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                                                                   EXHIBIT 10.85

                             GEN-PROBE INCORPORATED
              DEFERRED ISSUANCE RESTRICTED STOCK AWARD GRANT NOTICE
                         (THE 2003 INCENTIVE AWARD PLAN)

Gen-Probe Incorporated (the "COMPANY"), pursuant to Section 7 of The 2003
Incentive Award Plan of Gen-Probe Incorporated (the "PLAN"), hereby awards to
Employee a Deferred Issuance Restricted Stock Award (the "SHARES") as set forth
below (the "AWARD"). This Award shall be evidenced by a Deferred Issuance
Restricted Stock Award Agreement (the "AGREEMENT"). This Award is subject to all
of the terms and conditions as set forth herein and in the applicable Agreement,
and the Plan, all of which are attached hereto and incorporated herein in their
entirety. Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Plan.

EMPLOYEE:                              HENRY L. NORDHOFF
DATE OF GRANT:                         MAY 20, 2005
NUMBER OF SHARES SUBJECT TO AWARD:     20,000
FAIR MARKET VALUE PER SHARE:           $43.55

VESTING SCHEDULE:      5,000 Shares subject to the Award shall vest on May 20,
                       2006, and 1/48th of the Shares shall vest monthly
                       thereafter over the following three (3) years; provided,
                       however, that no Shares shall vest following Employee's
                       Termination of Employment.

ISSUANCE SCHEDULE:     The Shares will be issued in accordance with the issuance
                       schedule set forth in Section 2.4 of the Agreement.

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned acknowledges receipt of, and
understands and agrees to, this Grant Notice, the Agreement and the Plan.
Employee further acknowledges that as of the Date of Grant, this Grant Notice,
the Award Agreement and the Plan set forth the entire understanding between
Employee and the Company regarding the acquisition of Shares and supersede all
prior oral and written agreements on that subject with the exception of (i)
Awards previously granted and delivered to Employee under the Plan, and (ii) the
following agreements only:

         OTHER AGREEMENTS:               None

GEN-PROBE INCORPORATED                          HENRY L. NORDHOFF

By:  /s/  R. William Bowen                         /s/  Henry L. Nordhoff
    -------------------------------------       --------------------------------
          R. William Bowen                              Henry L. Nordhoff

Title: Vice President and General Counsel       Date:       June 23, 2005
                                                      --------------------------

Date:     May 20, 2005
      -----------------------------------

ATTACHMENTS:  Gen-Probe Incorporated 2003 Incentive Award Plan and Deferred
              Issuance Restricted Stock Award Agreement

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                                  ATTACHMENT I

                GEN-PROBE INCORPORATED 2003 INCENTIVE AWARD PLAN

<PAGE>

                          THE 2003 INCENTIVE AWARD PLAN

                                       OF

                             GEN-PROBE INCORPORATED
     (adopted by Board of Directors on March 3, 2003, and amended on May 13,
                  2003) (adopted by Stockholders May 29, 2003)

            Gen-Probe Incorporated, a Delaware corporation, has adopted The 2003
Incentive Award Plan of Gen-Probe Incorporated (the "Plan"), effective May 29,
2003, for the benefit of its eligible Employees, Consultants and Directors.

            The purposes of the Plan are as follows:

            (1) To provide an additional incentive for Directors, Employees and
Consultants (as such terms are defined below) to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.

            (2) To enable the Company to obtain and retain the services of
Directors, Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.

                                   ARTICLE I.

                                   DEFINITIONS

            1.1. General. Whenever the following terms are used in the Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.

            1.2. Administrator. "Administrator" shall mean the entity that
conducts the general administration of the Plan as provided herein. With
reference to the administration of the Plan with respect to Options and shares
of Restricted Stock granted to Independent Directors, the term "Administrator"
shall refer to the Board. With reference to the administration of the Plan with
respect to any other Awards, the term "Administrator" shall refer to the
Committee, except to the extent the Board has assumed the authority for
administration of the Plan as provided in Section 9.2.

            1.3. Award. "Award" shall mean an Option, a Restricted Stock award
or a Stock Appreciation Right which may be awarded or granted under the Plan
(collectively, "Awards").

                                       1.
<PAGE>

            1.4. Award Agreement. "Award Agreement" shall mean a written
agreement executed by an authorized officer of the Company and the Holder, which
shall contain such terms and conditions with respect to an Award, as the
Administrator shall determine, consistent with the Plan.

            1.5. Award Limit. "Award Limit" shall mean One Million
(1,000,000)(1) shares of Common Stock, as adjusted pursuant to Section 10.3 of
the Plan.

            1.6. Board. "Board" shall mean the Board of Directors of the
Company.

            1.7. Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through any of the following
transactions:

            (a) any person or related group of persons (other than the Company
or a person that, prior to such transaction, directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer for securities of the Company;

            (b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of one
or more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or
nomination was approved by the Board;

            (c) a merger or consolidation of the Company with any other
corporation (or other entity), 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 another entity) more
than 66-2/3% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
person acquires more than 25% of the combined voting power of the Company's then
outstanding voting securities shall not constitute a Change in Control; or

            (d) a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets.

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

(1) Adjusted from 500,000 to 1,000,000 to reflect the two-for-one stock split
implemented as a 100% stock dividend, effective September 2003.

                                       2
<PAGE>

            1.8. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

            1.9. Committee. "Committee" shall mean the Board, or Compensation
Committee of the Board, or another committee or subcommittee of the Board,
appointed as provided in Section 9.1.

            1.10. Common Stock. "Common Stock" shall mean the Common Stock of
the Company, par value $0.0001 per share.

            1.11. Company. "Company" shall mean Gen-Probe Incorporated, a
Delaware corporation.

            1.12. Consultant. "Consultant" shall mean any consultant or adviser
(other than an Employee) if:

            (a) the consultant or adviser renders bona fide services to the
Company;

            (b) the services rendered by the consultant or adviser 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; and

            (c) the consultant or adviser is a natural person who has contracted
directly with the Company to render such services.

            1.13. Director. "Director" shall mean a member of the Board, whether
such Director is an Employee or an Independent Director.

            1.14. DRO. "DRO" shall mean a domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.

            1.15. Employee. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary.

            1.16. Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.

            1.17. Fair Market Value. "Fair Market Value" shall mean, as of any
date, the value of the Common Stock determined as follows:

            (a) If the Common Stock is listed on any established stock exchange
or traded on The Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported by The Nasdaq Stock Market or such other source as
the Board

                                       3
<PAGE>

deems reliable.

            (b) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

            1.18. Holder. "Holder" shall mean a person who has been granted or
awarded an Award.

            1.19. Incentive Stock Option. "Incentive Stock Option" shall mean an
Option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Administrator.

