Exhibit 10.7


QUIDEL
CORPORATION


1998
STOCK INCENTIVE PLAN


(as
amended March 20, 2007)















TABLE OF CONTENTS


	
  ARTICLE I PURPOSE OF PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II EFFECTIVE DATE AND TERM OF PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.1 TERM OF PLAN

  	
   

  	
  1

  
	
  2.2 EFFECT ON
  AWARDS

  	
   

  	
  1

  
	
  2.3 STOCKHOLDER
  APPROVAL

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE III SHARES SUBJECT TO PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.1 NUMBER OF
  SHARES

  	
   

  	
  1

  
	
  3.2 SOURCE OF
  SHARES

  	
   

  	
  1

  
	
  3.3 AVAILABILITY
  OF UNUSED SHARES

  	
   

  	
  1

  
	
  3.4 ADJUSTMENT
  PROVISIONS

  	
   

  	
  2

  
	
  3.5 RESERVATION
  OF SHARES

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV ADMINISTRATION OF PLAN

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  4.1
  ADMINISTERING BODY

  	
   

  	
  2

  
	
  4.2 AUTHORITY OF
  ADMINISTERING BODY

  	
   

  	
  3

  
	
  4.3 NO LIABILITY

  	
   

  	
  4

  
	
  4.4 AMENDMENTS

  	
   

  	
  4

  
	
  4.5 OTHER
  COMPENSATION PLANS

  	
   

  	
  4

  
	
  4.6 PLAN BINDING
  ON SUCCESSORS

  	
   

  	
  5

  
	
  4.7 REFERENCES
  TO SUCCESSOR STATUTES, REGULATIONS AND RULES

  	
   

  	
  5

  
	
  4.8 ISSUANCES
  FOR COMPENSATION PURPOSES ONLY

  	
   

  	
  5

  
	
  4.9 INVALID
  PROVISIONS

  	
   

  	
  5

  
	
  4.10 GOVERNING
  LAW

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE V GENERAL AWARD PROVISIONS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  5.1
  PARTICIPATION IN THE PLAN

  	
   

  	
  5

  
	
  5.2 AWARD
  DOCUMENTS

  	
   

  	
  5

  
	
  5.3 EXERCISE OF
  AWARDS

  	
   

  	
  6

  
	
  5.4 PAYMENT FOR
  AWARDS

  	
   

  	
  6

  
	
  5.5 NO
  EMPLOYMENT RIGHTS

  	
   

  	
  7

  
	
  5.6 RESTRICTIONS
  UNDER APPLICABLE LAWS AND REGULATIONS

  	
   

  	
  7

  
	
  5.7 ADDITIONAL
  CONDITIONS

  	
   

  	
  8

  
	
  5.8 NO
  PRIVILEGES OF STOCK OWNERSHIP

  	
   

  	
  8

  
	
  5.9
  NONASSIGNABILITY

  	
   

  	
  9

  
	
  5.10 INFORMATION
  TO RECIPIENTS

  	
   

  	
  9

  
	
  5.11 WITHHOLDING
  TAXES

  	
   

  	
  9

  
	
  5.12 LEGENDS ON
  AWARDS AND STOCK CERTIFICATES

  	
   

  	
  10

  
	
  5.13 EFFECT OF
  TERMINATION OF EMPLOYMENT ON AWARDS

  	
   

  	
  10

  
	
  (a)
  Termination for Just Cause

  	
   

  	
  10

  
	
  (b)
  Termination Other Than for Just Cause

  	
   

  	
  10

  
	
  (c)
  Alteration of vesting and Exercise Periods

  	
   

  	
  10

  
	
  (d)
  Leave of Absence

  	
   

  	
  11

  
	
  5.14 LIMITS ON
  AWARDS TO CERTAIN ELIGIBLE PERSONS

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI AWARDS

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  6.1 STOCK
  OPTIONS

  	
   

  	
  11

  
	
  (a)
  Nature of Stock Options

  	
   

  	
  11

  
	
  (b)
  Option Exercise Price

  	
   

  	
  11

  



 



 i
 








 


	
  (c) Option Period and Vesting

  	
   

  	
  11

  
	
  (d)
  Special Provisions Regarding Incentive Stock Options

  	
   

  	
  12

  
	
  6.2 RESTRICTED
  STOCK

  	
   

  	
  12

  
	
  (a)
  Award of Restricted Stock

  	
   

  	
  12

  
	
  (b)
  Requirements of Restricted Stock

  	
   

  	
  12

  
	
  (i) No Transfer

  	
   

  	
  12

  
	
  (ii)
  Certificates

  	
   

  	
  13

  
	
  (iii)
  Restrictive Legends

  	
   

  	
  13

  
	
  (iv) Other
  Restrictions

  	
   

  	
  13

  
	
  (c)
  Lapse of Restrictions

  	
   

  	
  13

  
	
  (d)
  Rights of Recipient

  	
   

  	
  13

  
	
  (e)
  Termination of Employment

  	
   

  	
  13

  
	
  6.3 STOCK
  APPRECIATION RIGHTS

  	
   

  	
  13

  
	
  (a)
  Granting of Stock Appreciation Rights

  	
   

  	
  13

  
	
  (b)
  Stock Appreciation Rights Related to Options

  	
   

  	
  13

  
	
  (c)
  Stock Appreciation Rights Unrelated to Options

  	
   

  	
  14

  
	
  (d)
  Limits

  	
   

  	
  14

  
	
  (e)
  Payments

  	
   

  	
  14

  
	
  6.4 STOCK
  PAYMENTS

  	
   

  	
  14

  
	
  6.5 DIVIDEND
  EQUIVALENTS

  	
   

  	
  15

  
	
  6.6 STOCK
  BONUSES

  	
   

  	
  15

  
	
  6.7 STOCK SALES

  	
   

  	
  15

  
	
  6.8 PHANTOM
  STOCK

  	
   

  	
  15

  
	
  6.9 OTHER
  STOCK-BASED BENEFITS

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII REORGANIZATIONS

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  7.1 CORPORATE
  TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL

  	
   

  	
  15

  
	
  7.2 CORPORATE TRANSACTIONS
  INVOLVING A CHANGE IN CONTROL

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII DEFINITIONS

  	
   

  	
  16

  



 



 ii















 


QUIDEL CORPORATION


1998 STOCK INCENTIVE PLAN


ARTICLE I

PURPOSE OF PLAN


The
Company has adopted this Plan to promote the interests of the Company and its
stockholders by using investment interests in the Company to attract, retain
and motivate employees and other persons, to encourage and reward their
contributions to the performance of the Company, and to align their interests
with the interests of the Company’s stockholders.  Capitalized terms not otherwise defined
herein have the meanings ascribed to them in Article VIII.


ARTICLE II

EFFECTIVE DATE AND TERM OF PLAN


2.1          Term of
Plan.  This Plan
became effective as of the Effective Date and shall continue in effect until
the Expiration Date, at which time this Plan shall automatically terminate.


2.2          Effect on
Awards.  Awards may
be granted only during the Plan Term, but each Award granted during the Plan
Term shall remain in effect after the Expiration Date until such Award has been
exercised, terminated or expired in accordance with its terms and the terms of
this Plan.


