Exhibit 4.2


 


OAK VALLEY BANCORP


 


2008 Equity Plan


 


THIS
2008 EQUITY PLAN is hereby adopted by the Board of Directors of Oak Valley
Bancorp, a California corporation (the “Company”) on May 1, 2008, subject
to approval by the shareholders of the Company below.


 


ARTICLE I


 


PURPOSE AND EFFECTIVE DATE


 


1.1                                 Purpose. The purpose of the Plan is to provide
financial incentives for selected Employees, Advisors and Non-Employee
Directors, thereby promoting the long-term growth and financial success of the
Company by (a) attracting and retaining Employees, Advisors and
Non-Employee Directors of outstanding ability, (b) strengthening the
Company’s capability to develop, maintain, and direct a competent management
team, (c) providing an effective means for selected Employees, Advisors
and Non-Employee Directors to acquire and maintain ownership of Company Stock, (d) motivating
Employees to achieve long-range Performance Goals and objectives, and (e) providing
incentive compensation opportunities competitive with peer financial
institution holding companies.


 


1.2                                 Effective Date and Expiration
of Plan. The Plan will be
effective upon its adoption by the Board and approval by affirmative vote of
the Shareholders required under applicable rules and procedures, including
those prescribed under Sections 162(m) and 422 of the Code and applicable
NASDAQ rules (the “Effective Date”). 
Unless earlier terminated by the Board pursuant to Section 12.2,
the Plan shall terminate on the tenth anniversary of its Effective Date.  No Award shall be made pursuant to the Plan
after its termination date, but Awards made prior to the termination date may
extend beyond that date.  Notwithstanding
the foregoing, no Incentive Stock Options may be granted more than ten years
after the earlier of (a) the adoption of this Plan by the Board or (b) the
Effective Date.


 


ARTICLE II


 


DEFINITIONS


 


The following words and
phrases, as used in the Plan, shall have the meanings set forth in this
section.  When applying these definitions
and any other word, term or phrase used in this Plan, the form of any word,
term or phrase will include any and all of its other forms.


 


2.1                                 Advisor means any advisor who renders bona fide
services to the Company and/or one or more of the Subsidiaries as an advisory
or marketing board member and who is neither an Employee nor a director of the
Company or any Subsidiary; provided that the services rendered are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Company’s securities.


 


2.2                                 Award means, individually or collectively, any
Option, SAR, Restricted Stock, Restricted Stock, Performance Stock, or
unrestricted Company Stock Award.


 


2.3                                 Award Agreement means the written agreement between the
Company and each Participant that describes the terms and conditions of each
Award.  If there is a conflict between
the terms of the Plan and the Award Agreement, the terms of the Plan will
govern.


 


2.4                                 Board means the Board of Directors of the Company.


 


2.5                                 Cause with respect to any Participant, means: (a) Gross
negligence or gross neglect of duties; or (b) Commission of a felony or of
a gross misdemeanor involving moral turpitude in connection with the
Participant’s employment or service, as the case may be, with the Company or
any of its Subsidiaries; or (c) Fraud, disloyalty, dishonesty or willful
violation of any law or significant Company policy committed in connection with
the Participant’s employment or provision of services, as the case may be; or (d) Issuance
of an order for removal of the Participant by any agency which regulates the
activities of the Company or any of its Subsidiaries.  Any determination of “Cause” under this Plan
shall be made by the Committee in its sole discretion.


 


2.6                                 Company means Oak Valley Bancorp, a California
corporation.


 


2.7                                 Company Director means a non-employee member of the Board.


 


2.8                                 Company Stock means the Company’s common shares, without par
value per share.


 


2.9                                 Code means the Internal Revenue Code of 1986, as
amended or superseded after the Effective Date, and any applicable rulings or
regulations issued thereunder.


 


2.10                           Committee means the Compensation Committee of the Board
or a subcommittee thereof.


 


2.11                           Disability means: (a) with respect to an Incentive
Stock Option, “disabled” within the meaning of Section 22(e)(3) of
the Code; (b) with respect to any Award subject to Section 409A of
the Code, “disabled” as defined under Section 409A of the Code; and (c) with
respect to any Award not described in subsections (a) and (b) of this
Section 2.11, a long-term disability as defined by the Company’s or
Subsidiary’s group disability insurance plan, or any successor plan that is
applicable to such Participant at the time of his or her Termination.


 


2.12                           Effective Date means the date on which the Plan is approved
by the Shareholders of the Company, as provided in Section 1.2.


 


2.13                           Employee means any person who, on any applicable date,
is a common law employee of the Company or any Subsidiary.  A worker who is classified as other than a
common law employee but who is subsequently reclassified as a common law
employee of the Company or any Subsidiary for any reason and on any basis


 

















 


will
be treated as a common law employee only from the date that reclassification
occurs and will not retroactively be reclassified as an Employee for any
purpose of this Plan.


 


2.14                           Exchange Act means the Securities Exchange Act of 1934, as
amended.


 


2.15                           Exercise Price means the amount, if any, that a Participant
must pay to exercise an Award (other than an Option).


 


2.16                           Fair Market Value means, as of any specified date, an amount
equal to the reported closing price on the specified date of a share of Company
Stock on NASDAQ or any other established stock exchange or quotation system on
which the Company Stock is then listed or traded or, if no shares of Company
Stock have been traded on such date, the closing price of a share of Company
Stock on NASDAQ or such other established stock exchange or quotation system as
reported on the first day prior thereto on which shares of Company Stock were
so traded. If the preceding sentence does not apply, Fair Market Value shall be
determined in good faith by the Committee using other reasonable means.