            1.20. Independent Director. "Independent Director" shall mean a
member of the Board who is not an Employee.

            1.21. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option not intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated thereunder.

            1.22. Option. "Option" shall mean a stock option granted under
Article IV of the Plan. An Option granted under the Plan shall, as determined by
the Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options.

            1.23. Performance Criteria. "Performance Criteria" shall mean the
following business criteria with respect to the Company, any Subsidiary or any
division or operating unit: (a) net income, (b) pre-tax income, (c) operating
income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return
on invested capital or assets, (h) cost reductions or savings, (i) funds from
operations, (j) appreciation in the Fair Market Value of Common Stock and (k)
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization.

            1.24. Plan. "Plan" shall mean The 2003 Incentive Award Plan of
Gen-Probe Incorporated.

            1.25. Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article VII of the Plan.

            1.26. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.

            1.27. Section 162(m) Employee. "Section 162(m) Employee" shall mean
any Employee designated by the Administrator as an Employee whose compensation
for the fiscal year in which the Employee is so designated or a future fiscal
year may be subject to the limit on deductible compensation imposed by Section
162(m) of the Code.

            1.28. Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.

                                       4
<PAGE>

            1.29. Stock Appreciation Right. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article VIII of the Plan.

            1.30. Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

            1.31. Substitute Award. "Substitute Award" shall mean an Option
granted under the Plan upon the assumption of, or in substitution for,
outstanding equity awards previously granted by another company or entity in
connection with a corporate or similar transaction, such as a merger,
combination, consolidation or acquisition of property or stock; provided,
however, that in no event shall the term "Substitute Award" be construed to
refer to an option granted in connection with the cancellation and repricing of
an Option.

            1.32. Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of a Holder as a Consultant to the Company or
a Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death, disability or
retirement; but excluding terminations where there is a simultaneous engagement
by or commencement of employment with the Company or any Subsidiary or a parent
corporation thereof (within the meaning of Section 422 of the Code). The
Administrator, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy, including, but not
by way of limitation, the question of whether a Termination of Consultancy
resulted from a discharge for cause, and all questions of whether a particular
leave of absence constitutes a Termination of Consultancy. Notwithstanding any
other provision of the Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a Consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

            1.33. Termination of Directorship. "Termination of Directorship"
shall mean the time when a Holder who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, removal, failure to be re-elected, death, disability or
retirement. The Board, in its sole and absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Directorship with
respect to Independent Directors.

            1.34. Termination of Employment. "Termination of Employment" shall
mean the time when the employee-employer relationship between a Holder and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (a) terminations where
there is a simultaneous reemployment or continuing employment of a Holder by the
Company or any Subsidiary or a parent corporation thereof (within the meaning of
Section 422 of the Code), (b) at the discretion of the Administrator,
terminations which result in a temporary severance of the employee-employer
relationship, and (c) at the discretion of the Administrator, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions

                                       5
<PAGE>

relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; provided, however, that, with respect
to Incentive Stock Options, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.

                                   ARTICLE II.

                             SHARES SUBJECT TO PLAN

            2.1. Shares Subject to Plan.

            (a) The shares of stock subject to Awards shall be Common Stock,
subject to Section 10.3 of the Plan. The aggregate number of such shares which
may be issued upon exercise of such Options or rights or upon any such Awards
under the Plan shall not exceed Five Million (5,000,000)(2); provided, however
that the aggregate number of shares of Common Stock which may issued as shares
of Restricted Stock under the Plan shall not exceed twenty percent (20%) of the
total number of shares of Common Stock issuable hereunder. The shares of Common
Stock issuable upon exercise of such Options or rights or upon any such Awards
may be either previously authorized but unissued shares or treasury shares.

            (b) The maximum number of shares of Common Stock which may be
subject to Awards granted under the Plan to any individual in any calendar year
shall not exceed the Award Limit. To the extent required by Section 162(m) of
the Code, shares subject to Options that are canceled continue to be counted
against the Award Limit.

            2.2. Add-Back of Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other Award under the Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part for cash as permitted by the Plan, the number of shares of
Common Stock subject to such Option or other right but as to which such Option
or other right was not exercised prior to its expiration or cancellation may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Furthermore, any shares subject to Awards which are adjusted
pursuant to Section 10.3 and become exercisable with respect to shares of stock
of another corporation shall be considered cancelled and may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1. Shares
of Common Stock which are delivered by the Holder or withheld by the Company
upon the exercise of any Award under the Plan, in payment of the exercise price
thereof or tax withholding thereon, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any shares of
Restricted Stock are surrendered by the Holder or repurchased by the Company
pursuant to Section 7.4 or 7.5 hereof, such shares may

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

(2) Adjusted from 2,500,000 to 5,000,000 to reflect the two-for-one stock split
implemented as a 100% stock dividend, effective September 2003.

                                       6
<PAGE>

again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of
Common Stock may again be optioned, granted or awarded if such action would
cause an Incentive Stock Option to fail to qualify as an "incentive stock
option" under Section 422 of the Code.

                                  ARTICLE III.

                               GRANTING OF AWARDS

            3.1. Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.

            3.2. Provisions Applicable to Section 162(m) Employees.

            (a) The Committee, in its discretion, may determine whether an Award
is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code.

            (b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Employee that vests or becomes
exercisable or payable upon the attainment of performance goals which are
related to one or more of the Performance Criteria, including Restricted Stock
the restrictions to which lapse upon the obtainment of performance goals which
are related to one or more of the Performance Criteria.

            (c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Award granted under Article VII which may be granted to one or more Section
162(m) Employees, no later than ninety (90) days following the commencement of
any fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section 162(m) of
the Code), the Committee shall, in writing, (i) designate one or more Section
162(m) Employees, (ii) select the Performance Criteria applicable to the fiscal
year or other designated fiscal period or period of service, (iii) establish the
various performance targets, in terms of an objective formula or standard, and
amounts of such Awards, as applicable, which may be earned for such fiscal year
or other designated fiscal period or period of service, and (iv) specify the
relationship between Performance Criteria and the performance targets and the
amounts of such Awards, as applicable, to be earned by each Section 162(m)
Employee for such fiscal year or other designated fiscal period or period of
service. Following the completion of each fiscal year or other designated fiscal
period or period of service, the Committee shall certify in writing whether the
applicable performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the amount earned
by a Section 162(m) Employee, the Committee shall have the right to reduce (but
not to increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year or other
designated fiscal period or period of service.

                                       7
<PAGE>

            (d) Furthermore, notwithstanding any other provision of the Plan,
any Award that is granted to a Section 162(m) Employee and is intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and the Plan and such Awards shall be deemed amended
to the extent necessary to conform to such requirements.

