Prepared by R.R. Donnelley Financial -- 2003 Stock Plan




 EXHIBIT 10.3A 
  
 TERCICA, INC. 
  
 2003 STOCK PLAN 
  
 SECTION 1 
 BACKGROUND AND PURPOSE OF THE PLAN 
  
 1.1 Background. The Plan permits the grant of Incentive Stock Option,
Nonstatutory Stock Options, Stock Purchase Rights, Restricted Stock, Stock Appreciation Rights, Performance Units and Performance Shares. 
  
 1.2 Purpose. The purposes of this Plan are (a) to attract and retain the best available personnel for positions of substantial responsibility, (b)
to provide additional incentive to Employees, Directors and Consultants, and (c) to promote the success of the Company’s business. 
  
 SECTION 2 
 DEFINITIONS

  
 As used herein, the following definitions will apply:

  
 2.1 “Administrator” means the Board or any of
its Committees as will be administering the Plan, in accordance with Section 4 of the Plan. 
  
 2.2 “Affiliated SAR” means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised.

  
 2.3 “Applicable Laws” means the requirements
relating to the administration of stock option 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 Awards are, or will be, granted under the Plan. 
  
 2.4 “Award” means, individually or collectively, a grant under the Plan of Options, SARs, Stock Purchase Rights, Restricted Stock, Performance Units or Performance Shares. 
  
 2.5 “Award Agreement” means the written agreement setting
forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. 
  
 2.7 “Board” means the Board of Directors of the Company. 
  
 2.8 “Change in Control” means the occurrence of any of the following events: 








 2.8.1 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; 
  
 2.8.2 The consummation of the
sale or disposition by the Company of all or substantially all of the Company’s assets; 
  
 2.8.3 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 
  
 2.8.4 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. 
  
 2.9 “Code” means the Internal Revenue Code of 1986, as
amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code. 
  
 2.10 “Committee” means a committee appointed by the Board in accordance with Section 4 of the Plan. 
  
 2.11 “Common Stock” means the common stock of the Company.

  
 2.12 “Company” means Tercica, Inc., a
Delaware corporation, or any successor thereto. 
  
 2.13
“Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. 
  
 2.14 “Director” means a member of the Board. 
  
 2.15 “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards
other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

  
 2.16 “Employee” means any person, including
Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

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

 2 









 2.18 “Exchange Program” means a program under which (a) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, and/or (b) the exercise price of an outstanding Award is reduced. The terms and
conditions of any Exchange Program will be determined by the Administrator in its sole discretion. 
  
 2.19 “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: 
  
 2.19.1 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 will be the closing sales price for such stock (or 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; 
  
 2.19.2 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 will 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 
  
 2.19.3 In the absence of an established market
for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator. 
  
 2.20 “Fiscal Year” means the fiscal year of the Company. 
  
 2.22 “Freestanding SAR” means a SAR that is granted independently of any Option. 
  
 2.24 “Incentive Stock Option” means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 
  
 2.25 “Inside Director” means a Director who is an Employee. 
  
 2.26 “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

  
 2.27 “Officer” means a person who is an
officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
  
 2.28 “Option” means a stock option granted pursuant to the Plan. 
  
 2.29 “Optioned Stock” means the Common Stock subject to an Award. 
  
 2.30 “Outside Director” means a Director who is not an
Employee. 
  
 2.31 “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
  

 3 









 2.32 “Participant” means the holder of an outstanding Award granted under the Plan.

  
 2.33 “Performance Share” means an Award
granted to a Participant pursuant to Section 9. 
  
 2.34
“Performance Unit” means an Award granted to a Participant pursuant to Section 9. 
  
 2.33 “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and
therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator, in
its discretion. 
  
 2.35 “Plan” means this 2003
Stock Plan. 
  
 2.36 “Registration Date” means
the effective date of the first registration statement which is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s securities. 
  
 2.37 “Restricted Stock” means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under Section 6 of the Plan or issued pursuant to Section 7 of the Plan. 
  
 2.38 “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. 
  