 


2.17                           Fiscal Year means the fiscal year of the Company, which is
the 52 week period ending on December 31.


 


2.18                           Incentive Stock Option means an option within the meaning of Section 422
of the Code.


 


2.19                           Non-Employee Director means either a Company Director or a
Subsidiary Director.


 


2.20                           Nonqualified Stock Option means an option granted under the Plan other
than an Incentive Stock Option.


 


2.21                           Option means either a Nonqualified Stock Option or an
Incentive Stock Option to purchase Company Stock.


 


2.22                           Option Price means the price at which Company Stock may be
purchased under an Option.


 


2.23                           Participant means an Employee, a Advisor or a Non-Employee
Director to whom an Award has been made under the Plan.


 


2.24                           Performance Goals means goals established by the Committee
pursuant to Section 4.5.


 


2.25                           Performance Period means a period of time over which performance
is measured.


 


2.26                           Personal Representative means the person or persons who, upon the
death, Disability, or incompetency of a Participant, shall have acquired, by
will or by the laws of descent and distribution or by other legal proceedings,
the right to exercise an Option or SAR or the right to any Restricted Stock
Award theretofore granted or made to such Participant.


 


2.27                           Plan means the Oak Valley Bancorp 2008 Equity Plan.


 


2.28                           [Intentionally Omitted].


 


2.29                           Restricted Performance Stock means Company Stock subject to Performance
Goals.


 


2.30                           Restricted Stock means Company Stock subject to the terms and
conditions provided in Article VI and including Restricted Performance
Stock.


 


2.31                           Restricted Stock Award means an Award granted under Article VI.


 


2.32                           Restriction Period means a period of time determined under Section 6.2
during which Restricted Stock is subject to the terms and conditions provided
in Section 6.3..


 


2.33                           SAR means a stock appreciation right granted under
Section 5.7.


 


2.34                           Shareholders mean the shareholders of the Company.


 


2.35                           Subsidiary means a corporation or other entity the
majority of the voting stock of which is owned directly or indirectly by the
Company.


 


2.36                           Subsidiary Director means a non-employee member of the board of
directors of a Subsidiary who is not also a Company Director.


 


2.37                           Termination means (i) in
the case of an Employee, a cessation of the employee-employer relationship
between the Employee and the Company or a Subsidiary for any reason, including,
but not by way of limitation, a termination by resignation, discharge, death,
Disability, retirement, but excluding any such termination where there is a
simultaneous commencement or continuation of status as a Advisor or as a
Director; (ii) in the case of a Advisor, a cessation of the service
relationship between the Advisor and the Company or a Subsidiary for any
reason, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, but excluding any such termination where there is
a simultaneous commencement or continuation of status as an Employee or as a
Director; and (iii) in the case of a Director, a cessation of the Director’s
service on the Board for any reason, including, but not by way of limitation, a
termination by resignation, death, Disability, retirement or non-reelection to
the Board, but excluding any such termination where there is a simultaneous
commencement or continuation of status as an Employee or as a Advisor.


 

















 


ARTICLE III


 


ADMINISTRATION


 


3.1                                 Committee to Administer. The Plan shall be administered by the
Committee, in accordance with its charter, as adopted from time to time by the
Board; provided, however, that the Board has the authority to grant Awards to
Company Directors.


 


3.2                                 Powers of Committee.


 


(a)          The Committee and the Board shall have full
power and authority to interpret and administer the Plan and to establish and
amend rules and regulations for its administration. Any action or decision
by the Board or the Committee shall be final, binding and conclusive with
respect to the interpretation of the Plan and any Award made under it.


 


(b)         Subject to the provisions of the Plan, the
Committee or the Board, as the case may be, shall have authority, in its
discretion, to determine those Employees, Consultants/Advisors and Non-Employee
Directors who shall receive an Award; the time or times when such Award shall
be made; the vesting schedule, if any, for the Award; and the type of Award to
be granted, the number of shares of Company Stock to be subject to each Option
and Restricted Stock Award, and all other terms and conditions of any Award.


 


(c)          The Committee or the Board, as the case may
be, shall determine and set forth in an Award Agreement the terms of each
Award, including such terms, restrictions, and provisions as shall be necessary
to cause certain Options to qualify as Incentive Stock Options. The Committee
or the Board, as the case may be, may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any Award Agreement, in such
manner and to the extent the Committee or the Board, as appropriate, shall
determine in order to carry out the purposes of the Plan. The Committee or the
Board, as the case may be, may, in its discretion, accelerate (i) the date
on which any Option or SAR may be exercised or (ii) the date of
termination of the restrictions applicable to a Restricted Stock Award, if the
Committee or the Board, as appropriate, determines that to do so will be in the
best interests of the Company and the Participants in the Plan.


 


ARTICLE IV


 


AWARDS


 


4.1                                 Awards.  Awards under the Plan shall consist of Incentive Stock Options,
Nonqualified Stock Options, SARs, Restricted Stock, Restricted Performance
Stock and unrestricted Company Stock. All Awards shall be subject to the terms
and conditions of the Plan and to such other terms and conditions consistent
with the Plan as the Committee or the Board, as the case may b e, deems
appropriate. Awards under a particular section of the Plan need not be uniform
and Awards under two or more sections may be combined in one Award Agreement.
Any combination of Awards may be granted at one time and on more than one
occasion to the same Employee, Advisor or Non-Employee Director. Awards of
Restricted Performance Stock shall be earned solely upon attainment of
Performance Goals and the Committee shall have no discretion to increase such
Awards.