            3.3. Limitations Applicable to Section 16 Persons. Notwithstanding
any other provision of the Plan, the Plan, and any Award granted or awarded to
any individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

            3.4. At-Will Employment. Nothing in the Plan or in any Award
Agreement hereunder shall confer upon any Holder any right to continue in the
employ of, or as a Consultant for, the Company or any Subsidiary, or as a
Director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Holder at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in a written employment
or consulting agreement between the Holder and the Company and any Subsidiary.

                                   ARTICLE IV.

                        GRANTING OF OPTIONS TO EMPLOYEES,
                      CONSULTANTS AND INDEPENDENT DIRECTORS

            4.1. Eligibility. Any Employee or Consultant selected by the
Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an
Option. Any Independent Director selected by the Board pursuant to Section
4.5(a)(i) shall be eligible to be granted an Option. All grants shall be made at
the discretion of the Committee or the Board, as the case may be, and no person
shall be entitled to a grant of an Option as a matter of right.

            4.2. Disqualification for Stock Ownership. No person may be granted
an Incentive Stock Option under the Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary or parent corporation (within the meaning of
Section 422 of the Code) unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.

            4.3. Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.

                                       8
<PAGE>

            4.4. Granting of Options to Employees and Consultants.

            (a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:

                  (i) Select from among the Employees or Consultants (including
      Employees or Consultants who have previously been granted Awards under the
      Plan) such of them as in its opinion should be granted Options;

                  (ii) Subject to the Award Limit, determine the number of
      shares of Common Stock to be subject to such Options granted to the
      selected Employees or Consultants;

                  (iii) Subject to Section 4.3, determine whether such Options
      are to be Incentive Stock Options or Non-Qualified Stock Options and
      whether such Options are to qualify as performance-based compensation as
      described in Section 162(m)(4)(C) of the Code; and

                  (iv) Determine the terms and conditions of such Options,
      consistent with the Plan; provided, however, that the terms and conditions
      of Options intended to qualify as performance-based compensation as
      described in Section 162(m)(4)(C) of the Code shall include, but not be
      limited to, such terms and conditions as may be necessary to meet the
      applicable provisions of Section 162(m) of the Code.

            (b) Upon the selection of an Employee or Consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate, and the Committee shall authorize one or more of the officers of
the Company to prepare, execute and deliver the Award Agreement with respect to
such Option.

            (c) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Holder, to disqualify such
Option from treatment as an "incentive stock option" under Section 422 of the
Code.

            4.5. Granting of Options to Independent Directors.

            (a) Subject to Section 4.5(b), the Board shall from time to time, in
its absolute discretion, and subject to applicable limitations of the Plan:

                  (i) Determine whether to grant Options to Independent
      Directors, and, in the event Options are so granted, select from among the
      Independent Directors (including Independent Directors who have previously
      been granted Awards under the Plan) such of them as in its opinion should
      be granted Options;

                                       9
<PAGE>

                  (ii) Subject to the Award Limit, determine the number of
      shares of Common Stock to be subject to such Options granted to the
      selected Independent Directors; and

                  (iii) Determine the terms and conditions of such Options,
      consistent with the Plan.

            (b) Upon the selection of an Independent Director to be granted an
Option, and the grant of an Option to an Independent Director, the Board shall
instruct the Secretary of the Company to issue the Option and may impose such
conditions on the grant of the Option as it deems appropriate, and the Board
shall authorize one or more officers of the Company to prepare, execute and
deliver the Award Agreement with respect to such Option.

            4.6. Options in Lieu of Cash Compensation. Options may be granted
under the Plan to Employees and Consultants in lieu of cash bonuses that would
otherwise be payable to such Employees and Consultants and to Independent
Directors in lieu of directors' fees that would otherwise be payable to such
Independent Directors, pursuant to such policies that may be adopted by the
Administrator from time to time.

                                   ARTICLE V.

                                TERMS OF OPTIONS

            5.1. Option Price. The price per share of the shares of Common Stock
subject to each Option granted to Employees and Consultants shall be set by the
Committee; provided, however, that such price shall be no less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted,
and:

            (a) in the case of Incentive Stock Options, such price shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the date
the Option is modified, extended or renewed for purposes of Section 424(h) of
the Code; and

            (b) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code), such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of Section 424(h) of the Code).

            5.2. Option Term. The term of an Option granted to an Employee or
Consultant shall be set by the Committee in its absolute discretion; provided,
however, that the term shall not be more than ten (10) years from the date the
Option is granted; and, provided, further, that, in the case of Incentive Stock
Options, the term shall not be more than five (5) years from the date the
Incentive Stock Option is granted if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by

                                       10
<PAGE>

requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Holder, or amend any other term or condition
of such Option relating to such a termination; provided, however, that the term
shall not be more than ten (10) years from the date the Option is granted.

            5.3. Option Vesting

            (a) The period during which the right to exercise, in whole or in
part, an Option granted to an Employee or a Consultant vests in the Holder shall
be set by the Committee and the Committee may determine that an Option may not
be exercised in whole or in part for a specified period after it is granted. At
any time after grant of an Option, the Committee may, in its absolute discretion
and subject to whatever terms and conditions it selects, accelerate the period
during which an Option granted to an Employee or Consultant vests and becomes
exercisable.

            (b) No portion of an Option granted to an Employee or Consultant
which is unexercisable at Termination of Employment or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as may
be otherwise provided by the Committee either in the Award Agreement or by
action of the Committee following the grant of the Option.

            (c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by a Holder during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any parent or subsidiary
corporation (within the meaning of Section 422 of the Code) of the Company),
exceeds $100,000, such Options or other options shall be treated as
non-qualified stock options to the extent required by Section 422 of the Code.
The rule set forth in the preceding sentence shall be applied by taking Options
or other options into account in the order in which they were granted. For
purposes of this Section 5.3(c), the Fair Market Value of stock shall be
determined as of the time the Option or other options with respect to such stock
is granted.

            5.4. Terms of Options Granted to Independent Directors. The price
per share of the shares subject to each Option granted to an Independent
Director shall equal 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted. The period during which the right to exercise,
in whole or in part, an Option granted to an Independent Director vests in the
Holder shall be set by the Administrator and the Administrator may determine
that an Option may not be exercised in whole or in part for a specified period
after it is granted. The term of each Option granted to an Independent Director
shall be determined by the Administrator and shall be no greater than ten (10)
years from the date the Option is granted. No portion of an Option which is
unexercisable at Termination of Directorship shall thereafter become
exercisable. Options granted to Independent Directors under Section 4.5 shall be
subject to such other terms and conditions as are determined by the
Administrator.