2.3          Stockholder
Approval.  This
Plan shall be approved by the Company’s stockholders within 12 months after the
Effective Date.  The effectiveness of any
Awards granted prior to such stockholder approval shall be subject to such
stockholder approval.


ARTICLE III

SHARES SUBJECT TO PLAN


3.1          Number
of Shares.  The
maximum number of shares of Common Stock that may be issued pursuant to Awards
shall be Three Million (3,000,000) subject to adjustment as set forth in Section 3.4.


3.2          Source
of Shares.  The
Common Stock to be issued under this Plan will be made available, at the
discretion of the Board, either from authorized but unissued shares of Common
Stock or from previously issued shares of Common Stock reacquired by the
Company.


3.3          Availability
of Unused Shares. 
Shares of Common Stock subject to unexercised portions of any Award that
expire, terminate or are canceled, and shares of Common Stock issued pursuant
to an Award that are reacquired by the Company pursuant to the terms of the 



 1
 









Award under which
such shares were issued, will again become available for the grant of further
Awards under this Plan.


3.4          Adjustment
Provisions.


(a)           If the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of
shares or other securities, or if additional shares or new or different shares
or other securities are distributed in respect of such shares of Common Stock
(or any stock or securities received with respect to such Common Stock),
including without limitation through merger, consolidation, sale or exchange of
all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, combination of shares, stock dividend,
stock split, reverse stock split, spin-off, or any other equity restructuring
transaction as that term is defined in Statement of Financial Accounting
Standards No. 123 (revised), an appropriate and equitable adjustment shall be
made in (i) the maximum number and kind of shares subject to this Plan as
provided in Section 3.1, (ii) the number and kind of shares or
other securities subject to then outstanding Awards, and/or (iii) the
price for each share or other unit of any other securities subject to, or
measurement criteria applicable to, then outstanding Awards.


(b)           No fractional interests will be
issued under this Plan resulting from any adjustments.


(c)           To the extent any adjustments relate
to stock or securities of the Company, such adjustments shall be made by the
Administering Body, whose determination in that respect shall be final, binding
and conclusive.


(d)           The grant of an Award pursuant to
this Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.


(e)           No adjustment to the terms of an
Incentive Stock Option shall be made unless such adjustment either
(i) would not cause such Option to lose its status as an Incentive Stock
Option or (ii) is agreed to in writing by the Administering Body and the
Recipient.


3.5          Reservation
of Shares.  The
Company will at all times reserve and keep available shares of Common Stock
equaling at least the total number of shares of Common Stock issuable pursuant
to outstanding Awards.


ARTICLE IV

ADMINISTRATION OF PLAN


4.1          Administering
Body.


(a)           This Plan shall be administered by
the Board or by a Committee of the Board appointed pursuant to Section 4.1(b).



 2
 









(b)           The Board in its sole discretion may
from time to time appoint a Committee (which may be a subcommittee of an
existing committee of the Board) of not less than two Board members to
administer this Plan and, subject to applicable law, to exercise all of the
powers, authority and discretion of the Board under this Plan.  The Board may from time to time increase or
decrease (but not below two) the number of members of the Committee, remove
from membership on the Committee all or any portion of its members, and/or
appoint such person or persons as it desires to fill any vacancy existing on
the Committee, whether caused by removal, resignation or otherwise.  The Board may disband the Committee at any
time and revest in the Board the administration of this Plan.


(c)           Notwithstanding the foregoing
provisions of Section 4.1(b) above to the contrary, as long as the
Company is an Exchange Act Registered Company, (i) the Board shall appoint the
Committee, (ii) this Plan shall be administered by the Committee, and (iii)
each member of the Committee shall be a Nonemployee Director, and, in addition,
if Awards are to be made to persons subject to Section 162(m) of the IRC and
such Awards are intended to constitute Performance-Based Compensation, then
each member of the Committee shall, in addition to being a Nonemployee
Director, be an Outside Director.


4.2          Authority
of Administering Body.


(a)           Subject to the express provisions of
this Plan, the Administering Body shall have the power to implement (including
the power to delegate such implementation to appropriate officers of the
Company), interpret and construe this Plan and any Awards and Award Documents
or other documents defining the rights and obligations of the Company and
Recipients hereunder and thereunder, to determine all questions arising
hereunder and thereunder, and to adopt and amend such rules and regulations for
the administration hereof and thereof as it may deem desirable.  The interpretation and construction by the
Administering Body of any provisions of this Plan or of any Award or Award
Document shall be conclusive and binding. 
Any action taken by, or inaction of, the Administering Body relating to
this Plan or any Award or Award Document shall be within the absolute
discretion of the Administering Body and shall be conclusive and binding upon
all persons.  Subject only to compliance
with the express provisions hereof, the Administering Body may act in its
absolute discretion in matters related to this Plan and any and all Awards and
Award Documents.


(b)           Subject to the express provisions of
this Plan, the Administering Body may from time to time in its discretion
select the Eligible Persons to whom, and the time or times at which, Awards
shall be granted or sold, the nature of each Award, the number of shares of
Common Stock or the number of rights that make up or underlie each Award, the
exercise price and period for the exercise of each Award, and such other terms
and conditions applicable to each individual Award as the Administering Body shall
determine.  The Administering Body may
grant at any time new Awards to an Eligible Person who has previously received
Awards or other grants (including other stock options) regardless of whether
such prior Awards or such other grants are still outstanding, have previously
been exercised as a whole or in part, or are canceled in connection with the
issuance of new Awards.  The
Administering Body may grant Awards singly, in combination or in tandem with
other Awards, as it determines in its discretion.  



 3
 









The purchase
price, exercise price, initial value and any and all other terms and conditions
of the Awards may be established by the Administering Body without regard to
existing Awards or other grants.


(c)           Any action of the Administering Body
with respect to the administration of this Plan shall be taken pursuant to a
majority vote of the authorized number of members of the Administering Body or
by the unanimous written consent of its members; provided, however, that (i) if the Administering Body is the
Committee and consists of two members, then actions of the Administering Body
must be unanimous, and (ii) if the Administering Body is the Board, actions
taken by the Board shall be valid if approved in accordance with applicable
law.


4.3          No
Liability.  No member
of the Board or the Committee or any designee thereof will be liable for any
action or inaction with respect to this Plan or any Award or any transaction
arising under this Plan or any Award, except in circumstances constituting bad
faith of such member.


4.4          Amendments.


(a)           The Administering Body may, insofar
as permitted by applicable law, rule or regulation, and subject to Section
4.4(c), from time to time suspend or discontinue this Plan or revise or
amend it in any respect whatsoever, and this Plan as so revised or amended will
govern all Awards hereunder, including those granted before such revision or
amendment.  Without limiting the
generality of the foregoing, the Administering Body is authorized to amend this
Plan to comply with or take advantage of amendments to applicable laws, rules
or regulations, including the Securities Act, Exchange Act, the IRC or the
rules of any exchange or interdealer quotation system upon which the Common
Stock is listed or traded.  No
stockholder approval of any amendment or revision shall be required unless (i)
such approval is required by this Plan or by applicable law, rule or regulation
or (ii) an amendment or revision to this Plan would materially increase the
number of shares subject to this Plan (as adjusted under Section 3.4).