 2.39 “Section
16(b)” means Section 16(b) of the Exchange Act. 
  
 2.40
“Service Provider” means an Employee, Director or Consultant. 
  
 2.41 “Share” means a share of the Common Stock, as adjusted in accordance with Section 3 of the Plan. 
  
 2.42 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option, that pursuant to
Section 8 is designated as an SAR. 
  
 2.43 “Stock
Purchase Right” means the right to purchase Common Stock pursuant to Section 6 of the Plan. 
  
 2.44 “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the
Code. 
  
 2.45 “Tandem SAR” means an SAR that is
granted in connection with a related Option, the exercise of which will require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the
same extent). 
  

 4 









 SECTION 3 
 SHARES SUBJECT TO THE PLAN 
  
 3.1 Stock Subject to the Plan. The maximum aggregate number of Shares that may be optioned and sold under the Plan includes (a) any Shares which have been reserved but not issued under the Company’s 2002 Executive Stock Plan
(the “Executive Plan”), (b) any Shares which have been reserved but not issued under the Company’s 2002 Stock Plan (the “2002 Plan”), (c) any Shares returned to the Executive Plan or the 2002 Plan as a result of termination
of options or repurchase of Shares issued under either such plan, and (d) an annual increase to be added on the first day of the Company’s fiscal year beginning in 2005, equal to the lesser of (i) 5,000,000 Shares, (ii) 4% of the outstanding
Shares on such date or (iii) an amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. Shares shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that
is settled in cash. Upon payment in Shares pursuant to the exercise of an SAR, the number of Shares available for issuance under the Plan shall be reduced only by the number of shares actually issued in such payment. If the exercise price of an
Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is
exercised. 
  
 3.2 Lapsed Awards. If an Award expires or
becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Exchange Program, the unpurchased Shares which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise or grant of an Award, will not be returned to the Plan and will not become available for future distribution under the Plan,
except that if unvested Shares are forfeited or repurchased by the Company at their original purchase price or, if less than their original purchase price, their fair market value, such Shares will become available for future grant under the Plan.

  
 3.3 Adjustments. In the event that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares such that an adjustment is determined by the Administrator (in its sole discretion) to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Administrator may, in such manner as it may deem equitable, adjust the number and class of Shares which may be delivered under the
Plan, the number, class, and price of Shares covered by each outstanding Award, the numerical Share limits of Section 5 and the number of Shares issuable pursuant to Section10. 
  
 3.4 Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such
number of Shares as will be sufficient to satisfy the requirements of the Plan. 
  

 5 









 SECTION 4 
 ADMINISTRATION OF THE PLAN 
  
 4.1 Eligibility. Nonstatutory Stock Options, Stock Purchase Rights, Restricted Stock, Stock Appreciation Rights, Performance Units and Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted
only to Employees. 
  
 4.2 Procedure. 
  
 4.2.1 Multiple Administrative Bodies. Different Committees with
respect to different groups of Service Providers may administer the Plan. 
  
 4.2.2 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 will be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code. 
  
 4.2.3 Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
will be structured to satisfy the requirements for exemption under Rule 16b-3. 
  
 4.2.4 Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws. 
  
 4.3 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 will have the authority, in its discretion: (a) to determine the Fair Market Value; (b) to select the Service Providers
to whom Awards may be granted hereunder; (c) to determine the number of shares of Common Stock to be covered by each Award granted hereunder; (d) to approve forms of agreement for use under the Plan; (e) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder (such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards 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 Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, will
determine); (f) to institute an Exchange Program; (g) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (h) 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; (i) to modify or amend each Award (subject to Section 17.3 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; (j) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Award 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 will be determined on the date that the amount of tax to be withheld is to be determined and all
elections by a Participant to have Shares withheld for this purpose will be made in such form and under such conditions as the Administrator may deem necessary or advisable); (k) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by the Administrator; (l) allow a Participant to defer the receipt of the payment of 
  

 6 









 cash or the delivery of Shares that would otherwise be due to such Participant under an Award, and (m) to make all other
determinations deemed necessary or advisable for administering the Plan. 
  