            5.5. Substitute Awards. Notwithstanding the foregoing provisions of
this Article V to the contrary, in the case of an Option that is a Substitute
Award, the price per share

                                       11
<PAGE>

of the shares subject to such Option may be less than the Fair Market Value per
share on the date of grant, provided, that the excess of:

            (a) the aggregate Fair Market Value (as of the date such Substitute
Award is granted) of the shares subject to the Substitute Award; over

            (b) the aggregate exercise price thereof; does not exceed the excess
of;

            (c) the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such fair market
value to be determined by the Administrator) of the shares of the predecessor
entity that were subject to the grant assumed or substituted for by the Company;
over

            (d) the aggregate exercise price of such shares.

            5.6. Restrictions on Common Stock.

            The Administrator may, in its sole discretion, provide under the
terms of an Option that shares of Common Stock purchased upon exercise of such
Option shall be subject to repurchase from the Holder by the Company, or shall
be subject to such restrictions as the Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company and the Subsidiaries, Company performance and individual
performance; provided, however, that, by action taken before or after the Common
Stock is purchased upon exercise of the Option, the Administrator may, on such
terms and conditions as it may determine to be appropriate, terminate the
Company's repurchase right or remove any or all of the restrictions imposed by
the terms of the Award Agreement. The Company's right to repurchase the Common
Stock from the Holder then subject to the right shall provide that immediately
upon a Termination of Employment, a Termination of Consultancy, or a Termination
of Directorship, as applicable, and for such period as the Administrator shall
determine, the Company shall have the right to purchase the Common Stock at a
price per share equal to the price paid by the Holder for such Common Stock, or
such other price as is determined by the Administrator; provided, however, that,
in the event of a Change in Control, such right of repurchase shall terminate
immediately prior to the effective date of such Change in Control. Shares of
Common Stock purchased upon the exercise of an Option may not be sold,
transferred or encumbered until any repurchase right and any and all
restrictions are terminated or expire. The Secretary of the Company or such
other escrow holder as the Administrator may appoint shall retain physical
custody of each certificate representing such shares of Common Stock until the
repurchase right and any and all of the restrictions imposed under the Award
Agreement with respect to the shares evidenced by such certificate terminate,
expire or shall have been removed. In order to enforce the restrictions imposed
upon shares of Common Stock hereunder, the Administrator shall cause a legend or
legends to be placed on certificates representing all shares of Common Stock
that are still subject to any repurchase right or restrictions under Award
Agreements, which legend or legends shall make appropriate reference to the
conditions imposed thereby. If a Holder makes an election under Section 83(b) of
the Code, or any successor section thereto, to be taxed with respect to the
Common Stock as of the date of transfer of the Common Stock rather than as of
the date or dates upon which the Holder would otherwise be taxable under Section
83(a) of the

                                       12
<PAGE>

Code, the Holder shall deliver a copy of such election to the Company
immediately after filing such election with the Internal Revenue Service.

                                   ARTICLE VI.

                               EXERCISE OF OPTIONS

            6.1. Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

            6.2. Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his office:

            (a) A written notice complying with the applicable rules established
by the Administrator stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option;

            (b) Such representations and documents as the Administrator, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

            (c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Holder, appropriate proof
of the right of such person or persons to exercise the Option; and

            (d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, the
Administrator, may in its sole and absolute discretion (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock which have been owned by the Holder for at least six
months, duly endorsed for transfer to the Company with a Fair Market Value on
the date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise of the Option
having a Fair Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof; (iv) allow payment,
in whole or in part, through the delivery of a notice that the Holder has placed
a market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of such
proceeds is then made to the Company upon settlement of such sale; or (v) allow
payment

                                       13
<PAGE>

through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii) and (iv).

            6.3. Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

            (a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;

            (b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Administrator shall, in its absolute discretion, deem necessary
or advisable;

            (c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;

            (d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and

            (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the discretion of
the Administrator may be in the form of consideration used by the Holder to pay
for such shares under Section 6.2(d).

            6.4. Rights as Stockholders. Holders shall not be, nor have any of
the rights or privileges of, stockholders of the Company in respect of any
shares purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.

            6.5. Ownership and Transfer Restrictions. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder or (b) one year after the transfer of such shares to such
Holder.

            6.6. Limitations on Exercise of Options Granted to Independent
Directors. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:

            (a) The expiration of 12 months from the date of the Holder's death;

                                       14
<PAGE>

            (b) The expiration of 12 months from the date of the Holder's
Termination of Directorship by reason of his or her permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);

            (c) The expiration of three months from the date of the Holder's
Termination of Directorship for any reason other than such Holder's death or his
or her permanent and total disability, unless the Holder dies within said
three-month period; or

            (d) The expiration of 10 years from the date the Option was granted.

            6.7. Additional Limitations on Exercise of Options. Holders may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as
may be imposed in the discretion of the Administrator.

                                  ARTICLE VII.

                            AWARD OF RESTRICTED STOCK

            7.1. Eligibility. Subject to the Award Limit, Restricted Stock may
be awarded to any Employee or Consultant who the Committee determines should
receive such an Award.

            7.2. Award of Restricted Stock.

            (a) The Committee may from time to time, in its absolute discretion:

                  (i) Select from among the Employees or Consultants (including
      Employees or Consultants who have previously been granted other Awards
      under the Plan) such of them as in its opinion should be awarded
      Restricted Stock; and

                  (ii) Determine the purchase price, if any, and other terms and
      conditions applicable to such Restricted Stock, consistent with the Plan.

            (b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the Common Stock to be purchased,
unless otherwise permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted Stock.

            (c) Upon the selection of an Employee or Consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate, and the Committee shall authorize
one or more officers of the Company to prepare, execute and deliver the Award
Agreement with respect to such Restricted Stock.

            7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery
of the shares of Restricted Stock to the escrow holder pursuant to Section 7.6,
the Holder shall have,

                                       15
<PAGE>

unless otherwise provided by the Committee, all the rights of a stockholder with
respect to said shares, subject to the restrictions in his Award Agreement,
including the right to receive all dividends and other distributions paid or
made with respect to the shares; provided, however, that in the discretion of
the Committee, any extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in Section 7.4.

            7.4. Restriction. All shares of Restricted Stock issued under the
Plan (including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, if any, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that, except with respect to shares of Restricted Stock granted to Section
162(m) Employees, by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Award Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no consideration was paid by the
Holder upon issuance, a Holder's rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company without
consideration, upon Termination of Employment or, if applicable, upon
Termination of Consultancy with the Company; provided, however, that the
Committee in its sole and absolute discretion may provide that such rights shall
not lapse in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, except with respect to
shares of Restricted Stock granted to Section 162(m) Employees, the Committee in
its sole and absolute discretion may provide that no such lapse or surrender
shall occur in the event of a Termination of Employment, or a Termination of
Consultancy, without cause or following any Change in Control of the Company or
because of the Holder's retirement, or otherwise.