(b)           The Administering Body shall make any
adjustments as provided in Section 3.4(a) and may, with the written
consent of a Recipient, make such modifications in the terms and conditions of
an Award as it deems advisable.  Without
limiting the generality of the foregoing, the Administering Body may, in its
discretion with the written consent of the Recipient, at any time and from time
to time after the grant of any Award accelerate or extend the vesting or
exercise period of any Award as a whole or in part.


(c)           Except as otherwise provided in this
Plan or in the applicable Award Document, no amendment, revision, suspension or
termination of this Plan or any outstanding Award may impair or adversely
affect any rights or obligations under any Award theretofore granted without
the written consent of the Recipient to whom such Award was granted.


4.5          Other
Compensation Plans. 
The adoption of this Plan shall not affect any other stock option,
incentive or other compensation plans in effect from time-to-time for the
Company, and this Plan shall not preclude the Company from establishing any
other forms of incentive or 



 4
 









other compensation
for employees, directors, advisors or consultants of the Company, whether or
not approved by stockholders.


4.6          Plan
Binding on Successors. 
This Plan shall be binding upon the successors and assigns of the
Company.


4.7          References
to Successor Statutes, Regulations and Rules.  Any reference in this Plan to a particular
statute, regulation or rule shall also refer to any successor provision of such
statute, regulation or rule.


4.8          Issuances
for Compensation Purposes Only.  This Plan is intended to constitute an “employee
benefit plan,” as defined in Rule 405 promulgated under the Securities Act, and
shall be administered accordingly.


4.9          Invalid
Provisions.  In the
event that any provision of this Plan is found to be invalid or otherwise
unenforceable under any applicable law, such invalidity or unenforceability
shall not be construed as rendering any other provisions contained herein
invalid or unenforceable, and all such other provisions shall be given full
force and effect to the same extent as though the invalid and unenforceable
provision were not contained herein.


4.10        Governing
Law.  This
Agreement shall be governed by and interpreted in accordance with the internal
laws of the State of Delaware, without giving effect to the principles of the
conflicts of laws thereof.


ARTICLE V

GENERAL AWARD PROVISIONS


5.1          Participation
in the Plan.


(a)           A person shall be eligible to receive
Awards under this Plan if, at the time of the grant of the Award, such person
is an Eligible Person.


(b)           Incentive Stock Options may be
granted only to Eligible Persons meeting the employment requirements of
Section 422 of the IRC.


(c)           Notwithstanding anything to the
contrary herein, the Administering Body may, in order to fulfill the purposes
of this Plan, modify grants of Awards to Recipients who are foreign nationals
or employed outside of the United States to recognize differences in applicable
law, tax policy or local custom.


5.2          Award
Documents.


(a)           Each Award granted under this Plan
shall be evidenced by an agreement duly executed on behalf of the Company and
by the Recipient, or by a confirming memorandum issued by the Company to the
Recipient, setting forth such terms and conditions applicable to the Award as
the Administering Body may in its discretion determine.  Awards will not be binding 



 5
 









upon the Company,
and Recipients will have no rights thereto, until such an agreement is entered
into between the Company and the Recipient or such a memorandum is delivered by
the Company to the Recipient, but an Award may have an effective date on or
after the date of grant but prior to the date of such an agreement or
memorandum.  Award Documents may but need
not be identical and shall comply with and be subject to the terms and
conditions of this Plan, a copy of which shall be provided to each Recipient
and incorporated by reference into each Award Document.  Any Award Document may contain such other
terms, provisions and conditions not inconsistent with this Plan as may be
determined by the Administering Body.


(b)           In case of any conflict between this
Plan and any Award Document, this Plan shall control.


5.3          Exercise
of Awards.  No
Award shall be exercisable except in respect of whole shares, and fractional
share interests shall be disregarded.  An
Award shall be deemed to be exercised when the Secretary or other designated
official of the Company receives written notice of such exercise from the Recipient,
together with payment of the exercise price made in accordance with Section 5.4
and any amounts required under Section 5.11.  Notwithstanding any other provision of this
Plan, the Company and/or the Administering Body may impose, by rule and/or in
Award Documents, such conditions upon the exercise of Awards (including,
without limitation, conditions limiting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements.


5.4          Payment
for Awards.


(a)           The exercise price or other payment
for an Award shall be payable upon the exercise of a Stock Option or upon other
purchase of shares pursuant to an Award granted hereunder by delivery of legal
tender of the United States or payment of such other consideration as the
Administering Body may from time to time deem acceptable in any particular
instance.


(b)           The Company may assist any person to
whom an Award is granted hereunder (including without limitation any officer or
director of the Company) in the payment of the purchase price or other amounts
payable in connection with the receipt or exercise of that Award, by lending
such amounts to such person on such terms and at such rates of interest and
upon such security (if any) as shall be approved by the Administering Body.


(c)           If so approved by the Adminstration
Body, the exercise price for Awards may be paid by delivery of Common Stock to
the Company by or on behalf of the person exercising the Award and duly
endorsed in blank or accompanied by stock powers duly endorsed in blank, with
signatures guaranteed in accordance with the Exchange Act if required by the
Company, or retained by the Company from the stock otherwise issuable upon
exercise or surrender of vested and/or exercisable Awards or other equity Awards
previously granted to the Recipient and being exercised (if applicable) (in
either case valued at Fair Market Value as of the exercise date); or such other
consideration as the Administering Body may from time to time in the exercise
of its discretion deem acceptable in any particular instance; provided, however, that (i) the
Company and/or the Administering Body may allow exercise of an Award in a
broker-



 6
 









assisted or
similar transaction in which the exercise price is not received by the Company
until promptly after exercise, and/or (ii) the Administering Body may
allow the Company to loan the exercise price to the person entitled to exercise
the Award, if the exercise will be followed by a prompt sale of some or all of
the underlying shares and a portion of the sale proceeds is dedicated to full
payment of the exercise price and amounts required pursuant to Section 5.11.


(d)           Recipients will have no rights to the
assistance described in Section 5.4(b) or to the exercise techniques
described in Section 5.4(c), and the Company may offer or permit such
assistance or techniques on an ad hoc basis to any Recipient without incurring
any obligation to offer or permit such assistance or techniques on other
occasions or to other Recipients.


5.5          No
Employment Rights. 
Nothing contained in this Plan (or in Award Documents or in any other
documents related to this Plan or to Awards granted hereunder) shall confer
upon any Eligible Person or Recipient any right to continue in the employ of
the Company or any Affiliated Entity or constitute any contract or agreement of
employment or engagement, or interfere in any way with the right of the Company
or any Affiliated Entity to reduce such person’s compensation or other benefits
or to terminate the employment or engagement of such Eligible Person or
Recipient, with or without cause.  Except
as expressly provided in this Plan or in any statement evidencing the grant of
an Award pursuant to this Plan, the Company shall have the right to deal with
each Recipient in the same manner as if this Plan and any such statement
evidencing the grant of an Award pursuant to this Plan did not exist, including
without limitation with respect to all matters related to the hiring,
discharge, compensation and conditions of the employment or engagement of the
Recipient.  Any questions as to whether
and when there has been a termination of a Recipient’s employment or
engagement, the reason (if any) for such termination, and/or the consequences
thereof under the terms of this Plan or any statement evidencing the grant of
an Award pursuant to this Plan shall be determined by the Administering Body
and the Administering Body’s determination thereof shall be final and binding.