 4.4 Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards. 
  
 SECTION 5 
 STOCK OPTIONS 
  
 5.1 Limitations. 
  
 5.1.1
Incentive Stock Options may be granted only to Employees. 
  
 5.1.2 Each Option will be designated in the Award 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 Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory
Stock Options. For purposes of this Section 5.1.2, Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such
Shares is granted. 
  
 5.1.3 The following limitations will apply
to grants of Options: 
  
 (a) No Service Provider will be
granted, in any Fiscal Year, Options to purchase more than 2,000,000 Shares. 
  
 (b) In connection with his or her initial service as an Employee, a Service Provider may be granted Options to purchase up to an additional 1,000,000 Shares, which will not count against the limit set forth in
subsection (a) above. 
  
 (c) The foregoing limitations will be
adjusted proportionately in connection with any change described in Section 3.3. 
  
 (d) If an Option is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 13), the cancelled Option will be counted against the limits set forth in
subsections (a) and (b) 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. 
  
 5.2 Term of Option. The term of each Option will be stated in the
Award Agreement. In the case of an Incentive Stock Option, the term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant 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 will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement. 
  

 7 









 5.3 Option Exercise Price and Consideration. 
  
 5.3.1 Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option will be determined by the Administrator, subject to the following: 
  
 (a) In the case of an Incentive Stock Option 
  
 (i) 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 will be no less than 110% of the Fair Market Value per Share on the date of grant. 
  
 (ii) granted to any Employee other than an Employee described in paragraph (i) immediately above, the per Share exercise
price will be no 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 will be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price will 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. 
  
 5.3.2 Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be
exercised and will determine any conditions that must be satisfied before the Option may be exercised. 
  
 5.3.3 Form of Consideration. The Administrator will 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 will 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 from the Company, (A) have been owned by the Participant 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 will 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 Participant, including any liability attributable to the Participant’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. 
  
 5.4 Exercise of Option. 
  
 5.4.1 Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at
such times and under such 
  

 8 









 conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a
fraction of a Share. 
  
 An Option will be deemed exercised when
the Company receives: (i) written or electronic notice of exercise (in accordance with the Award 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 any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested
by the Participant, in the name of the Participant 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 will exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company will 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 3.3 of the Plan. 
  
 Exercising an Option in any manner will 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. 
  
 5.4.2 Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her
Option within such period of time as is specified in the Award 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 Award Agreement).
In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months 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 the Option will 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 will terminate, and the
Shares covered by such Option will revert to the Plan. 
  
 5.4.3
Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to
the extent 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 Award Agreement). In the absence of a specified time in the Award Agreement, the Option will 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 Option, the Shares covered by the unvested portion of the Option will revert to
the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  
 5.4.4 Death of Participant. If a Participant dies while a Service
Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may 
  

 9 









 the option be exercised later than the expiration of the term of such Option as set forth in the Award 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 Option may
be 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 and distribution. In the absence of
a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. If, at the time of death, Participant is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  
 SECTION 6 
 STOCK PURCHASE RIGHTS 
  
 6.1 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 will advise the offeree in writing or electronically, by means of an Award Agreement, of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree will be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer will be accepted by execution of an Award Agreement in the form determined by the
Administrator. 
  
 6.2 Repurchase Option. Unless the
Administrator determines otherwise, the Award Agreement will 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 Award Agreement will be determined by the Administrator and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option will lapse at a
rate determined by the Administrator. 
  
 6.3 Other
Provisions. The Award Agreement will contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. 
  
 6.4 Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser will have the rights equivalent to those of a stockholder, and will 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 3.3 of the Plan. 
  
 SECTION 7 
 RESTRICTED STOCK

  
 7.1 Grant of Restricted Stock. Subject to the terms
and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service 
  

 10 









 Providers in such amounts as the Administrator, in its sole discretion, will determine. The Administrator, in its sole
discretion, will determine the number of Shares to be granted to each Service Provider. 
  
 7.2 Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions on such Shares have lapsed.