            7.5. Repurchase of Restricted Stock. The Committee shall provide in
the terms of each individual Award Agreement that the Company shall have the
right to repurchase from the Holder the Restricted Stock then subject to
restrictions under the Award Agreement immediately upon a Termination of
Employment or, if applicable, upon a Termination of Consultancy between the
Holder and the Company, at a cash price per share equal to the price paid by the
Holder for such Restricted Stock; provided, however, that the Committee in its
sole and absolute discretion may provide that no such right of repurchase shall
exist in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Employees, the
Committee in its sole and absolute discretion may provide that no such right of
repurchase shall exist in the event of a Termination of Employment or a
Termination of Consultancy without cause or following any Change in Control of
the Company or because of the Holder's retirement, or otherwise.

            7.6. Escrow. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted

                                       16
<PAGE>

Stock until all of the restrictions imposed under the Award Agreement with
respect to the shares evidenced by such certificate expire or shall have been
removed.

            7.7. Legend. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted Stock
that are still subject to restrictions under Award Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.

            7.8. Section 83(b) Election. If a Holder makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Holder would otherwise
be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of
such election to the Company immediately after filing such election with the
Internal Revenue Service.

            7.9. Restricted Stock in Lieu of Cash Compensation. Notwithstanding
anything herein to the contrary, shares of Restricted Stock may be granted to
Independent Directors in lieu of directors' fees which would otherwise be
payable to such Independent Directors pursuant to such policies as may be
adopted by the Administrator from time to time.

                                  ARTICLE VIII.

                            STOCK APPRECIATION RIGHTS

            8.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any Employee or Consultant selected by the Committee. A Stock
Appreciation Right may be granted (a) in connection and simultaneously with the
grant of an Option, (b) with respect to a previously granted Option, or (c)
independent of an Option. A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with the Plan as the Committee shall
impose and shall be evidenced by an Award Agreement.

            8.2. Coupled Stock Appreciation Rights.

            (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to
a particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.

            (b) A CSAR may be granted to the Holder for no more than the number
of shares subject to the simultaneously or previously granted Option to which it
is coupled.

            (c) A CSAR shall entitle the Holder (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may

                                       17
<PAGE>

impose.

            8.3. Independent Stock Appreciation Rights.

            (a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine. The exercise price per share of Common Stock subject to each ISAR
shall be set by the Committee. An ISAR is exercisable only while the Holder is
an Employee or Consultant; provided that the Committee may determine that the
ISAR may be exercised subsequent to Termination of Employment or Termination of
Consultancy without cause, or following a Change in Control of the Company, or
because of the Holder's retirement, death or disability, or otherwise.

            (b) An ISAR shall entitle the Holder (or other person entitled to
exercise the ISAR pursuant to the Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.

            8.4. Payment and Limitations on Exercise.

            (a) Payment of the amounts determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair Market Value
as of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee. To the extent such payment is effected in
Common Stock it shall be made subject to satisfaction of all provisions of
Section 6.3 above pertaining to Options.

            (b) Holders of Stock Appreciation Rights may be required to comply
with any timing or other restrictions with respect to the settlement or exercise
of a Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Committee.

                                       18
<PAGE>

                                   ARTICLE IX.

                                 ADMINISTRATION

            9.1. Committee. The Committee shall be the Compensation Committee of
the Board, unless the Board specifically assumes the functions of the Committee
or appoints another committee to assume such functions.

            9.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time assume any and all
rights and duties of the Committee under the Plan, except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Options granted to Independent Directors.

            9.3. Majority Rule; Unanimous Written Consent. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

            9.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation.

                                   ARTICLE X.

                            MISCELLANEOUS PROVISIONS

            10.1. Not Transferable. No Award under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution

                                       19
<PAGE>

or, subject to the consent of the Administrator, pursuant to a DRO, unless and
until such Award has been exercised, or the shares underlying such Award have
been issued, and all restrictions applicable to such shares have lapsed. No
Award or interest or right therein shall be liable for the debts, contracts or
engagements of the Holder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

            During the lifetime of the Holder, only he may exercise an Option or
other Award (or any portion thereof) granted to him under the Plan, unless it
has been disposed of with the consent of the Administrator pursuant to a DRO.
After the death of the Holder, any exercisable portion of an Option or other
Award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Holder's
will or under the then applicable laws of descent and distribution.

            Notwithstanding the foregoing provisions of this Section 10.1, the
Administrator, in its sole discretion, may determine to grant a Non-Qualified
Stock Option which, by its terms as set forth in the applicable Award Agreement,
may be transferred by the Holder, in writing and with prior written notice to
the Administrator, to any one or more Permitted Transferees (as defined below),
subject to the following terms and conditions: (a) a Non-Qualified Stock Option
transferred to a Permitted Transferee shall not be assignable or transferable by
the Permitted Transferee other than by will or the laws of descent and
distribution; (b) any Non-Qualified Stock Option which is transferred to a
Permitted Transferee shall continue to be subject to all the terms and
conditions of the Non-Qualified Stock Option as applicable to the original
Holder (other than the ability to further transfer the Non-Qualified Stock
Option); and (c) the Holder and the Permitted Transferee shall execute any and
all documents requested by the Administrator, including, without limitation,
documents to: (i) confirm the status of the transferee as a Permitted
Transferee, (ii) satisfy any requirements for an exemption for the transfer
under applicable federal and state securities laws and (iii) evidence the
transfer. For purposes of this Section, "Permitted Transferee" shall mean, with
respect to a Holder, any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Holder's household (other than a
tenant or employee), a trust in which these persons (or the Holder) control the
management of assets, and any other entity in which these persons (or the
Holder) owns more than fifty percent (50%) of the voting interests, or any other
transferee specifically approved by the Administrator after taking into account
any state or federal tax or securities laws applicable to transferable
Non-Qualified Stock Options.

            10.2. Amendment, Suspension or Termination of the Plan.

            (a) Except as otherwise provided in this Section 10.2, the Plan may
be wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board. However, without approval of the
Company's stockholders given within

                                       20
<PAGE>

twelve months before or after the action by the Board, no action of the Board
may, except as provided in Section 10.3, increase the limits imposed in Section
2.1 on the maximum number of shares that may be issued under the Plan.

            (b) No amendment, suspension or termination of the Plan shall,
without the consent of the Holder alter or impair any rights or obligations
under any Award theretofore granted or awarded, unless the Award itself
otherwise expressly so provides.