5.6          Restrictions
Under Applicable Laws and Regulations.


(a)           All Awards granted under this Plan
shall be subject to the requirement that, if at any time the Company shall
determine, in its discretion, that the listing, registration or qualification
of the shares subject to Awards granted under this Plan upon any securities
exchange or interdealer quotation system or under any federal, state or foreign
law, or the consent or approval of any government or regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such an Award or the issuance, if any, or purchase of shares in connection
therewith, such Award may not be exercised as a whole or in part unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Company.  During the term of this Plan,
the Company will use its reasonable efforts to seek to obtain from the
appropriate governmental and regulatory agencies any requisite qualifications,
consents, approvals or authorizations in order to issue and sell such number of
shares of its Common Stock as shall be sufficient to satisfy the requirements
of this Plan.  The inability of the
Company to obtain any 



 7
 









such
qualifications, consents, approvals or authorizations shall relieve the Company
of any liability in respect of the nonissuance or sale of such stock as to
which such qualifications, consents, approvals or authorizations pertain.


(b)           The Company shall be under no
obligation to register or qualify the issuance of Awards or underlying
securities under the Securities Act or applicable state securities laws.  Unless the issuance of Awards and underlying
securities have been registered under the Securities Act and qualified or
registered under applicable state securities laws, the Company shall be under
no obligation to issue any Awards or underlying securities unless the Awards
and underlying securities may be issued pursuant to applicable exemptions from
such registration or qualification requirements.  In connection with any such exempt issuance,
the Company may require the Recipient to provide a written representation and
undertaking to the Company, satisfactory in form and scope to the Company and
upon which the Company may reasonably rely, that such Recipient is acquiring
such Awards and underlying shares for such Recipient’s own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such securities, and that such person will make no transfer
of the same except in compliance with any rules and regulations in force at the
time of such transfer under the Securities Act and other applicable law, and
that if shares of stock are issued without such registration, a legend to this
effect (together with any other legends deemed appropriate by the Company) may
be endorsed upon the securities so issued. 
The Company may also order its transfer agent to stop transfers of such
securities.  The Company may also require
the Recipient to provide the Company such information and other documents as it
may request in order to satisfy the Company as to the investment sophistication
and experience of the Recipient and as to any other conditions for compliance
with any such exemptions from registration or qualification.


5.7          Additional
Conditions.  Any
Award may also be subject to such other provisions (whether or not applicable
to any other Award or Recipient) as the Administering Body determines
appropriate, including without limitation provisions to assist the Recipient in
financing the purchase of Common Stock through the exercise of Stock Options,
provisions for the forfeiture of or restrictions on resale or other disposition
of shares of Common Stock acquired under any Award, provisions giving the
Company the right to repurchase shares of Common Stock acquired under any Award
in the event the Recipient elects to dispose of such shares, and provisions to
comply with federal and state securities laws and federal and state income tax
withholding requirements.


5.8          No
Privileges of Stock Ownership.  Except as otherwise set forth herein, a
Recipient or a permitted transferee of an Award shall have no rights as a
stockholder with respect to any shares issuable or issued in connection with
the Award until the date of the receipt by the Company of all amounts payable
and performance by the Recipient of all obligations in connection with the
exercise of the Award.  Status as an
Eligible Person shall not be construed as a commitment that any Award will be
granted under this Plan to an Eligible Person or to Eligible Persons generally.  No person shall have any right, title or
interest in any fund or in any specific asset (including shares of capital
stock) of the Company by reason of any Award granted hereunder.  Neither this Plan (or any documents related
hereto) nor any action taken pursuant hereto shall be construed to create a
trust of any kind or a fiduciary relationship between the 



 8
 









Company and any
person.  To the extent that any person
acquires a right to receive an Award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company.


5.9          Nonassignability.  Unless the Administering Body shall otherwise
determine on a case-by-case basis, no Award granted under this Plan shall be
assignable or transferable except (a) by will or by the laws of descent and
distribution, or (b) subject to the final sentence of this Section 5.9,
upon dissolution of marriage pursuant to a qualified domestic relations
order.  Unless the Administering Body
shall otherwise determine on a case-by-case basis, during the lifetime of a
Recipient, an Award granted to such person shall be exercisable only by the
Recipient (or the Recipient’s permitted transferee) or such person’s guardian
or legal representative.  Notwithstanding
the foregoing, (i) no Award owned by a Recipient subject to Section 16 of
the Exchange Act may be assigned or transferred in any manner inconsistent with
Rule 16b-3, and (ii) Incentive Stock Options (or other Awards subject to
transfer restrictions under the IRC) may not be assigned or transferred in
violation of Section 422(b)(5) of the IRC (or any comparable or successor
provision) or the regulations thereunder, and nothing herein is intended to
allow such assignment or transfer.


5.10        Information
to Recipients.


(a)           The Company shall determine what, if
any, financial and other information shall be provided to Recipients and when
such financial and other information shall be provided after giving
consideration to applicable federal and state laws, rules and regulations,
including without limitation applicable federal and state securities laws,
rules and regulations.


(b)           The furnishing of financial and other
information that is confidential to the Company shall be subject to the
Recipient’s agreement that the Recipient shall maintain the confidentiality of
such financial and other information, shall not disclose such information to
third parties, and shall not use the information for any purpose other than
evaluating an investment in the Company’s securities under this Plan.  The Company may impose other restrictions on
the access to and use of such confidential information and may require a
Recipient to acknowledge the Recipient’s obligations under this Section 5.10(b)
(which acknowledgment shall not be a condition to Recipient’s obligations under
this Section 5.10(b)).


5.11        Withholding
Taxes.  Whenever
the granting, vesting or exercise of any Award, or the issuance of any shares
upon exercise of any Award or transfer thereof, gives rise to tax or tax
withholding liabilities or obligations, the Company shall have the right to
require the Recipient to remit to the Company an amount sufficient to satisfy
any federal, state and local withholding tax requirements arising in connection
therewith.  The Company may, in the
exercise of its discretion, allow satisfaction of tax withholding requirements
by accepting delivery of stock of the Company or by withholding a portion of
the stock otherwise issuable in connection with an Award, in each case valued
at Fair Market Value as of the date of such delivery or withholding.



 9
 









5.12        Legends
on Awards and Stock Certificates.  Each Award Document and each certificate
representing shares acquired upon vesting or exercise of an Award shall be
endorsed with all legends, if any, required by applicable federal and state securities
and other laws to be placed on the Award Document and/or the certificate.  The determination of which legends, if any,
shall be placed upon Award Documents or the certificates shall be made by the
Company and such decision shall be final and binding.