 


4.2                                 Eligibility for Awards.  An Award may be made to any Employee or Advisor selected by the
Committee. In making this selection and in determining the form and amount of
the Award, the Committee may give consideration to the functions and
responsibilities of the respective Employee and/or Advisor, his or her present
and potential contributions to the success of the Company or any of its
Subsidiaries, the value of his or her services to the Company or any of its
Subsidiaries, and such other factors deemed relevant by the Committee.
Non-Employee Directors are eligible to receive Awards pursuant to Article VII.


 


4.3                                 Shares Available Under the
Plan.


 


(a)                                  The Company Stock to be offered under the Plan
pursuant to Options, SARs, Restricted Performance Stock and Restricted Stock
and unrestricted Company Stock Awards must be (i) Company Stock previously
issued and outstanding and reacquired by the Company or (ii) authorized
but unissued Company Stock not reserved for any other purpose. Subject to
adjustment under Section 12.2, the number of shares of Company Stock that
may be issued pursuant to Awards under the Plan (the “Section 4.3 Limit”)  shall
not exceed, in the aggregate, 1,500,000 shares.


 


(b)                                 Any shares of Company Stock subject to
Restricted Stock or unrestricted Company Stock Awards shall not exceed Fifty
Percent (50%) of the total shares available under the Plan and the maximum
number of shares of Company Stock that may be issued subject to Incentive Stock
Options is 1,500,000 subject to adjustment under Section 12.1.  The Section 4.3 Limit shall not have
counted against it:  (i) the number
of shares of Company Stock subject to an Option or any other Award which is
equal to the number of shares of Company Stock tendered by a Participant to the
Company in payment of the Option Price of such Option or the Exercise Price of
such other Award, as applicable; (ii) shares of Company Stock subject to
an Award which for any reason terminates by expiration, forfeiture,
cancellation or otherwise without having been exercised or paid; (iii) shares
of Company Stock withheld from any Award to satisfy a Participant’s tax
withholding obligations or, if applicable, to pay the Option Price of an Option
or the Exercise Price of any other Award; (iv) if an SAR is settled in
whole or in part by the issuance of shares of Company Stock, the number of
shares of Company Stock which represents the difference between (A) the
number of shares of Company Stock which remain subject to such SAR on the date
of such settlement and (B) the number of shares of Company Stock actually
issued upon settlement of such SAR; or (v) the number of shares of Company
Stock subject to an Option which is equal to the number of shares of Company
Stock acquired by the Company on the open market using the cash proceeds
received by the Company from the exercise of such Option; provided, however,
that such number of shares of Company Stock shall in no event be greater than
the number which is determined by dividing (A) the amount of cash proceeds
received by the Company from the Participant upon the exercise of such Option
by (B) the Fair Market Value of a share of the Company Stock on the date
of exercise of such Option.


 


(c)                                  No awards shall be granted under the 1998 Oak
Valley Bank Stock Option Plan on and after the date on which the merger and
reorganization is approved by the Shareholders.


 


4.4                                 Annual Limitation on Awards. The maximum number of shares of Company Stock
subject to Restricted Stock awarded to any Employee or Advisor with respect to
a Performance Period or Restriction Period 
may not exceed 150,000 shares of Company Stock for each Fiscal Year
included in such Performance Period or Restriction Period.  The maximum number of shares of Company Stock
for which Options or SARs may be granted to any Participant in any one Fiscal
Year shall not exceed 150,000 subject to adjustment under Section 12.1.


 

















 


4.5                                 General Performance Goals.


 


(a)                                  Performance Goals relating to the payment or
vesting of an Award that is intended to qualify as “performance-based
compensation” under Section 162(m) of the Code will be comprised of
one or more of the following performance criteria as the Committee may deem
appropriate:


 


	
  (i)

  	
  Earnings
  per share (actual or targeted growth);

  
	
  (ii)

  	
  Net
  income after capital costs;

  
	
  (iii)

  	
  Net
  income (before or after taxes);

  
	
  (iv)

  	
  Return
  measures (including, but not limited to, return on average assets,
  risk-adjusted return on capital, or return on average equity);

  
	
  (v)

  	
  Efficiency
  ratio;

  
	
  (vi)

  	
  Full-time
  equivalency control;

  
	
  (vii)

  	
  Stock
  price (including, but not limited to, growth measures and total shareholder return);

  
	
  (viii)

  	
  Noninterest
  income compared to net interest income ratio;

  
	
  (ix)

  	
  Expense
  targets;

  
	
  (x)

  	
  Operating
  efficiency;

  
	
  (xi)

  	
  Credit
  quality measures;

  
	
  (xii)

  	
  Customer
  satisfaction measures;

  
	
  (xiii)

  	
  Loan
  growth;

  
	
  (xiv)

  	
  Deposit
  growth;

  
	
  (xv)

  	
  Net
  interest margin;

  
	
  (xvi)

  	
  Fee
  income; and

  
	
  (xvii)

  	
  Operating
  expense.

  



 


(b)                                 For any Awards not intended
to qualify as “performance-based compensation” under Section 162(m) of
the Code, the Committee may establish Performance Goals based on the
performance criteria listed in Section 4.5(a) or other performance
criteria as it deems appropriate.


 


(c)                                  Any of the performance criteria listed in Section 4.5(a) may
be applied solely with reference to the Company and/or any Subsidiary or
relatively between the Company and/or any Subsidiary and one or more unrelated
entities.  In addition, different
performance criteria may be applied to individual Participants or to groups of
Participants and, as specified by the Committee, may be based on results
achieved (i) separately by the Company or any Subsidiary, (ii) any
combination of the Company and the Subsidiaries or (iii) any combination
of business units or divisions of the Company and the Subsidiaries.