  
 7.3 Transferability. Except as provided in this Section
7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction. 
  
 7.4 Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of
Restricted Stock as it may deem advisable or appropriate. 
  
 7.5
Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the
Period of Restriction. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed. 
  
 7.6 Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full
voting rights with respect to those Shares, unless the Administrator determines otherwise. 
  
 7.7 Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect
to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock
with respect to which they were paid. 
  
 7.8 Return of
Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan. 
  
 SECTION 8 
 STOCK APPRECIATION RIGHTS 
  
 8.1 Grant of SARs. Subject to the terms and conditions of the Plan, an SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole
discretion. The Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. 
  
 8.1.1 Number of Shares. The Administrator will have complete discretion to determine the number of SARs granted to any Service Provider.

  

 11 









 8.1.2 Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan,
will have complete discretion to determine the terms and conditions of SARs granted under the Plan. However, the exercise price of Tandem or Affiliated SARs will equal the Exercise Price of the related Option. 
  
 8.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (a) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect to the
Tandem SAR will be for no more than one hundred percent (100%) of the difference between the Exercise Price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time
the Tandem SAR is exercised; and (c) the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option. 
  
 8.3 Exercise of Affiliated SARs. An Affiliated SAR will be deemed to
be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option. 
  
 8.4 Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such terms and conditions as the
Administrator, in its sole discretion, will determine. 
  
 8.5
SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion,
will determine. 
  
 8.6 Expiration of SARs. An SAR granted
under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 5.4 also will apply to SARs. 
  
 8.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant will
be entitled to receive payment from the Company in an amount determined by multiplying: 
  
 (a) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times 
  
 (b) The number of Shares with respect to which the SAR is exercised. 
  
 At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in
some combination thereof. 
  
 SECTION 9 
 PERFORMANCE UNITS AND PERFORMANCE SHARES 
  
 9.1 Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to
time, as will be determined by the 
  

 12 









 Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Participant. 
  
 9.2 Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant. 
  
 9.3
Performance Objectives and Other Terms. The Administrator will set performance objectives in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid
out to the Service Providers. The time period during which the performance objectives must be met will be called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, or individual goals,
applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion. 
  
 9.4 Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled
to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives have been achieved. After the grant
of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives for such Performance Unit/Share. 
  
 9.5 Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after
the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof. 
  
 9.6 Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will
be forfeited to the Company, and again will be available for grant under the Plan. 
  
 SECTION 10 
 FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS 
  
 All grants of Options to Outside Directors pursuant to this Section will be
automatic and nondiscretionary and will be made in accordance with the following provisions: 
  
 10.1 Type of Option. All Options granted pursuant to this Section will be Nonstatutory Stock Options and, except as otherwise provided herein, will be subject to the other terms and conditions of the Plan.

  
 10.2 No Discretion. No person will have any discretion
to select which Outside Directors will be granted Options under this Section or to determine the number of Shares to be covered by such Options (except as provided in Section 3). Notwithstanding the foregoing, the Administrator, 
  

 13 









 in its discretion, may grant an Option that is otherwise issuable to an Outside Director pursuant to this Section 10 to
the Outside Director’s employer and such employer shall be deemed an Outside Director for purposes of the Plan. 
  
 10.3 First Option. Each person who first becomes an Outside Director following the Registration Date will be automatically granted an Option to
purchase 90,000 Shares (a “First Option”) on or about the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided,
however, that an Inside Director who ceases to be an Inside Director but who remains a Director will not receive a First Option. 
  
 10.4 Subsequent Option. Each Outside Director who also is the Chairman of the Board will be automatically granted an Option to purchase 90,000
Shares and each Outside Director, other than the Chairman of the Board, will be automatically granted an Option to purchase 45,000 Shares (collectively referred to as a “Subsequent Option”) on each date of the annual meeting of the
stockholders of the Company beginning in 2004, if as of such date, he or she will have served on the Board for at least the preceding six (6) months. 
  