5.13        Effect of
Termination of Employment on Awards. 
If a Recipient who is an employee of the Company or
any Affiliated Entity ceases for any reason to be such an employee, that
portion of the Award than has not yet vested shall terminate, unless the Administering
Body accelerates the vesting schedule in its sole discretion (pursuant to Section
5.13(c)), in which case, the Administering Body may impose whatever
conditions it considers appropriate on the accelerated portion.  Awards will be exercisable by a Recipient (or
the Recipient’s successor-in-interest) following such Recipient’s termination
of employment with the Company or any Affiliated Entity, only to the extent
that installments thereof had become exercisable on or prior to the date of
such termination and only in accordance with the following provisions:


(a)           Termination
for Just Cause. 
Subject to Section 5.13(c) and except as otherwise provided in a
written agreement between the Company and the Recipient, which may be entered
into at any time before or after termination of employment, in the event of a
Just Cause Dismissal of a Recipient, all of the Recipient’s unexercised Awards
shall, whether or not vested, expire and become unexercisable as of the date of
such Just Cause Dismissal.


(b)           Termination
Other Than for Just Cause.  Subject to Section 5.13(c) and except
as otherwise provided in a written agreement between the Company and the
Recipient, which may be entered into at any time before or after termination of
employment, in the event of a Recipient’s termination of employment for:


(i)            any
reason other than for Just Cause Dismissal, death, Permanent Disability or
normal retirement, the Recipient’s unexercised Awards shall, whether or not
vested, expire and become unexercisable as of the earlier of (A) the date
such Awards would expire in accordance with their terms had the Recipient
remained employed and (B) three calendar months after the date of employment
termination in the case of Incentive Stock Options, or six calendar months after
the date of employment termination in the case of Nonqualified Stock Options.


(ii)           death,
Permanent Disability or normal retirement, the Recipient’s unexercised Awards
shall, whether or not vested, expire and become unexercisable as of the earlier
of (A) the date such Awards would expire in accordance with their terms
had the Recipient remained employed and (B) 12 months after the date of
employment termination.


(c)           Alteration
of Vesting and Exercise Periods.  Notwithstanding anything to the contrary
herein, (i) the Administering Body may, in its discretion, designate shorter or
longer periods for the vesting or exercise of any Award, or the lapse of
transfer or other restrictions pertaining thereto, following a Recipient’s
termination of employment with the Company or any Affiliated Entity, provided, however, that any shorter
periods determined by the 



 10
 









Administering Body
shall be effective only if provided for in the Award Document that evidences
the grant to the Recipient of such Award or if such shorter period is agreed to
in writing by the Recipient; and (ii) the Administering Body may, in its
discretion, elect to accelerate the vesting of all or any portion of any Award
that had not become exercisable on or prior to the date of such termination or
to extend the vesting period beyond the date of such termination.


(d)           Leave
of Absence.  In the
case of any employee on an approved leave of absence, the Administering Body
may make such provision respecting continuance of Awards granted to such
employee as the Administering Body in its discretion deems appropriate.


5.14        Limits on
Awards to Eligible Persons.  Notwithstanding any other provision of this
Plan, in order for the compensation attributable to Awards hereunder to qualify
as Performance-Based Compensation, no one Eligible Person shall be granted any
Awards with respect to more than 1,800,000 shares of Common Stock in any one
calendar year.  The limitation set forth
in this Section 5.14 shall be subject to adjustment as provided in Section
3.4 or under Article VII, but only to the extent such adjustment
would not affect the status of compensation attributable to Awards hereunder as
Performance-Based Compensation.


ARTICLE VI

AWARDS


6.1          Stock
Options.


(a)           Nature
of Stock Options. 
Stock Options may be Incentive Stock Options or Nonqualified Stock
Options.


(b)           Option
Exercise Price. 
The exercise price for each Stock Option shall be determined by the
Administering Body as of the date such Stock Option is granted.  The exercise price shall be no less than the
Fair Market Value of the Common Stock subject to the Stock Option as of the
date of grant.  Subject to approval by
the stockholders, the Administering Body may, with the consent of the Recipient
and subject to compliance with statutory or administrative requirements
applicable to Incentive Stock Options, amend the terms of any Stock Option to
provide that the exercise price of the shares remaining subject to the Stock
Option shall be reestablished at a price not less than 100% of the Fair Market
Value of the Common Stock on the effective date of the amendment.  No modification of any other term or
provision of any Stock Option that is amended in accordance with the foregoing
shall be required, although the Administering Body may, in its discretion, make
such further modifications of any such Stock Option as are not inconsistent
with this Plan.


(c)           Option
Period and Vesting. 
Stock Options granted hereunder shall vest and may be exercised as
determined by the Administering Body, except that exercise of such Stock Options
after termination of the Recipient’s employment shall be subject to Section 5.13.  Each Stock Option granted hereunder and all
rights or obligations thereunder shall expire on such date as shall be
determined by the Administering Body, but not later than 10 years after the 



 11
 









date the Stock
Option is granted and shall be subject to earlier termination as provided
herein or in the Award Document.  The
Administering Body may, in its discretion at any time and from time to time
after the grant of a Stock Option, accelerate vesting of such Stock Option as a
whole or part by increasing the number of shares then purchasable, provided
that the total number of shares subject to such Stock Option may not be
increased.  Except as otherwise provided
herein, a Stock Option shall become exercisable, as a whole or in part, on the
date or dates specified by the Administering Body and thereafter shall remain
exercisable until the expiration or earlier termination of the Stock Option.


(d)           Special
Provisions Regarding Incentive Stock Options.


(i)            Notwithstanding
anything in this Section 6.1 to the contrary, the exercise price
and vesting period of any Stock Option intended to qualify as an Incentive
Stock Option shall comply with the provisions of Section 422 of the IRC
and the regulations thereunder.  As of
the Effective Date, such provisions require, among other matters, that
(A) the exercise price must not be less than the Fair Market Value of the
underlying stock as of the date the Incentive Stock Option is granted, and not
less than 110% of the Fair Market Value as of such date in the case of a grant
to a Significant stockholder; and (B) that the Incentive Stock Option not
be exercisable after the expiration of ten years from the date of grant of such
Incentive Stock Option, or five years from the date of grant in the case of an
Incentive Stock Option granted to a Significant stockholder.


(ii)           The
aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the Common Stock for which one or more Stock Options granted to any
Recipient under this Plan (or any other option plan of the Company or any of
its subsidiaries or affiliates) may for the first time become exercisable as
Incentive Stock Options under the federal tax laws during any one calendar year
shall not exceed $100,000.


(iii)          Any
Options granted as Incentive Stock Options pursuant to this Plan that for any
reason fail or cease to qualify as such shall be treated as Nonqualified Stock
Options.


6.2          Restricted
Stock.


(a)           Award
of Restricted Stock.  The Administering Body shall determine the
Purchase Price (if any), the terms of payment of the Purchase Price, the
restrictions upon the Restricted Stock, and when such restrictions shall lapse.