            (c) No Awards may be granted or awarded during any period of
suspension or after termination of the Plan, and in no event may any Option be
granted under the Plan after the first to occur of the following events:

                  (i) The expiration of ten years from the date the Plan is
      adopted by the Board; or

                  (ii) The expiration of ten years from the date the Plan is
      approved by the Company's stockholders under Section 10.5.

            10.3. Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.

            (a) Subject to Section 10.3(d), in the event that the Administrator
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Administrator's sole discretion, affects
the Common Stock such that an adjustment is determined by the Administrator to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Award, then the Administrator shall, in such manner as it may deem
equitable, adjust any or all of:

                  (i) the number and kind of shares of Common Stock (or other
      securities or property) with respect to which Awards may be granted or
      awarded (including, but not limited to, adjustments of the limitations in
      Section 2.1 on the maximum number and kind of shares which may be issued
      and adjustments of the Award Limit);

                  (ii) the number and kind of shares of Common Stock (or other
      securities or property) subject to outstanding Awards; and

                  (iii) the grant or the exercise price with respect to any
      Award.

            (b) Subject to Sections 10.3(d) and 10.4, in the event of any
transaction or event described in Section 10.3(a) or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of the Company, or
the financial statements of the Company or any

                                       21
<PAGE>

affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Administrator, in its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, either by the terms of the Award
or by action taken prior to the occurrence of such transaction or event (any
such action applied to Employees and former Employees to be applied uniformly)
and either automatically or upon the Holder's request, is hereby authorized to
take any one or more of the following actions whenever the Administrator
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Award under the Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:

                  (i) to provide for either the cancellation of any such Award
      for an amount of cash equal to the amount that could have been attained
      upon the exercise of such Award or realization of the Holder's rights had
      such Award been currently exercisable or payable or fully vested, or the
      replacement of such Award with other rights or property selected by the
      Administrator in its sole discretion;

                  (ii) to provide that the Award cannot vest, be exercised or
      become payable after such event;

                  (iii) to provide that such Award shall be exercisable as to
      all shares covered thereby, notwithstanding anything to the contrary in
      Section 5.3 or 5.4 or the provisions of such Award;

                  (iv) to provide that such Award be assumed by the successor or
      survivor corporation, or a parent or subsidiary thereof, or shall be
      substituted for by similar options, rights or awards covering the stock of
      the successor or survivor corporation, or a parent or subsidiary thereof,
      with appropriate adjustments as to the number and kind of shares and
      prices;

                  (v) to make adjustments in the number and type of shares of
      Common Stock (or other securities or property) subject to outstanding
      Awards, and in the number and kind of outstanding Restricted Stock, and/or
      in the terms and conditions of (including the grant or exercise price),
      and the criteria included in, outstanding Awards and Awards which may be
      granted in the future; and

                  (vi) to provide that, for a specified period of time prior to
      such event, the restrictions imposed under an Award Agreement upon some or
      all shares of Restricted Stock or Common Stock may be terminated and some
      or all shares of such Restricted Stock or Common Stock may cease to be
      subject to repurchase after such event.

            (c) Subject to Sections 10.3(d), 3.2 and 3.3, the Administrator may,
in its discretion, include such further provisions and limitations in any Award,
Award Agreement or certificate, as it may deem equitable and in the best
interests of the Company.

            (d) With respect to Awards that are granted to Section 162(m)
Employees and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no

                                       22
<PAGE>

adjustment or action described in this Section 10.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause such Award to fail to so qualify under Section 162(m)(4)(C) or any
successor provisions thereto. No adjustment or action described in this Section
10.3 or in any other provision of the Plan shall be authorized to the extent
that such adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code. Furthermore, no such adjustment or action shall be authorized to
the extent such adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule 16b-3
unless the Administrator determines that the Award is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to any Award
shall always be rounded to the next whole number.

            (e) The existence of the Plan, any Award Agreement and the Awards
granted hereunder shall not affect or restrict in any way the right or power of
the Company or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

            10.4. Change in Control. Notwithstanding any other provision of the
Plan, in the event of a Change in Control, each outstanding Award shall,
immediately prior to the effective date of the Change in Control, automatically
become fully exercisable for all of the shares of Common Stock at the time
subject to such Award and may be exercised for any or all of those shares as
fully-vested shares of Common Stock.

            10.5. Approval of Plan by Stockholders. The Plan shall be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of the Plan. Awards may be granted or
awarded prior to such stockholder approval; provided, however, that such Awards
shall not be exercisable nor shall such Awards vest prior to the time when the
Plan is approved by the stockholders; and provided, further, that if such
approval has not been obtained at the end of said twelve-month period, all
Awards previously granted or awarded under the Plan shall thereupon be canceled
and become null and void. In addition, if the Board determines that Awards other
than Options or Stock Appreciation Rights which may be granted to Section 162(m)
Employees should continue to be eligible to qualify as performance-based
compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria
must be disclosed to and approved by the Company's stockholders no later than
the first stockholder meeting that occurs in the fifth year following the year
in which the Company's stockholders previously approved the Performance
Criteria.

            10.6. Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Holder of
any sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting, exercise or payment of any Award. The Administrator
may in its discretion and in satisfaction of the foregoing requirement allow
such Holder to elect to have the Company withhold shares of

                                       23
<PAGE>

Common Stock otherwise issuable under such Award (or allow the return of shares
of Common Stock) having a Fair Market Value equal to the sums required to be
withheld. Notwithstanding any other provision of the Plan, the number of shares
of Common Stock which may be withheld with respect to the issuance, vesting,
exercise or payment of any Award (or which may be repurchased from the Holder of
such Award within six months after such shares of Common Stock were acquired by
the Holder from the Company) in order to satisfy the Holder's federal and state
income and payroll tax liabilities with respect to the issuance, vesting,
exercise or payment of the Award shall be limited to the number of shares which
have a Fair Market Value on the date of withholding or repurchase equal to the
aggregate amount of such liabilities based on the minimum statutory withholding
rates for federal and state tax income and payroll tax purposes that are
applicable to such supplemental taxable income.

            10.7. Forfeiture Provisions. Subject to the limitations of
applicable law, pursuant to its general authority to determine the terms and
conditions applicable to Awards under the Plan, the Administrator shall have the
right to provide, in the terms of Awards made under the Plan, or to require a
Holder to agree by separate written instrument, that if (a)(i) the Holder at any
time, or during a specified time period, engages in any activity in competition
with the Company, or which is inimical, contrary or harmful to the interests of
the Company, as further defined by the Administrator or (ii) the Holder incurs a
Termination of Employment, Termination of Consultancy or Termination of
Directorship for cause, then (b) (i) any proceeds, gains or other economic
benefit actually or constructively received by the Holder upon any exercise of
the Award, or upon the receipt or resale of any Common Stock underlying any
Award, must be paid to the Company, and (ii) the Award shall terminate and any
unexercised portion of the Award (whether or not vested) shall be forfeited.