 


(d)                                 With respect to each Performance Period, the
Committee will establish the Performance Goals in writing no later than the
earlier of (i) 90 days after the beginning of the Performance Period or (ii) expiration
of 25 percent of the Performance Period.


 


(e)                                  Except as otherwise provided in the Plan or
the Award Agreement, as of the end of each Performance Period, the Committee
will certify in writing the extent to which a Participant has or has not met
the Participant’s Performance Goal.  To
the extent permitted under Section 162(m) of the Code, if applicable,
the Committee may disregard or offset the effect of any special charges or
gains or cumulative effect of a change in accounting in determining the
attainment of Performance Goals.


 


(f)                                    To the extent permitted under Section 162(m) of
the Code, if applicable, the Committee shall make (i) appropriate
adjustments to performance criteria to reflect the effect on any performance
criteria of any stock dividend or stock split affecting Company Stock,
recapitalization, merger, consolidation, combination, spin-off, distribution of
assets to Shareholders, exchange of shares or similar corporate change and (ii) similar
adjustments to any portion of performance criteria that is not based on Company
Stock but which is affected by an event having an effect similar to those just
described.


 


ARTICLE V


 


OPTIONS AND STOCK APPRECIATION RIGHTS


 


5.1                                 Award of Options.  The Committee may, from time to time, and on such terms and conditions
as the Committee may prescribe, award (a) Incentive Stock Options, subject
to Section 5.5, to any eligible Employee of the Company or any parent or
subsidiary corporation (as permitted under Sections 422 and 424 of the Code)
and (b) Nonqualified Stock Options to any Employee or Advisor.


 


5.2                                 Period of Option.


 


(a)                                  An Option granted under the Plan shall be
exercisable only in accordance with the vesting schedule approved by the
Committee. The Committee may in its discretion prescribe additional conditions,
restrictions or terms on the vesting of an Option, including the full or
partial attainment of Performance Goals pursuant to Section 4.5. After the
Option vests, the Option may be exercised at any time during the term of the
Option, in whole or in installments, as specified in the related Award
Agreement.  Subject to Article X and
except as provided in Section 5.5, the duration of each Option shall not
be more than ten years from the date of grant.


 


(b)                                 Except as provided in Article X, a
Participant may not exercise an Option unless such Participant is then, and
continually (except for sick leave, military service, or other approved leave
of absence) after the grant of the Option has been, an Employee, Advisor, or
Non-Employee Director.


 


5.3                                 Award Agreement. Each Option shall be evidenced by an Award
Agreement. The Award Agreement shall specify whether the Option is intended to
be an Incentive Stock Option or a Nonqualified Stock Option.


 


5.4                                 Option Price, Exercise and
Payment.


 


(a)                                  Except as provided in Section 5.5, the
Option Price of Company Stock under each Option shall be determined by the
Committee but shall be a price not less than 100 percent of the Fair Market
Value of Company Stock at the close of business on the date such Option is
granted.


 


(b)                                 Subject to Section 12.2, the Committee
may not (i) amend an Option to reduce its Option Price, (ii) cancel
an Option and regrant an Option with a lower Option Price than the original
Option Price of the cancelled Option, or (iii) take any other action
(whether in the form of an amendment, cancellation or replacement grant) that
has the effect of “repricing” an Option, as defined under applicable NASDAQ rules or
the rules of the established stock exchange or quotation system on which
the Company Stock  is then listed or
traded.


 

















 


(c)                                  Vested Options
may be exercised from time to time by giving written notice to the Chief Financial
Officer of the Company or the Secretary of the Committee, or his or her
designee, specifying the number of shares to be purchased. The notice of
exercise shall be accompanied by payment in full of the Option Price in cash or
the Option Price may be paid in whole or in part through the transfer to the
Company of shares of Company Stock in accordance with procedures established by
the Committee from time to time.  In
addition, full payment of the purchased shares may be effected through a
broker-dealer sale and remittance procedure pursuant to which the Participant (i) shall
provide irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus all
applicable federal, state and local income and employment taxes required to be
withheld by the Company by reason of such purchase and (ii) shall provide
written directives to the Company to deliver the certificates for the purchased
sales directly to such brokerage firm in order to complete the sale
transaction.


 


(d)                                 In the event such Option Price is paid, in
whole or in part, with shares of Company Stock, the portion of the Option Price
so paid shall be equal to the value, as of the date of exercise of the Option,
of such shares. The value of such shares shall be equal to the number of such
shares multiplied by the Fair Market Value of such shares on the trading day
coincident with the date of exercise of such Option (or the immediately
preceding trading day if the date of exercise is not a trading day). The
Company shall not issue or transfer Company Stock upon exercise of an Option
until the Option Price is fully paid.


 


5.5                                 Limitations on Incentive
Stock Options.  Each provision of the Plan and each Award
Agreement relating to an Incentive Stock Option shall be construed so that each
Incentive Stock Option shall be an incentive stock option as defined in Section 422
of the Code, and any provisions of the Award Agreement thereof that cannot be
so construed shall be disregarded.  No
Incentive Stock Option may be granted to any Employee who, at the time of such
grant, owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of its parent or subsidiary
corporation (as determined under Sections 422 and 424 of the Code), unless (a) the
Option Price for such Incentive Stock Option is at least 110 percent of the
Fair Market Value of a share of Company Stock on the date the Incentive Stock
Option is granted and (b) such Incentive Stock Option may not be exercised
more than five years after it is granted. 
Notwithstanding anything in the Plan to the contrary, to the extent
required by the Code, the exercise of Incentive Stock Options granted under the
Plan shall be subject to the $100,000 calendar year limit as set forth in Section 422
of the Code; provided that, to the extent any grant exceeds such $100,000
calendar year limit, the portion of such granted Option shall be deemed a
Nonqualified Stock Option in accordance with Section 422 of the Code.