(b)           Requirements
of Restricted Stock. 
All shares of Restricted Stock granted or sold pursuant to this Plan
will be subject to the following conditions:


(i)            No
Transfer.  The
shares may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, alienated or encumbered until the restrictions are
removed or expire;



 12















(ii)           Certificates.  The Company may require that the certificates
representing Restricted Stock granted or sold to a Recipient pursuant to this
Plan remain in the physical custody of an escrow holder or the Company until
all restrictions are removed or expire;


(iii)         Restrictive
Legends.  Each
certificate representing Restricted Stock granted or sold to a Recipient
pursuant to this Plan will bear such legend or legends making reference to the
restrictions imposed upon such Restricted Stock as the Company deems necessary
or appropriate to enforce such restrictions; and


(iv)          Other
Restrictions.  The
Administering Body may impose such other conditions on Restricted Stock as the
Administering Body may deem advisable, including, without limitation,
restrictions under the Securities Act, under the Exchange Act, under the
requirements of any stock exchange or interdealer quotation system upon which
such Restricted Stock or shares of the same class are then listed or traded and
under any blue sky or other securities laws applicable to such shares.


(c)           Lapse
of Restrictions. 
The restrictions imposed upon Restricted Stock will lapse in accordance
with such terms or other conditions as are determined by the Administering
Body.


(d)           Rights
of Recipient. 
Subject to the provisions of Section 6.3(b) and any restrictions
imposed upon the Restricted Stock, the Recipient will have all rights of a
stockholder with respect to the Restricted Stock granted or sold to such
Recipient under this Plan, including, without limitation, the right to vote the
shares and receive all dividends and other distributions paid or made with
respect thereto.


(e)           Termination
of Employment.  Unless the Administering Body in its
discretion determines otherwise, if a Recipient’s employment with the Company
or any Affiliated Entity terminates for any reason, all of the Recipient’s
Restricted Stock remaining subject to restrictions on the date of such
termination of employment shall be repurchased by the Company at the Purchase
Price (if any) paid by the Recipient to the Company, without interest or
premium, and otherwise returned to the Company without consideration.


6.3          Stock
Appreciation Rights.


(a)           Granting
of Stock Appreciation Rights.  The Administering Body may at any time and
from time to time approve the grant to Eligible Persons of Stock Appreciation
Rights, related or unrelated to Stock Options.


(b)           Stock
Appreciation Rights Related to Options.


(i)            A
Stock Appreciation Right granted in connection with a Stock Option granted
under this Plan will entitle the holder of the related Stock Option, upon
exercise of the Stock Appreciation Right, to surrender such Stock Option, or
any portion thereof to the extent previously vested but unexercised, with
respect to the number of shares as to which such 



 13
 









Stock
Appreciation Right is exercised, and to receive payment of an amount computed
pursuant to Section 6.3(b)(iii). 
Such Stock Option will, to the extent surrendered, then cease to be
exercisable.


(ii)           A
Stock Appreciation Right granted in connection with a Stock Option hereunder
will be exercisable only when, and only to the extent that, the related Stock
Option is exercisable, will not be transferable except to the extent that such
related Stock Option may be transferable, will not expire later than the underlying
Stock Option, and will be exercisable only when the Fair Market Value of the
Common Stock subject to the underlying Stock Option exceeds the exercise price
of such Stock Option.


(iii)          Upon
the exercise of a Stock Appreciation Right related to a Stock Option, the
Recipient will be entitled to receive payment of an amount determined by
multiplying (A) the difference obtained by subtracting the exercise price of a  share of Common Stock specified in the
related Stock Option from the Fair Market Value of a share of Common Stock on
the date of exercise of such Stock Appreciation Right (or as of such other date
or as of the occurrence of such event as may have been specified in the
instrument evidencing the grant of the Stock Appreciation Right), by (B) the number
of shares as to which such Stock Appreciation Right is exercised.


(c)           Stock
Appreciation Rights Unrelated to Options.  The Administering Body may grant Stock
Appreciation Rights unrelated to Stock Options to Eligible Persons.  Section 6.3(b)(iii) shall be used
to determine the amount payable at exercise under such Stock Appreciation
Right, except that in lieu of the exercise price specified in the related Stock
Option, the initial base amount specified in the Award shall be used.


(d)           Limits.  Notwithstanding the foregoing, the
Administering Body, in its discretion, may place a dollar limitation on the
maximum amount that will be payable upon the exercise of a Stock Appreciation
Right under this Plan.


(e)           Payments.  Payment of the amount determined under the
foregoing provisions may be made solely in whole shares of Common Stock valued
at their Fair Market Value on the date of exercise of the Stock Appreciation
Right or, alternatively, at the sole discretion of the Administering Body, in
cash or in a combination of cash and shares of Common Stock as the
Administering Body deems advisable.  The
Administering Body has full discretion to determine the form in which payment
of a Stock Appreciation Right will be made and to consent to or disapprove the
election of a Recipient to receive cash in full or partial settlement of a
Stock Appreciation Right.  If the
Administering Body decides to make full payment in shares of Common Stock, and
the amount payable results in a fractional share, payment for the fractional
share will be made in cash.


6.4          Stock
Payments.  The
Administering Body may approve Stock Payments of the Company’s Common Stock to
any Eligible Person for all or any portion of the compensation (other than base
salary) or other payment that would otherwise become payable by the Company to
the Eligible Person in cash.



 14
 









6.5          Dividend
Equivalents.  The
Administering Body may grant Dividend Equivalents to any Recipient who has
received a Stock Option, Stock Appreciation Right or other Award denominated in
shares of Common Stock.  Dividend
Equivalents may be paid in cash, Common Stock or other Awards; the amount of
Dividend Equivalents paid other than in cash shall be determined by the
Administering Body by application of such formula as the Administering Body may
deem appropriate to translate the cash value of dividends paid to the
alternative form of payment of the Dividend Equivalent.  Dividend Equivalents shall be computed as of
each dividend record date and shall be payable to recipients thereof at such time
as the Administering Body may determine. 
Notwithstanding the foregoing, the payment of a Dividend Equivalent with
respect to a Stock Option intended to constitute Performance-Based Compensation
shall not be contingent upon the exercise of such Stock Option.


6.6          Stock
Bonuses.  The
Administering Body may issue shares of Common Stock to Eligible Persons as
bonuses for services rendered or for any other valid consideration on such
terms and conditions as the Administering Body may determine.


6.7          Stock
Sales.  The
Administering Body may sell to Eligible Persons shares of Common Stock on such
terms and conditions as the Administering Body may determine.


6.8          Phantom
Stock.  The
Administering Body may grant Awards of Phantom Stock.  Phantom Stock is a cash bonus granted under
this Plan measured by the Fair Market Value of a specified number of shares of
Common Stock on a specified date, or measured by the excess of such Fair Market
Value over a specified minimum, which may but need not include a Dividend Equivalent.


6.9          Other
Stock-Based Benefits. 
The Administering Body is authorized to grant Other Stock-Based
Benefits.  Other Stock-Based Benefits are
any arrangements granted under this Plan not otherwise described above that
(a) by their terms might involve the issuance or sale of Common Stock or
(b) involve a benefit that is measured, as a whole or in part, by the
value, appreciation, dividend yield or other features attributable to a
specified number of shares of Common Stock.


