or SAR, the per shareexercise price. 

(ll) “Plan” means this 2004 Stock Plan. 

(mm) “Restricted Stock” means Shares granted pursuant to Section 10 of the Plan. 

(nn) “Retirement” means a Participant’s voluntary retirement at or after age 65 (or, with the consent of the PlanAdministrator, in its sole discretion, age 55). 

(oo) “Return on Assets” means the percentage equal to theCompany’s or a business unit’s Operating Income before incentive compensation, divided by average net Company or business unit, as applicable, assets, determined in accordance with generally accepted accounting principles. 

(pp) “Return on Equity” means the percentage equal to the Company’s Net Income divided by average shareholder’sequity, determined in accordance with generally accepted accounting principles. 

(qq) “Return on Sales”means the percentage equal to the Company’s or a business unit’s Operating Income before incentive compensation, divided by the Company’s or the business unit’s, as applicable, revenue, determined in accordance with generallyaccepted accounting principles. 

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

(ss)“Section 16(b)” means Section 16(b) of the Securities Exchange Act of 1934, as amended. 

(tt) “Service Provider” means an Employee or Consultant. 

(uu) “Share” means ashare of the Common Stock, as adjusted in accordance with Section 16 of the Plan. 

 

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(vv) “Stock Appreciation Right” or “SAR” means an Awardgranted pursuant to Section 9 hereof. 

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

(xx) “Total ShareholderReturn” means the total return (change in share price plus reinvestment of any dividends) of a Share. 

3. Stock Subject to thePlan. Subject to the provisions of Section 16 of the Plan, the maximum aggregate number of Shares which may be issued under the Plan is 1,900,000 Shares, plus any Shares remaining available for issuance pursuant to the Company’s 1995Stock Plan as of the date the Plan was originally approved, up to a maximum of 100,000 Shares, plus any shares subject to any outstanding options under the Company’s 1995 Stock Option Plan that subsequently expire unexercised, up to a maximumof an additional 800,000 Shares; provided, however, that in no event shall more than 30% of the Stock remaining issuable under the Plan as of the date of obtaining shareholder approval in 2004 and 30% of the Shares subsequently added to the Plan byvirtue of outstanding 1995 Stock Option Plan options expiring unexercised be issued pursuant to Awards with an exercise price or purchase price that is less than 100% of Fair Market Value on the date of grant. The Shares may be authorized, butunissued, or reacquired Common Stock. 

If an Award expires or becomes unexercisable without having been exercised in full, or, with respectto Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and SARs, the forfeited or repurchased shares) which weresubject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to SARs, only shares actually issued pursuant to an SAR shall cease to be available under the Plan; all remaining sharesunder SARs shall remain available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan under any Award shall not be returned to the Plan and shall not becomeavailable for future distribution under the Plan; provided, however, that if Shares of Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units are repurchased by the Company at their original purchase price or are forfeitedto the Company, such Shares shall become available for future grant under the Plan. To the extent an Award under the Plan is paid out in cash rather than stock, such cash payment shall not result in reducing the number of Shares available forissuance under the Plan. 

4. Administration of the Plan. 

(a) Procedure. 

(i) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers. 

(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunderas “performance-based compensation” within the 

 

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meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside directors” within themeaning of Section 162(m) of the Code. 

(iii) Rule 16b-3. To the extent desirable to qualify transactionshereunder 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) aCommittee, which committee shall be constituted to satisfy Applicable Laws. 