            10.8. Effect of Plan upon Options and Compensation Plans. The
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company (a) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (b) to grant or assume options or other rights or
awards otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.

            10.9. Compliance with Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

                                       24
<PAGE>

            10.10. 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 share of Common Stock hereunder, shall relieve the Company
of any liability in respect of the failure to issue or sell such shares of
Common Stock as to which such requisite authority shall not have been obtained.

            10.11. Reservation of Shares. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of the Plan.

            10.12. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.

            10.13. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
California without regard to conflicts of laws thereof.

                                      * * *

            I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of Gen-Probe Incorporated on March 3rd, 2003, and amended on
May 13, 2003.

                                                       /s/ R. William Bowen
                                                       -------------------------
                                                       R. William Bowen
                                                       Secretary

                                      * * *

            I hereby certify that the foregoing Plan was duly approved by the
stockholders of Gen-Probe Incorporated on May 29, 2003.

                                                       /s/ R. William Bowen
                                                       -------------------------
                                                       R. William Bowen
                                                       Secretary

                                       25
<PAGE>

                                  ATTACHMENT II

               DEFERRED ISSUANCE RESTRICTED STOCK AWARD AGREEMENT

                                       26
<PAGE>

                             GEN-PROBE INCORPORATED
                            2003 INCENTIVE AWARD PLAN
               DEFERRED ISSUANCE RESTRICTED STOCK AWARD AGREEMENT

            Pursuant to the Deferred Issuance Restricted Stock Award Grant
Notice (the "GRANT NOTICE") and this Deferred Issuance Restricted Stock Award
Agreement (the "AGREEMENT"), Gen-Probe Incorporated (the "COMPANY") hereby
grants to you a deferred issuance restricted stock award pursuant to Section 7
of The 2003 Incentive Award Plan of Gen-Probe Incorporated (the "PLAN") for the
number of shares as indicated in the Grant Notice (collectively, the "AWARD").

            WHEREAS, Section 409A of the Internal Revenue Code of 1986, as
amended (the "CODE") provides that deferred compensation arrangements
(including, in this case, the Award) that do not comply with, among other
things, the distribution requirements of Code Section 409A, are subject to an
additional 20% tax, plus interest, on the distribution.

            WHEREAS, Code Section 409A provides that the payment of the deferred
compensation must not occur prior to: (i) Termination of Service (but "key
employees" of publicly traded companies must wait an additional six months),
(ii) Disability, (iii) death, (iv) a fixed date (or dates) specified at the time
of deferral, (v) a change in control, or (vi) the occurrence of an unforeseeable
emergency.

            WHEREAS, you are a "key employee" for purposes of the distribution
limitations contained in Code Section 409A and as defined in Code Section
416(i).

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

            1.1 General. Terms not explicitly defined in this Agreement but
defined in the Plan shall have the same definitions as in the Plan. Wherever the
following terms are used in this Agreement they shall have the meanings
specified below, unless the context clearly indicates otherwise.

            1.2 Cause. "CAUSE" shall mean (a) your failure or refusal to perform
specific and lawful directions with respect to your service with the Company or
a Subsidiary, (b) the commission by you of a felony or the perpetration by you
of an act of fraud, dishonesty, or misrepresentation against, or breach of
fiduciary duty toward, the Company or a Subsidiary or (c) any willful act or
omission by you which is injurious in any material respect to the financial
condition or business reputation of the Company or a Subsidiary.

            1.3 Disability. "DISABILITY" means you are (i) unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous

                                       1.
<PAGE>

period of not less than twelve (12) months, or (ii) by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering employees of the
Company.

            1.4 Secretary. "SECRETARY" shall mean the Secretary of the Company.

            1.5 Termination of Service. "TERMINATION OF SERVICE" means your
"separation from service" from the Company and its Subsidiaries for purposes of
Section 409A of the Code, including that which occurs as a result of Disability
or death.

                                   ARTICLE II

                                DETAILS OF AWARD

            2.1 Purchase Price Consideration. The Award is provided to you in
consideration of your past services. Therefore, you are not required to pay a
purchase price to receive the Award.

            2.2 Vesting. Subject to the limitations contained herein, your Award
will vest as provided in the Grant Notice.

            2.3 Dividends. You shall be entitled to receive payments equal to
any cash dividends and other distributions paid with respect to a corresponding
number of shares covered by your Award, provided that if any such dividends or
distributions are paid in shares, the Fair Market Value of such shares shall be
converted into additional shares covered by the Award, and further provided that
such additional shares shall be subject to the same forfeiture restrictions and
restrictions on transferability as apply to the shares subject to the Award with
respect to which they relate.

            2.4 Date of Issuance.

                  (a) The Company will issue to you a number of shares of the
Company's Common Stock equal to the number of vested shares subject to your
Award, including any additional shares received pursuant to Section 2.3 above
that relate to those vested shares, on the earlier of (i) May 20, 2009, or (ii)
the effective date of your Termination of Service.

                  (b) Notwithstanding anything to the contrary set forth herein,
because you are a "key employee" for purposes of the distribution limitations
contained in Code Section 409A and as defined in Code Section 416(i), share
issuances to you as a result of your Termination of Service shall not be made
before the date which is six (6) months following the date of your Termination
of Service, or, if earlier, the date of your death or Disability.

                                       2.
<PAGE>

            2.5 Capitalization Adjustments to Number of Shares. The number of
shares of Common Stock subject to your Award may be adjusted from time to time
for capitalization adjustments as described in Section 10.3 of the Plan.

            2.6 Securities Law Compliance. You will not be issued any shares of
Common Stock under your Award unless the shares are either (a) then registered
under the Securities Act of 1933 (the "SECURITIES ACT") or (b) the Company has
determined that such issuance would be exempt from the registration requirements
of the Securities Act. Your Award must also comply with other applicable laws
and regulations governing the Award, and you will not receive any shares of
Common Stock pursuant to your Award if the Company determines that such receipt
would not be in material compliance with such laws and regulations.

            2.7 Limitations on Transfer. Your Award is not transferable, except
by will or by the laws of descent and distribution. In addition to any other
limitation on transfer created by applicable securities laws, you agree not to
assign, hypothecate, donate, encumber or otherwise dispose of any interest in
any of the shares of Common Stock held by you under the Award until the shares
are issued to you in accordance with Section 2.4 of this Agreement. After the
shares have been issued to you, you are free to assign, hypothecate, donate,
encumber or otherwise dispose of any interest in such shares provided that any
such actions are in compliance with the provisions herein and applicable
securities laws.