 


5.6                                 Rights and Privileges. A Participant shall
have no rights as a Shareholder with respect to any shares of Company Stock
covered by an Option until the issuance of such shares to the Participant.


 


5.7                                 Award of SARs.


 


(a)                                  The Committee may, from time to time, and on
such terms and conditions as the Committee may prescribe, award SARs to any
Employee and/or Advisor.


 


(b)                                 A SAR shall represent the right to receive
payment of an amount equal to (i) the amount by which the Fair Market
Value of one share of Company Stock on the trading day immediately preceding
the date of exercise of the SAR exceeds the Exercise Price multiplied by (ii) the
number of shares covered by the SAR. 
Payment of the amount to which a Participant is entitled upon the
exercise of a SAR shall be made in cash, Company Stock, or partly in cash and
partly in Company Stock at the discretion of the Committee.  The shares shall be valued at their Fair
Market Value on the date of exercise.


 


(c)                                  SARs awarded under the Plan shall be evidenced
by an Award Agreement between the Company and the Participant.


 


(d)                                 The Committee may prescribe conditions and
limitations on the exercise of any SAR. SARs may be exercised only when the
Fair Market Value of a share of Company Stock exceeds the Exercise Price.


 


(e)                                  A SAR shall be exercisable only by written
notice to the Chief Financial Officer of the Company or the Secretary of the
Committee, or his or her designee.


 


(f)                                    To the extent not previously exercised, all
SARs shall automatically be exercised on the last trading day prior to their
expiration, so long as the Fair Market Value of a share of Company Stock
exceeds the Exercise Price, unless prior to such day the holder instructs the
Chief Financial Officer or Secretary of the Committee, otherwise in writing.


 


(g)                                 Subject to Article X, each SAR shall
expire on a date determined by the Committee at the time of grant.


 


ARTICLE VI


 


RESTRICTED STOCK


 


6.1                                 Award of Restricted Stock. The Committee may make a Restricted Stock
Award to any Employee and/or Advisor, subject to this Article VI and to
such other terms and conditions as the Committee may prescribe.


 


6.2                                 Restriction Period. At the time of making a Restricted Stock
Award, the Committee shall establish the Restriction Period applicable to such
Award. The Committee may establish different Restriction Periods from time to
time and each Restricted Stock Award may have a different Restriction Period,
in the discretion of the Committee. Restriction Periods, when established for a
Restricted Stock Award, shall not be changed except as permitted by Section 6.3.


 


6.3                                 Other Terms and Conditions. Company Stock, when awarded pursuant to a
Restricted Stock Award, will be represented in a book entry account in the name
of the Participant who receives the Restricted Stock Award. The Participant
shall be entitled to receive dividends during the Restriction Period and shall
have the right to vote such Restricted Stock and shall have all other
Shareholder  rights, with the exception
that (i) unless otherwise provided by the Committee, if any dividends are
paid in shares of Company Stock, those shares will be subject to the same
restrictions as the shares of Restricted Stock with respect to which they were
issued, (ii) the Participant will not be entitled to delivery of any stock
certificate evidencing the Company Stock underlying the Restricted Stock Award
during the Restriction Period, (iii) the Company will retain custody of
the Restricted Stock during the Restriction Period, and (iv) a breach of a
restriction or a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award will cause a forfeiture of the
Restricted Stock Award. The Committee may, in addition, prescribe additional
restrictions, terms, or conditions upon or to the Restricted Stock Award
including the attainment of Performance Goals in accordance with Section 4.5.


 


6.4                                 Restricted Stock Award
Agreement. Each Restricted
Stock Award shall be evidenced by an Award Agreement.


 

















 


6.5                                 Payment for Restricted Stock.
Restricted Stock Awards may
be made by the Committee under which the Participant shall not be required to
make any payment for the Company Stock or, in the alternative, under which the
Participant, as a condition to the Restricted Stock Award, shall pay all (or
any lesser amount than all) of the Fair Market Value of the Company Stock,
determined as of the date the Restricted Stock Award is made. If the latter,
such purchase price shall be paid in cash as provided in the Award Agreement.


 


ARTICLE VII


 


AWARDS FOR NON-EMPLOYEE DIRECTORS


 


7.1                                 Awards to Non-Employee
Directors. The Board shall
determine all Awards to Company Directors. The Board or the Committee, as the
case may be, retains the discretionary authority to make Awards to Non-Employee
Directors and any type of Award (other than Incentive Stock Options) may be
granted to Non-Employee Directors under this Plan. All such Awards shall be
subject to the terms and conditions of the Plan and to such other terms and
conditions consistent with the Plan as the Board or the Committee, as the case
may be, deems appropriate.


 


7.2                                 No Right to Continuance as a
Director. None of the actions
of the Company in establishing the Plan, the actions taken by the Company, the
Board, or the Committee under the Plan, or the granting of any Award under the
Plan shall be deemed (i) to create any obligation on the part of the Board
or the board of directors of the applicable Subsidiary to nominate any
Non-Employee Director for reelection or (ii) to be evidence of any
agreement or understanding, express or implied, that the Non-Employee Director
has a right to continue as a Non-Employee Director for any period of time or at
any particular rate of compensation.