(b) Powers of the Administrator. Subjectto 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 of the Common Stock, in accordance with Section 2(u) of the Plan; 

(ii) to select the Service Providers to whom Awards may be granted hereunder; 

(iii) to determine whether and to what extent Awards or any combination thereof, are granted hereunder; 

(iv) to determine the number of shares of Common Stock to be covered by each Award granted hereunder; 

(v) to approve forms of agreement for use under the Plan; 

(vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms andconditions include, but are not limited to, the exercise price, the time or times when Options or SARs may be exercised or other Awards vest (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions,and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; 

(vii) to construe and interpret the terms of the Plan and Awards; 

(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plansestablished for the purpose of qualifying for preferred tax treatment under foreign tax laws; 

(ix) to modify or amend eachAward (subject to Section 18(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options and SARs longer than is otherwise provided for in the Plan; 

 

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(x) to authorize any person to execute on behalf of the Company any instrument requiredto effect the grant of an Option or Stock Appreciation previously granted by the Administrator; 

(xi) to allow Participantsto satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award (or distribution of a Deferred Stock Unit) that number of Shares or cash having a Fair MarketValue equal to the minimum amount required to be withheld. The Fair Market Value of any 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 a Participant to have Shares orcash withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; 

(xii) to determine the terms and restrictions applicable to Awards; and 

(xiii) to make allother determinations deemed necessary or advisable for administering the Plan. 

(c) Effect of Administrator’sDecision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards. 

5. Eligibility. Restricted Stock, Performance Shares, Performance Units, Stock Appreciation Rights, Deferred Stock Units and Nonstatutory Stock Options may be granted to Service Providers. Incentive StockOptions may be granted only to Employees. 

6. Limitations. 

(a) Each Option shall be designated in the Notice of Grant as either an Incentive Stock Option or a Nonstatutory Stock Option. However,notwithstanding such designations, to the extent that the aggregate Fair Market Value: 

(i) of Shares subject to aParticipant’s Incentive Stock Options granted by the Company, any Parent or Subsidiary, which 

(ii) become exercisablefor the first time during any calendar year (under all plans of the Company or any Parent or Subsidiary)

exceeds $100,000, such excess Options shall betreated as Nonstatutory Stock Options. For purposes of this Section 6(a), 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 time ofgrant. 

(b) Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing theParticipant’s employment with the Company or its Subsidiaries, nor shall they interfere in any way with the Participant’s right or the Company’s or Subsidiary’s right, as the case may be, to terminate such employment at any time,with or without cause or notice. 

 

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(c) The following limitations shall apply to grants of Options and Stock AppreciationRights to Employees: 

(i) No Employee shall be granted, in any fiscal year of the Company, Options and Stock AppreciationRights to purchase more than 300,000 Shares. 

(ii) The foregoing limitations shall be adjusted proportionately in connectionwith any change in the Company’s capitalization as described in Section 16. 

7. Term of Plan. The Plan shall continue ineffect for a term of ten (10) years following the date upon which the Board approved the Plan in 2004. 

8. Stock Options.

(a) Term . The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall beten (10) years from the date of grant or such shorter term as may be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stockrepresenting more than ten percent (10%) of the 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 asmay be provided in the Notice of Grant. 

(b) Option Exercise Price and Consideration. 

(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determinedby the Administrator, subject to the following: 

(A) 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 beno less than 100% of the Fair Market Value per Share on the date of grant. 

(B) In the case of a Nonstatutory Stock Option,the per Share exercise price shall be no less than 25% of the Fair Market Value per share on the date of grant. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning ofSection 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. 

(C) 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 merger or other corporate transaction.

 

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(D) The exercise price for an Option may not be reduced without the consent of theCompany’s shareholders. This shall include, without limitation, a repricing of the Option as well as an Option exchange program whereby the Participant agrees to cancel an existing Option in exchange for an Option, SAR or other Award.

(c) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the periodwithin which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may specify that an Option may not be exercised until the completion of a serviceperiod. 

(d) Form of Consideration. The Administrator shall determine the acceptable form of consideration forexercising 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. Subject to Applicable Laws, such consideration may consistentirely of: 

(i) cash; 

(ii) check; 

(iii) other Shares which (A) in the case of Shares acquired upon exerciseof an option, have been owned by the Participant for more than six 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 beexercised; 

(iv) delivery of a properly executed exercise notice together with such other documentation as the Administratorand the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price; 

(v) any combination of the foregoing methods of payment; or 

(vi) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws. 