            2.8 Corporate Event. If at any time prior to the issuance of the
shares, an event as described in subsection 10.3(b) of the Plan occurs, any
successor of the Company may assume this Award or substitute a similar stock
award. If any surviving corporation or acquiring corporation refuses to assume
this Award or substitute a similar stock award in connection with such event,
the shares subject to the Award shall fully vest and be issued to you
immediately prior to such event.

            2.9 Withholding Obligations.

                  (a) On or before the time you receive a distribution of shares
pursuant to your Award, or at any time thereafter as requested by the Company,
you hereby authorize withholding from payroll and/or any other amounts payable
to you, and otherwise agree to make adequate provision for any sums required to
satisfy the federal, state, local and foreign tax withholding obligations of the
Company or a Subsidiary, if any, which arise in connection with your Award.

                  (b) Unless the tax withholding obligations of the Company
and/or any Subsidiary are satisfied, the Company shall have no obligation to
issue a certificate for the shares of Common Stock subject to your Award.

            2.10 Unsecured Obligation. Your Award is unfunded, and as a holder
of a vested Award, you shall be considered an unsecured creditor of the Company
with respect to the Company's obligation, if any, to issue shares pursuant to
this Agreement. You shall not have voting or any other rights as a stockholder
of the Company with respect to the shares purchased pursuant to this Agreement
until such shares are issued to you pursuant to Section 2.4 of this Agreement.
Upon such issuance, you will obtain full voting and other rights as a
stockholder of

                                       3.
<PAGE>

the Company. Nothing contained in this Agreement, and no action taken pursuant
to its provisions, shall create or be construed to create a trust of any kind or
a fiduciary relationship between you and the Company or any other person.

            2.11 Vesting Consideration. In consideration of the vesting of the
Award, you agree to render faithful and efficient services to the Company or any
Subsidiary, with such duties and responsibilities as the Company shall from time
to time prescribe. Nothing in the Plan or this Agreement shall confer upon you
any right to continue in the service of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and its
Subsidiaries, which are hereby expressly reserved, to discharge you at any time
for any reason whatsoever, with or without Cause.

                                   ARTICLE III

                                OTHER PROVISIONS

            3.1 Administration. The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon you, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan or this Agreement.
In its absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under the Plan and this
Agreement.

            3.2 Transfers. The rights and obligations of the Company under your
Award shall be transferable to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by the Company's successors and assigns.

            3.3 Lock-Up Period. You hereby agree that, if so requested by the
Company or any representative of the underwriters (the "MANAGING UNDERWRITER")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, you shall not sell or otherwise transfer any
shares of Common Stock or other securities of the Company during such period as
may be requested in writing by the Managing Underwriter and agreed to in writing
by the Company (which period shall not be longer than 180 days) following the
effective date of a registration statement of the Company filed under the
Securities Act.

            3.4 Restrictive Legends and Stop-Transfer Orders.

                  (a) The share certificate or certificates evidencing the
shares of Common Stock issued to you hereunder shall be endorsed with any
legends that may be required by state or federal securities laws, if any, as
determined by the Company.

                  (b) You agree that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate "stop
transfer" instructions to its transfer

                                       4.
<PAGE>

agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

                  (c) The Company shall not be required: (i) to transfer on its
books any shares of Common Stock that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement, or (ii) to treat as owner
of such shares of Common Stock or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such shares shall have been so
transferred.

            3.5 Notices. Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in care of the
Secretary, and any notice to be given to you shall be addressed to you at the
address given beneath your signature to the Conversion Agreement. By a notice
given pursuant to this Section 3.5, either party may hereafter designate a
different address for notices to be given to that party. Any notice which is
required to be given to you shall, if you are then deceased, be given to your
personal representative if such representative has previously informed the
Company of such representative's status and address by written notice under this
Section 3.5. Any notice shall be deemed duly given when delivered personally or
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) certified or registered mail in a post office
or branch post office regularly maintained by the United States Postal Service.

            3.6 Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.

            3.7 Construction. This Agreement shall be administered, interpreted
and enforced under the laws of the State of California without regard to
conflicts of laws principles thereof. You agree upon request to execute any
further documents or instruments necessary or desirable in the sole
determination of the Company to carry out the purposes or intent of your Award.
You acknowledge and agree that you have reviewed your Award in its entirety,
have had an opportunity to obtain the advice of counsel prior to executing and
accepting your Award and fully understand all provisions of your Award.

            3.8 Conformity to Securities Laws. You acknowledge that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, and state
securities laws and regulations. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Award is granted, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.

            3.9 Amendments. This Agreement may not be modified, amended or
terminated except by an instrument in writing, signed by you and by a duly
authorized representative of the Company. Notwithstanding the foregoing, this
Agreement may be amended solely by the Committee by a writing which specifically
states that it is amending this Agreement, so long as a copy of such amendment
is delivered to you, and provided that no such amendment adversely affecting
your rights hereunder may be made without your written

                                       5.
<PAGE>

consent. Without limiting the foregoing, the Committee reserves the right to
change, by written notice to you, the provisions of this Agreement in any way it
may deem necessary or advisable to carry out the purpose of the grant as a
result of any change in applicable laws or regulations or any future law,
regulation, ruling, or judicial decision, provided that any such change shall be
applicable only to rights relating to that portion of the Award which is then
subject to restrictions as provided herein.

            3.10 Governing Plan Document. Your Award is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
Award, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your Award and
those of the Plan, the provisions of the Plan shall control; provided, however,
that Section 2.4 of this Agreement shall govern the timing of any distribution
of shares under your Award.

            3.11 Severability. If all or any part of this Agreement or the Plan
is declared by any court or governmental authority to be unlawful or invalid,
such unlawfulness or invalidity shall not invalidate any portion of this
Agreement or the Plan not declared to be unlawful or invalid. Any Section of
this Agreement (or part of such a Section) so declared to be unlawful or invalid
shall, if possible, be construed in a manner which will give effect to the terms
of such Section or part of a Section to the fullest extent possible while
remaining lawful and valid.

            3.12 Effect on Other Employee Benefit Plans. The value of the Award
subject to this Agreement shall not be included as compensation, earnings,
salaries, or other similar terms used when calculating the Employee's benefits
under any employee benefit plan sponsored by the Company or any subsidiary,
except as such plan otherwise expressly provides. The Company expressly reserves
its rights to amend, modify, or terminate any of the Company's or any
Subsidiary's employee benefit plans.

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                                       6.