 


ARTICLE VIII


 


UNRESTRICTED COMPANY STOCK AWARDS FOR EMPLOYEES AND/OR

ADVISORS


 


8.1                                 The Committee may make awards of unrestricted
Company Stock to Employees and/or Consultants/Advisors on such terms and
conditions as the Committee may prescribe.


 


ARTICLE IX


 


[Intentionally Omitted]


 


ARTICLE X


 


GENERAL TERMINATION PROVISIONS


 


10.1                           Termination. Subject to Article XI and unless
otherwise specified in the applicable Award Agreement, the following provisions
will govern the treatment of a Participant’s outstanding Awards following a
Participant’s Termination.


 


(a)                                  Upon the Participant’s Termination, any Awards
that are not vested and/or exercisable on the date of such Termination will
immediately terminate and be of no further force and effect.


 


(b)                                 If the Participant Terminates for any reason
other than (i) death, (ii) Disability, or (iii) discharge for
Cause, such Participant’s outstanding SARs or Options may be exercised at any
time within three months after such Termination, to the extent of the number of
shares covered by such Options or SARs which are exercisable at the date of
such Termination; except that an Option or SAR shall not be exercisable on any
date beyond the expiration date of such Option or SAR.


 


(c)                                  Upon a Termination for Cause, any Options or
SARs held by the Participant (whether or not then exercisable) shall expire and
any rights thereunder shall terminate immediately.  Any non-vested Restricted Stock Awards of such
Participant shall immediately be forfeited and any rights thereunder shall
terminate.


 


(d)                                 Upon a Termination due to the Participant’s
death, any SARs or Options that are then exercisable may be exercised by the
Participant’s Personal Representative at any time before the earlier of (i) one
year after the Participant’s death or (ii) the expiration date of the
Award.


 


(e)                                  Upon a Termination due to the Participant’s
Disability, any SARs or Options that are then exercisable may be exercised by
the Participant at any time before the earlier of (i) one year after the
date of such Termination or (ii) the expiration date of the Award;
provided, however, that an Option which is intended to qualify as an Incentive
Stock Option will only be treated as such to the extent it complies with the
requirements of Section 422 of the Code.


 


ARTICLE XI


 


CHANGE IN CONTROL OF THE COMPANY


 


11.1                           Contrary Provisions.  Notwithstanding anything contained in the Plan to the contrary, the
provisions of this Article XI shall govern and supersede any inconsistent
terms or provisions of the Plan.


 


11.2                           Definitions


 


(a)                                  Change in Control.  For
purposes of this Plan, Change in Control shall mean a change in the ownership
or effective control of the Company or in the ownership of a substantial
portion of the assets of the Company (within the meaning of Section 409A
of the Code.


 


(i)                                     Change in Actual Control shall mean the acquisition by any one person,
or more than one person acting as a group (as defined in Section 11.2(a)(iv),
below) of ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than 50 percent of the total fair market
value or total voting power of the stock of the Company.  However, if any one person, or more than one
person acting as a group, is 


 

















 


considered
to own more than 50 percent of the total fair market value or total voting
power of the stock of the Company, the acquisition of additional stock by the
same person or persons is not considered to cause a Change in Actual Control of
the Company (or to cause a Change in Effective Control of the Company (within
the meaning of Section 11.2(a)(ii)). An increase in the percentage of
stock owned by any one person, or persons acting as a group, as a result of a
transaction in which the Company acquires its stock in exchange for property
will be treated as an acquisition of stock for purposes of this Section 11.2(a)(i).


 


(ii)                                  Change in Effective Control shall mean:


 


(A)                              The acquisition by any one person, or more
than one person acting as a group (as defined in Section 11.2(a)(iv),
below), during any 12-month period of ownership of stock of the Company
possessing 35 percent or more of the total voting power of the stock of the
Company; or


 


(B)                                The replacement of a majority of members of
the Board during any 12-month period by directors whose appointment or election
is not endorsed by a majority of the members of the Board prior to the date of
the appointment or election in accordance with Treasury Regulation §
1.409A-1(g)(5)(vi)(A)(2).


 


Notwithstanding
the foregoing, if any one person, or more than one person acting as a group, is
considered to effectively control the Company (within the meaning of this Section 11.2(a)(ii)),
the acquisition of additional control of the Company by the same person or
persons is not considered to cause a Change in Control.


 


(iii)                               Change in the Ownership of
the Company’s Assets shall
mean the acquisition by any one person, or more than one person acting as a
group (as defined in Section 11.2(a)(iv), below), during any 12-month
period of assets from the Company that have a total gross fair market value
equal to or more than 40 percent of the total gross fair market value of all of
the assets of the Company immediately prior to such acquisition or acquisitions.


 


Notwithstanding
the foregoing, there is no change in control event under this Section 11.2(a) when
there is a transfer to an entity that is controlled by the Shareholders
immediately after the transfer.


 


(iv)                              Persons acting as a group. For purposes of this Section 11.2(a),
persons will not be considered to be acting as a group solely because they
purchase or own stock of the same corporation at the same time, or as a result
of the same public offering. However, persons will be considered to be acting as
a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business
transaction with the corporation. If a person, including an entity, owns stock
in both corporations that enter into a merger, consolidation, purchase or
acquisition of stock, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation only with respect
to the ownership in that corporation prior to the transaction giving rise to
the change and not with respect to the ownership interest in the other
corporation.