(e) Exercise of Option. 

(i) Procedure for Exercise; Rights as a Shareholder. 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 theAdministrator and set forth in the Option Agreement. 

An Option may not be exercised for a fraction of a Share. 

An Option shall be deemed exercised when the Company receives: (i) written notice of exercise (in accordance with the Option Agreement) fromthe 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 any consideration and method of payment authorized by the Administrator and permitted

 

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by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by theParticipant, in the name of the Participant and his or her spouse. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of theCompany), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the optioned stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stockcertificate 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 stock certificate is issued, except as provided in Section 16 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 saleunder the Option, by the number of Shares as to which the Option is exercised. 

(f) Termination of Relationship as aService Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death, Disability or Retirement, the Participant may exercise his or her Option within such period of time as is specified in the OptionAgreement 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, theOption shall remain exercisable for thirty (30) days following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of theOption shall revert to the Plan. If, after termination, the Participant 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.

(g) Disability or Retirement of Participant. If a Participant ceases to be a Service Provider as a result of theParticipant’s Disability or pursuant to his or her Retirement, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (butin 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 twelve (12) months following theParticipant’s termination. If, on the date of termination, the Participant 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 Participantdoes 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. 

(h) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following theParticipant’s death within such period of time as is specified in the Option Agreement (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by theParticipant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option maybe exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent 

 

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and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months followingParticipant’s death. 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. 

9. Stock Appreciation Rights. 

(a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shallhave complete discretion to determine the number of SARs granted to any Participant. 

(b) Exercise Price and otherTerms. Subject to Section 6(c) of the Plan, the Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that no SAR mayhave a term of more than ten (10) years from the date of grant. The exercise price for the Shares or cash to be issued pursuant to an already granted SAR may not be changed without the consent of the Company’s shareholders. This shallinclude, without limitation, a repricing of the SAR as well as an SAR exchange program whereby the Participant agrees to cancel an existing SAR in exchange for an Option, SAR or other Award. 

(c) Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amountdetermined by multiplying: 

(i) The difference between the Fair Market Value of a Share on the date of exercise over theexercise price; times 

(ii) the number of Shares with respect to which the SAR is exercised. 

(d) Payment upon Exercise of SAR. At the discretion of the Administrator, payment for a SAR may be in cash, Shares or a combinationthereof. 

(e) SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exerciseprice, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine. 

(f) Expiration of SARs. A SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. 

(g) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon theParticipant’s death, Disability or Retirement termination, the Participant may exercise his or her SAR within such period of time as is specified in the SAR Agreement to the extent that the SAR is vested on the date of termination (but in noevent later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for thirty (30) days following the Participant’stermination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the 

 

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Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified by the Administrator, the SAR shall terminate, andthe Shares covered by such SAR shall revert to the Plan. 

(h) Disability or Retirement of Participant. If aParticipant ceases to be a Service Provider as a result of the Participant’s Disability or his or her Retirement, the Participant may exercise his or her SAR within such period of time as is specified in the SAR Agreement to the extent the SARis vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for twelve(12) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, aftertermination, the Participant does not exercise his or her SAR within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan. 

(i) Death of Participant. If a Participant dies while a Service Provider, the SAR may be exercised following the Participant’sdeath within such period of time as is specified in the SAR Agreement (but in no event may the SAR be exercised later than the expiration of the term of such SAR as set forth in the SAR Agreement), by the Participant’s designated beneficiary,provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such SAR may be exercised by the personal representativeof the Participant’s estate or by the person(s) to whom the SAR is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the SAR Agreement, the SARshall remain exercisable for twelve (12) months following Participant’s death. If the SAR is not so exercised within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

10. Restricted Stock. 

(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion.The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock award granted to any Participant (provided that during any fiscal year of the Company, no Participant shall be granted morethan 200,000 Shares of Restricted Stock), and (ii) the conditions that must be satisfied, which typically will be based principally or solely on continued provision of services but may include a performance-based component, upon which isconditioned the grant or vesting of Restricted Stock. Restricted Stock shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award.Until the Shares are issued, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the units to acquire Shares. 