ARTICLE VII

REORGANIZATIONS


7.1          Corporate
Transactions Not Involving a Change in Control.  If the Company shall consummate any
Reorganization not involving a Change of Control in which holders of shares of
Common Stock are entitled to receive in respect of such shares any securities,
cash or other consideration (including without limitation a different number of
shares of Common Stock), each Award outstanding under this Plan shall
thereafter be exercisable, in accordance with this Plan, only for the kind and
amount of securities, cash and/or other consideration receivable upon such
Reorganization by a holder of the same number of shares of Common Stock as are
subject to that Award immediately prior to such Reorganization, and any
adjustments will be made to the terms of the Award in the sole discretion of
the Administering Body as it may deem appropriate to give effect to the
Reorganization.



 15
 









7.2          Corporate
Transactions Involving a Change in Control.  As of the effective time and date of any
Change in Control, this Plan and any then outstanding Awards (whether or not
vested) shall automatically terminate unless (a) provision is made in writing
in connection with such transaction for the continuance of this Plan and for
the assumption of such Awards, or for the substitution for such Awards of new
awards covering the securities of a successor entity or an affiliate thereof,
with appropriate adjustments as to the number and kind of securities and
exercise prices, in which event this Plan and such outstanding Awards shall
continue or be replaced, as the case may be, in the manner and under the terms
so provided; or (b) the Board otherwise shall provide in writing for such
adjustments as it deems appropriate in the terms and conditions of the
then-outstanding Awards (whether or not vested), including without limitation
(i) accelerating the vesting of outstanding Awards and/or (ii) providing for
the cancellation of Awards and their automatic conversion into the right to
receive the securities, cash or other consideration that a holder of the shares
underlying such Awards would have been entitled to receive upon consummation of
such Change in Control had such shares been issued and outstanding immediately
prior to the effective date and time of the Change in Control (net of the
appropriate option exercise prices).  If,
pursuant to the foregoing provisions of this Section 7.2, this Plan and
the Awards shall terminate by reason of the occurrence of a Change in Control
without provision for any of the actions described in clause (a) or (b) hereof,
then any Recipient holding outstanding Awards shall have the right, at such
time immediately prior to the consummation of the Change in Control as the
Board shall designate, to exercise the Recipient’s Awards to the full extent
not theretofore exercised, including any installments which have not yet become
vested.


ARTICLE VIII

DEFINITIONS


Capitalized
terms used in this Plan and not otherwise defined shall have the meanings set
forth below:


“Administering Body”
means the Board as long as no Committee has been appointed
and is in effect and means the Committee as long as the Committee is appointed
and in effect.


“Affiliated Entity”
means any Parent Corporation or Subsidiary Corporation.


“Applicable Dividend
Period” means (i) the period between the date a
Dividend Equivalent is granted and the date the related Stock Option, Stock
Appreciation Right, or other Award is exercised, terminates, or is converted to
Common Stock, or (ii) such other time as the Administering  Body may specify in the written instrument evidencing the
grant of the Dividend Equivalent.


“Award” means
any Stock Option, Performance Award, Restricted Stock, Stock Appreciation
Right, Stock Payment, Stock Bonus, Stock Sale, Phantom Stock, Dividend
Equivalent, or Other Stock-Based Benefit granted or sold to an Eligible Person
under this Plan.



 16
 









“Award Document”
means the agreement or confirming memorandum setting forth the terms and
conditions of an Award.


“Board”
means the Board of Directors of the Company.


“Change in Control”
means the following and shall be deemed to occur if any of the following events
occur:


(a)           Any Person becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
fifty percent (50%) or more of either the then outstanding shares of Common
Stock or the combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of directors; or


(b)           Individuals who, as of the effective
date hereof, constitute the Board of Directors of the Company (the “Incumbent  Board”) cease for any reason to constitute at
least a majority of the Board of Directors of the Company, provided that any
individual who becomes a director after the effective date hereof whose
election, or nomination for election by the Company’s stockholders, is approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered to be a member of the Incumbent Board unless that
individual was nominated or elected by any Person having the power to exercise,
through beneficial ownership, voting agreement and/or proxy, twenty percent
(20%) or more of either the outstanding shares of Common Stock or the combined
voting power of the Company’s then outstanding voting securities entitled to
vote generally in the election of directors, in which case that individual
shall not be considered to be a member of the Incumbent Board unless such
individual’s election or nomination for election by the Company’s stockholders
is approved by a vote of at least two-thirds of the directors then comprising
the Incumbent Board; or


(c)           Consummation by the Company of the
sale or other disposition by the Company of all or substantially all of the
Company’s assets or a Reorganization of the Company with any other person,
corporation or other entity, other than


(i)            a
Reorganization that would result in the voting securities of the Company
outstanding immediately prior thereto (or, in the case of a reorganization or
merger or consolidation that is preceded or accomplished by an acquisition or
series of related acquisitions by any Person, by tender or exchange offer or
otherwise, of voting securities representing five percent (5%) or more of the
combined voting power of all securities of the Company, immediately prior to
such acquisition or the first acquisition in such series of acquisitions)
continuing to represent, either by remaining outstanding or by being converted
into voting securities of another entity, more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such other
entity outstanding immediately after such reorganization or merger or
consolidation (or series of related transactions involving such a
reorganization or merger or consolidation), or



 17
 









(ii)           a
Reorganization effected to implement a recapitalization or reincorporation of
the Company (or similar transaction) that does not result in a material change
in beneficial ownership of the voting securities of the Company or its
successor; or


(d)           Approval by the stockholders of the
Company or any order by a court of competent jurisdiction of a plan of
liquidation of the Company.


“Commission”
means the Securities and Exchange Commission.


“Committee”
means the committee appointed by the Board to administer this Plan pursuant to Section 4.1.


“Common Stock”
means the common stock of the Company, as constituted on the Effective Date of
this Plan, and as thereafter adjusted as a result of any one or more events
requiring adjustment of outstanding Awards under Section 3.4.


“Company” means
Quidel Corporation, a Delaware corporation.


“Dividend Equivalent”
means a right granted by the Company under Section 6.5 to a holder of a
Stock Option, Stock Appreciation Right or other Award denominated in shares of
Common Stock to receive from the Company during the Applicable Dividend Period
payments equivalent to the amount of dividends payable to holders of the number
of shares of Common Stock underlying such Stock Option, Stock Appreciation
Right, or other Award.


“Effective Date”
means June 9, 1998, which is the date this Plan was adopted by the Board.


“Eligible Person”
shall include directors, officers, employees, consultants and
advisors of the Company or of any Affiliated Entity.


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.


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


“Expiration Date”
means the 10th anniversary of the Effective Date.