 


11.3                          Effect of Change in Control
on Certain Awards.


 


(a)                                  If the Company is not the surviving
corporation following a Change in Control, and the surviving corporation
following such Change in Control or the acquiring corporation (such surviving
corporation or acquiring corporation is hereinafter referred to as the “Acquiror”)
does not assume the outstanding Options, SARs, Restricted Stock, or Restricted
Performance Stock or does not substitute equivalent equity awards relating to
the securities of such Acquiror or its affiliates for such Awards, then all
such Awards shall become immediately and fully exercisable (or in the case of
Restricted Stock, fully vested and all restrictions will immediately lapse). In
the case of Restricted Performance Stock, the target payout opportunities under
all outstanding Awards of Restricted Performance Stock shall be deemed to have
been fully earned based on targeted performance being attained as of the
effective date of the Change in Control. 
In addition, the Board or its designee may, in its sole discretion,
provide for a cash payment to be made to each Participant for the outstanding
Options, Restricted Stock, Restricted Performance Stock, or SARs upon the
consummation of the Change in Control, determined on the basis of the fair
market value that would be received in such Change in Control by the holders of
the Company’s securities relating to such Awards. Notwithstanding the
foregoing, any Option intended to be an Incentive Stock Option under Section 422
of the Code shall be adjusted in a manner to preserve such status.


 


	
  (b)

  	
  If the Company is the surviving corporation following a Change in
  Control, or the Acquiror assumes the outstanding Options, SARs, Restricted
  Stock, or Restricted Performance Stock or substitutes equivalent equity
  awards relating to the securities of such Acquiror or its affiliates for such
  Awards, then all such Awards or such substitutes therefor shall remain
  outstanding and be governed by their respective terms and the provisions of
  the Plan.

  
	
   

  	
   

  
	
  (c)

  	
  If (i) a Participant Terminates without Cause within twenty-four
  (24) months following a Change in Control, and (ii) the Company is the
  surviving corporation following such Change in Control, or the Acquiror
  assumes the outstanding Options, SARs, Restricted Stock, or Restricted
  Performance Stock or substitutes equivalent equity awards relating to the
  securities of such Acquiror or its affiliates for such Awards, then all
  outstanding Options, SARs, Restricted Stock, or Restricted Performance Stock
  shall become immediately and fully exercisable (or in the case of Restricted
  Stock, fully vested and all restrictions will immediately lapse). In the case
  of Restricted Performance Stock, the target payout opportunities under all
  outstanding Awards of Restricted Performance Stock shall be deemed to have
  been fully earned based on targeted performance being attained.

  
	
   

  	
   

  
	
  (d)

  	
  If (i) the employment of a Participant with the Company and its
  Subsidiaries is terminated for Cause within twenty-four (24) months following
  a Change in Control and (ii) the Company is the surviving corporation
  following such Change in Control, or the Acquiror assumes the outstanding
  Options, SARs, Restricted Stock, or Restricted Performance Stock or
  substitutes equivalent equity awards relating to the securities of such
  Acquiror or its affiliates for such Awards, then any Options or SARs of such
  Participant shall expire, and any non-vested Restricted Stock or Restricted
  Performance Stock shall be forfeited, and any rights under such Awards shall
  terminate immediately.

  
	
   

  	
   

  
	
  (e)

  	
  Outstanding Options or SARs which vest in accordance with
  Section 11.3, may be exercised by the Participant in accordance with
  Article X; provided, however, that a Participant whose Options or SARs
  become exercisable in accordance with Section 11.3(c) may exercise
  such Options or SARs at any time within one year after such Termination,
  except that an Option or SAR shall not be exercisable on any date beyond the
  expiration date of such Option or SAR. In the event of a Participant’s death
  after such Termination, such Options or SARs may be exercised by the
  Participant’s Personal Representative at any time before the earlier of (i) one
  year after the Participant’s death or (ii) the expiration date of the
  Award; provided, however, that, an Option which is intended to qualify as an
  Incentive Stock Option will only be treated as such to the extent it complies
  with the requirements of Section 422 of the Code.

  



 


11.4                           Amendment or
Termination.  This Article XI shall not be amended or
terminated at any time if any such amendment or termination would adversely
affect the rights of any Participant under the Plan.


 

















 


ARTICLE
XII


 


MISCELLANEOUS
PROVISIONS


 


12.1                           Adjustments Upon Changes in
Stock. In case of any
reorganization, recapitalization, reclassification, stock split, stock
dividend, distribution, combination of shares, merger, consolidation, rights
offering, or any other changes in the corporate structure or shares of the
Company, appropriate adjustments may be made by the Committee or the Board, as
the case may be, (or if the Company is not the surviving corporation in any
such transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and
kind of shares and the Option Price per share subject to outstanding Options or
which may be issued under outstanding Restricted Stock Awards or pursuant to
unrestricted Company Stock Awards. Appropriate adjustments may also be made by
the Committee or the Board, as the case may be, in the terms of any Awards
under the Plan, subject to Article XI, to reflect such changes and to
modify any other terms of outstanding Awards on an equitable basis. Any such
adjustments made by the Committee or the Board pursuant to this Section 12.1
shall be conclusive and binding for all purposes under the Plan.