(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the termsand conditions of Restricted Stock granted under the Plan. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by 

 

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the Administrator at the time the stock is awarded. The Administrator may require the recipient to sign a Restricted Stock Award agreement as a condition ofthe award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator. 

(c) Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by an agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator, inits sole discretion, shall determine; provided; however, that if the Restricted Stock grant has a purchase price, such purchase price must be paid no more than ten (10) years following the date of grant. 

(d) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock as “performance-basedcompensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latestdate permissible to enable the Restricted Stock to qualify as “performance-based compensation” under Section 162(m) of the Code. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, theAdministrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Restricted Stock under Section 162(m) of the Code (e.g., in determining the Performance Goals).

11. Performance Shares. 

(a) Grant of Performance Shares. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants at any time as shall be determined by the Administrator, in its solediscretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Performance Share award granted to any Participant (provided that during any fiscal year of the Company, no Participant shall begranted more than 200,000 units of Performance Shares), and (ii) the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, uponwhich is conditioned the grant or vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subjectto an Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the units to acquire Shares. 

(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the termsand conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include suchperformance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Shares agreement as a condition of the award. Any certificates representing the Shares of stockawarded shall bear such legends as shall be determined by the Administrator. 

 

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(c) Performance Share Award Agreement. Each Performance Share grant shall beevidenced by an agreement that shall specify such other terms and conditions as the Administrator, in its sole discretion, shall determine. 

(d) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator,in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Performance Shares to qualify as“performance-based compensation” under Section 162(m) of the Code. In granting Performance Shares which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it fromtime to time to be necessary or appropriate to ensure qualification of the Performance Shares under Section 162(m) of the Code (e.g., in determining the Performance Goals). 

12. Performance Units. 

(a) Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in a cash equivalent to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subjectto the terms and conditions of the Plan, Performance Units may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion todetermine the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of PerformanceUnits. Performance Units shall be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share of Common Stock. No right to vote or receive dividends or any other rights as a shareholder shall exist withrespect to Performance Units or the cash payable thereunder. 

(b) Number of Performance Units. The Administrator willhave complete discretion in determining the number of Performance Units granted to any Participant, provided that during any fiscal year of the Company, no Participant shall receive Performance Units having an initial value greater than $1,000,000,except that such Participant may receive Performance Units in a fiscal year of the Company in which his or her service as a Participant first commences with an initial value no greater than $2,000,000. 

(c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the termsand conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include suchperformance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Unit agreement as a condition of the award. Any certificates representing the Shares awarded shallbear such legends as shall be determined by the Administrator. 

 

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(d) Performance Unit Award Agreement. Each Performance Unit grant shall beevidenced by an agreement that shall specify such terms and conditions as the Administrator, in its sole discretion, shall determine. 

(e) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator,in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Performance Units to qualify as“performance-based compensation” under Section 162(m) of the Code. In granting Performance Units which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it fromtime to time to be necessary or appropriate to ensure qualification of the Performance Units under Section 162(m) of the Code (e.g., in determining the Performance Goals). 

13. Deferred Stock Units. 

(a) Description. Deferred Stock Units shall consist of a Restricted Stock, Performance Share or Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, inaccordance with rules and procedures established by the Administrator. Deferred Stock Units shall remain subject to the claims of the Company’s general creditors until distributed to the Participant. 

(b) 162(m) Limits. Deferred Stock Units shall be subject to the annual 162(m) limits applicable to the underlying Restricted Stock,Performance Share or Performance Unit Award. 

14. Death of Participant. In the event that a Participant dies while a ServiceProvider, then 100% of his or her Awards shall immediately vest. 

15. Non-Transferability of Awards. Unless determined otherwise bythe Administrator, an Award 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 recipient, only bythe recipient. If the Administrator makes an Award transferable, such Award shall contain such additional terms and conditions as the Administrator deems appropriate. 