 10.5 Terms. The terms of each Option granted pursuant to this Section will be as follows: 
  
 10.5.1 The term of the Option will be ten (10) years. 
  
 10.5.2 The exercise price per Share will be 100% of the Fair Market Value per
Share on the date of grant of the Option. 
  
 10.5.3 Subject to
Section 13, the First Option will vest and become exercisable as to 1/3 of the Shares subject to the Option on each anniversary of its date of grant, provided that the Participant continues to serve as a Service Provider on such dates. 

 
 10.5.4 Subject to Section 13, the Subsequent Option will vest and become
exercisable as to 100% of the Shares subject to the Option on the anniversary of its date of grant, provided that the Participant continues to serve as a Service Provider on such date. 
  
 10.6 Amendment. The Administrator in its discretion may change the number of Shares subject to the First Options and
Subsequent Options. 
  
 SECTION 11 
 LEAVE OF ABSENCE 
  
 Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider
will 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, or any Subsidiary. 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 Participant will cease to be treated as
an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option. 
  

 14 









 SECTION 12 
 TRANSFERABILITY OF AWARDS 
  
 Unless determined otherwise by the 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 Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 
  
 SECTION 13 
 DISSOLUTION OR LIQUIDATION OR CHANGE IN CONTROL 
  
 13.1 Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each
Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action. 
  
 13.2 Change in Control. In the event of a Change in Control, each
outstanding Option, SAR and Stock Purchase Right will be assumed or an equivalent option or right 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, SAR or Stock Purchase Right, the Participant will fully vest in and have the right to exercise the Option, SAR or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable (subject to the consummation of the Change in Control). If an Option, SAR or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator will
notify the Participant in writing or electronically that the Option, SAR or Stock Purchase Right will be fully vested and exercisable (subject to the consummation of the Change in Control) for a period of fifteen (15) days from the date of such
notice, and the Option, SAR or Stock Purchase Right will terminate upon the expiration of such period. 
  
 With respect to Options, SARs and/or Stock Purchase Rights granted to an Outside Director that are assumed or substituted for, if on the date of or
following such assumption or substitution the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant, then the Participant will
fully vest in and have the right to exercise the Option, SAR and/or Stock Purchase Rights as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. 
  
 For the purposes of this Section 13.2, the Option, SAR or Stock Purchase
Right will be considered assumed if, following the Change in Control, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option, SAR or Stock Purchase Right immediately prior to the Change
in Control, the consideration (whether stock, cash, or other securities or property) received in the 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 
  

 15 









 Shares); provided, however, that if such consideration received in the 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, SAR or Stock Purchase Right, for each Share of Optioned
Stock subject to the Option, SAR or Stock Purchase Right, 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 Change in Control.

  
 SECTION 14 
 NO EFFECT ON EMPLOYMENT OR SERVICE 
  
 Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service
Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws. 
  
 SECTION 15 
 DATE OF GRANT 
  
 The date of grant of an Award will 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 will be provided to each Participant within a reasonable time after the date of such grant. 
  
 SECTION 16 
 TERM OF PLAN 
  
 Subject to Section 20 of the Plan, the Plan will become effective upon its
adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 17 of the Plan. 
  
 SECTION 17 
 AMENDMENT AND TERMINATION
OF THE PLAN 
  
 17.1 Amendment and Termination. The
Administrator may at any time amend, alter, suspend or terminate the Plan. 
  
 17.2 Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. 
  
 17.3 Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.
Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. 
  

 16 









 SECTION 18 
 CONDITIONS UPON ISSUANCE OF SHARES 
  
 18.1 Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be
further subject to the approval of counsel for the Company with respect to such compliance. 
  
 18.2 Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 
  
 SECTION 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, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained. 
  
 SECTION 20 
 STOCKHOLDER APPROVAL 
  
 The Plan will be subject
to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. 
  
 SECTION 21 
 WITHHOLDING 
  
 21.1 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof). 
  
 21.2 Withholding Arrangements. The Administrator, in its sole
discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (a) electing to have the Company withhold otherwise deliverable Shares, or
(b) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld
at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is
to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld. 
  

 17