 


12.2                           Amendment, Suspension, and
Termination of Plan.


 


(a)                                 The Board may suspend or terminate the Plan or
any portion thereof at any time, and may amend the Plan from time to time in
such respects as the Board may deem advisable in order that any Awards
thereunder shall conform to any change in applicable laws or regulations or in
any other respect the Board may deem to be in the best interests of the
Company; provided, however, that no such amendment shall, without  approval, (i) except as provided in Section 12.1,
increase the number of shares of Company Stock which may be issued under the
Plan, (ii) expand the types of awards available to Participants under the
Plan, (iii) materially expand the class of employees and/or Advisors
eligible to participate in the Plan, (iv) materially change the method of
determining the Option Price of Options; (v) delete or limit the provision
in Section 5.4 prohibiting the repricing of Options; (vi) extend the
termination date of the Plan or (vii) be made to the extent that
Shareholder approval is required to satisfy applicable law, regulation or any
securities stock exchange, market or other quotation system on or through which
the Company Stock is listed or traded. No such amendment, suspension, or
termination shall materially adversely alter or impair any outstanding Options,
SARs or shares of Restricted Stock without the consent of the Participant
affected thereby.


 


(b)                                The Committee may amend or modify any
outstanding Options, SARs, or Restricted Stock Awards in any manner to the
extent that the Committee would have had the authority under the Plan initially
to award such Options, SARs, or Restricted Stock Awards, as so modified or
amended, including without limitation, to change the date or dates as of which
such Options or SARs may be exercised, or to remove the restrictions on shares
of Restricted Stock.


 


(c)                                  Notwithstanding the foregoing, the Plan and
any Award Agreements may be amended without any additional consideration to
affected Participants to the extent necessary to comply with, or avoid
penalties under, Section 409A of the Code, even if those amendments
reduce, restrict or eliminate rights granted prior to such amendments.


 


12.3                           Nonuniform Determinations. The Committee’s (or, if applicable, the Board’s)
determinations under the Plan, including without limitation, (a) the
determination of the Employees, Advisors and Non-Employee Directors to receive
Awards, (b) the form, amount, and timing of any Awards, (c) the terms
and provisions of any Awards and (d) the Award Agreements evidencing the
same, need not be uniform and may be made by it selectively among Employees,
Advisors and/or Non-Employee Directors who receive, or who are eligible to
receive, Awards under the Plan, whether or not such Employees,
Consultants/Advisors and/or Non-Employee Directors are similarly situated.


 


12.4                           General Restriction. Each Award under the Plan shall be subject to
the condition that, if at any time the Committee shall determine that (a) the
listing, registration, or qualification of the shares of Company Stock subject
or related thereto upon NASDAQ or any other established stock exchange, market
or quotation system or under any state or federal law, (b) the consent or
approval of any government or regulatory body, or (c) an agreement by the
Participant with respect thereto, is necessary or desirable, then such Award
shall not become exercisable in whole or in part unless such listing,
registration, qualification, consent, approval, or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.


 


12.5                           No Right To Employment. None of the actions of the Company in
establishing the Plan, the actions taken by the Company, the Board or the
Committee under the Plan, or the granting of any Award under the Plan shall be
deemed (a) to create any obligation on the part of the Company or any
Subsidiary to retain any person in the employ of, or continue the provision of
services to, the Company or any Subsidiary, or (b) to be evidence of any
agreement or understanding, express or implied, that the person has a right to
continue as an employee, consultant, or advisor for any period of time or at
any particular rate of compensation.


 


12.6                           Governing Law. The provisions of the Plan shall take
precedence over any conflicting provision contained in an Award Agreement. All
matters relating to the Plan or to Awards granted hereunder shall be governed
by and construed in accordance with the laws of the State of California without
regard to the principles of conflict of laws.


 


12.7                           Trust Arrangement. All benefits under the Plan represent an
unsecured promise to pay by the Company. The Plan shall be unfunded and the
benefits hereunder shall be paid only from the general assets of the Company
resulting in the Participants having no greater rights than the Company’s
general creditors; provided, however, nothing herein shall prevent or prohibit
the Company from establishing a trust or other arrangement for the purpose of
providing for the payment of the benefits payable under the Plan.


 


12.8                           Indemnification of Board and
Committee. Indemnification of
the members of the Board and/or the members of the Committee shall be in
accordance with the charter documents of the Company, as amended by the
Shareholders from time to time, and any agreements issued consistent therewith.


 


12.9                           No Impact on Benefits.  Awards
are not compensation for purposes of calculating a Participant’s rights under
any employee benefit plan that does not specifically require the inclusion of
Awards in calculating benefits.


 


12.10                     Beneficiary Designation.  Each
Participant may name a beneficiary or beneficiaries to receive or exercise any
vested Award that is unpaid or unexercised at the Participant’s death.  Unless otherwise provided in the beneficiary
designation, each designation will revoke all prior designations made by the
same Participant, must be made on a form prescribed by the Committee and will
be effective only when filed in writing with the Committee.  If a Participant has not made an effective
beneficiary designation, the deceased Participant’s beneficiary will be the
Participant’s surviving spouse or, if none, the deceased Participant’s
estate.  The identity of a Participant’s
designated beneficiary will be based only on the information included in the
latest beneficiary designation form completed by the Participant and will not
be inferred from any other evidence.


 


12.11                     Tax Withholding.  The
Company shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, the minimum statutory amount to satisfy
federal, state and local taxes required by law or regulation to be withheld
with respect to any taxable event arising as a result of the Plan.  With respect to withholding required upon any
taxable event arising as a result of an Award granted hereunder, a Participant
may elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold shares of
Company Stock having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax that could be imposed on
the transaction.  All such elections
shall be irrevocable, made in writing and signed by the Participant, and shall
be subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.