16. Adjustments Upon Changes in Capitalization or Change of Control. 

(a) Changesin Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Award, the number of shares of Common Stock which have been authorized for issuance under thePlan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per share of Common Stock covered by each such outstanding Award and the 162(m) fiscalyear share issuance limits under Sections 6(c), 10(a) and 11(a) 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 

 

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number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertiblesecurities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Compensation Committee, whose determination in that respect shall be final, binding andconclusive. 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 respectto, the number or price of shares of Common Stock subject to an Award. 

(b) Change of Control. 

(i) Stock Options and SARs. In the event of a Change of Control, each outstanding Option and SAR shall become fully(100%) vested and exercisable. In addition, at the election of the Company the following shall occur: 

(A) each Optionand SAR shall be deemed to have been exercised to the extent it had not been exercised prior to that date, (ii) the Shares issuable in connection with the deemed exercise of each Option and SAR shall be issued to and in the name of the acquirorof the Company, if any, and (iii) in respect of each Share issued in connection with the deemed exercise of an Option or SAR, the Participant shall receive a per Share payment equal to the number (or amount) and kind of stock, securities, cash,property or other consideration that each holder of a Share was entitled to receive in connection with the Change of Control, reduced by the Per Share Strike Price, or 

(B) immediately after each outstanding Option and SAR has become fully (100%) vested it shall be terminated in exchange for a pershare payment for each Share then subject to such Option or SAR equal to the number (or amount) and kind of stock, securities, cash, property or other consideration that each holder of a Share was entitled to receive in connection with the Change ofControl, reduced by the Per Share Strike Price, or 

(C) in the event of a Change of Control that is consummated pursuant toa merger, consolidation or reorganization (a “Transaction”), each outstanding Option and SAR shall become fully (100%) vested and exercisable, and the Plan and the outstanding Options and SARs shall continue in effect in accordancewith their respective terms and each Participant shall be entitled to receive in respect of each Share subject to any outstanding Option, upon exercise of such Option, the same number (or amount) and kind of stock, securities, cash, property orother consideration that each holder of a Share was entitled to receive in connection with the Transaction in respect of a Share. 

(ii) Restricted Stock, Performance Shares, Performance Units and Deferred Stock Units. In the event of a Change of Control, each outstanding award of Restricted Stock, Performance Shares, Performance Units and Deferred Stock Unitsshall become fully (100%) vested. In addition, at the election of the Company, immediately after each outstanding award of Restricted Stock, Performance Shares, Performance Units and Deferred Stock Units have become fully (100%) vested,they shall be terminated and cancelled in exchange for a per share payment for each Share (or, for Performance Units, unit) then subject to such each outstanding award of 

 

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Restricted Stock, Performance Shares, Performance Units and Deferred Stock Units equal to the number (or amount) and kind of stock, securities, cash,property or other consideration that each holder of a Share was entitled to receive in connection with the Change of Control. The Company may also elect to have vested Deferred Stock Units be assumed by the acquirer for distribution according totheir existing distribution schedule. 

17. Date of Grant. The date of grant of an Award shall be, for all purposes, the date onwhich 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 Participant within a reasonable time after the date of suchgrant. 

18. Amendment and Termination of the Plan. 

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. 

(b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirableto comply Section 422 of the Code (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such shareholderapproval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation. 

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant andthe Administrator, which agreement must be in writing and signed by the Participant and the Company. 

19. Conditions Upon Issuance ofShares. 

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless theexercise of the Award or the issuance and delivery of such Shares (or with respect to Performance Units, the cash equivalent thereof) shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company withrespect to such compliance. 

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

 

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20. Liability of Company. 

(a) 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 suchrequisite authority shall not have been obtained. 

(b) Grants Exceeding Allotted Shares. If the Awarded Stock coveredby an Award exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess Awarded Stock, unless shareholder approval of anamendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 18(b) of the Plan. 

21. 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.

 

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