“Fair Market Value”
of a share of the Company’s capital stock as of a particular date shall be
(i) if the stock is listed on an established stock exchange or exchanges
(including for this purpose, the Nasdaq National Market), the closing sale
price of the stock quoted for such date as reported in the Transactions Index
of each such exchange, as published in The
Wall Street Journal and determined by the Administering Body, or, if
no sale price was quoted in any such Index for such date, then as of the next
preceding date on which such a sale price was quoted; or (ii) if the stock
is not then listed on an exchange or the Nasdaq National Market, the average of
the closing bid and asked prices per share for the stock in the
over-the-counter market as quoted on The Nasdaq Small Cap Market on such date
(in the case of (i) or (ii), subject to adjustment as and if necessary and
appropriate to set an exercise price not less than 100% of the fair market 



 18
 









value of the stock
on the date an option is granted); or (iii) if the stock is not then
listed on an exchange or quoted in the over-the-counter market, an amount
determined in good faith by the Administering Body; provided, however, that (A) when appropriate, the
Administering Body, in determining Fair Market Value of capital stock of the
Company, may take into account such other factors as it may deem appropriate
under the circumstances and (B) if the stock is traded on the Nasdaq Small Cap
Market and both sales prices and bid and asked prices are quoted or available,
the Administering Body may elect to determine Fair Market Value under either
clause (i) or (ii) above. 
Notwithstanding the foregoing, the Fair Market Value of capital stock
for purposes of grants of Incentive Stock Options shall be determined in
compliance with applicable provisions of the IRC.  The Fair Market Value of rights or property other
than capital stock of the Company means the fair market value thereof as
determined by the Committee on the basis of such factors as it may deem
appropriate.


“Incentive Stock Option”
means a Stock Option that qualifies as an incentive stock option under Section
422 of the IRC, or any successor statute thereto.


“IRC” means
the Internal Revenue Code of 1986, as amended.


“Just Cause Dismissal”
means a termination of a Recipient’s employment for any of the following
reasons:  (i) the Recipient violates any
reasonable rule or regulation of the Board, the Company’s Chief Executive
Officer or the Recipient’s superiors that results in damage to the Company or
which, after written notice to do so, the Recipient fails to correct within a
reasonable time; (ii) any willful misconduct or gross negligence by the
Recipient in the responsibilities assigned to the Recipient; (iii) any
willful failure to perform the Recipient’s job as required to meet Company
objectives; (iv) any wrongful conduct of a Recipient that has an adverse impact
on the Company or that constitutes a misappropriation of Company assets;
(v) the Recipient’s performing services for any other person or entity
that competes with the Company while the Recipient is employed by the Company,
without the written approval of the Chief Executive Officer of the Company; or
(vi) any other conduct that the Administering Body determines constitutes Just
Cause for Dismissal; provided, however,
that if a Recipient is party to an employment agreement with the Company
providing for just cause dismissal (or some comparable notion) of Recipient
from Recipient’s employment with the Company, “Just Cause Dismissal” for
purposes of this Plan shall have the same meaning as ascribed thereto or to
such comparable notion in such employment agreement.


“Nonemployee Director” means
any director of the Company who qualifies as a “non-employee director” within
the meaning of Rule 16b-3.


“Nonqualified Stock Option”
means a Stock Option that is not an Incentive Stock Option.


“Other Stock-Based
Benefits” means an Award granted under Section 6.9
of this Plan.


“Outside Director”
means an “outside director” as defined in the Treasury regulations adopted
under Section 162(m) of the IRC.



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“Parent Corporation”
means any Parent Corporation as defined in Section 424(e) of the IRC.


“Payment Event”
means the event or events giving rise to the right to payment of a Performance
Award.


“Performance-Based
Compensation” means performance-based compensation
as described in Section 162(m) of the IRC. 
If the amount of compensation an Eligible Person will receive under any
Award is not based solely on an increase in the value of Common Stock after the
date of grant or award, the Committee, in order to qualify an Award as
performance-based compensation under Section 162(m) of the IRC, can condition
the grant, award, vesting, or exercisability of such an Award on the attainment
of a preestablished, objective performance goal.  For this purpose, a preestablished, objective
performance goal may include one or more of the following performance criteria:
 (a) cash flow, (b) earnings
per share (including earning before interest, taxes, depreciation and
amortization), (c) return on equity, (d) total stockholder return,
(e) return on capital, (f) return on assets or net assets,
(g) income or net income, (h) operating income or net operating
income, (i) operating margin, (j) return on operating revenue, and
(k) any other similar performance criteria.


“Permanent Disability”
means that the Recipient becomes physically or mentally incapacitated or
disabled so that the Recipient is unable to perform substantially the same
services as the Recipient performed prior to incurring such incapacity or
disability (the Company, at its option and expense, being entitled to retain a
physician to confirm the existence of such incapacity or disability, and the
determination of such physician to be binding upon the Company and the
Recipient), and such incapacity or disability continues for a period of three
consecutive months or six months in any 12-month period or such other period(s)
as may be determined by the Committee with respect to any Award, provided that
for purposes of determining the period during which an Incentive Stock Option
may be exercised pursuant to Section 5.13(ii) hereof, Permanent
Disability means “permanent and total disability” as defined in Section 22(e)
of the IRC.


“Person”
means any person, entity or group, within the meaning of Section 13(d) or
14(d) of the Exchange Act, but excluding (i) the Company and its subsidiaries,
(ii) any employee stock ownership or other employee benefit plan maintained by
the Company that is qualified under ERISA and (iii) an underwriter or
underwriting syndicate that has acquired the Company’s securities solely in
connection with a public offering thereof.


“Phantom Stock”
means an Award granted under Section 6.8 of this Plan.


“Plan” means
this 1998 Stock Incentive Plan of the Company.


“Plan Term”
means the period during which this Plan remains in effect (commencing the
Effective Date and ending on the Expiration Date).



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“Purchase Price”
means the purchase price (if any) to be paid by a Recipient for Restricted
Stock as determined by the Committee (which price shall be at least equal to
the minimum price required under applicable laws and regulations for the
issuance of Common Stock which is nontransferable and subject to a substantial
risk of forfeiture until specific conditions are met).


“Recipient”
means an Eligible Person who has received an Award under this Plan.


“Reorganization”
means any merger, consolidation or other reorganization.


“Restricted Stock”
means Common Stock that is the subject of an Award made under
Section 6.2 and that is nontransferable and subject to a
substantial risk of forfeiture until specific conditions are met, as set forth
in this Plan and in any statement evidencing the grant of such Award.


“Rule 16b-3”
means Rule 16b-3 under the Exchange Act.


“Securities Act”
means the Securities Act of 1933, as amended.


“Significant stockholder”
is an individual who, at the time a Stock Option is granted to such individual
under this Plan, owns more than ten percent (10%) of the combined voting power
of all classes of stock of the Company or of any Parent Corporation or
Subsidiary Corporation (after application of the attribution rules set forth in
Section 424(d) of the IRC).


“Stock Appreciation Right”
means a right granted under Section 6.3 to receive a payment that is
measured with reference to the amount by which the Fair Market Value of a
specified number of shares of Common Stock appreciates from a specified date,
such as the date of grant of the Stock Appreciation Right, to the date of
exercise.


“Stock Bonus”
means an issuance or delivery of unrestricted or restricted shares of Common
Stock under Section 6.6 of this Plan as a bonus for services
rendered or for any other valid consideration under applicable law.


“Stock Payment”
means a payment in shares of the Company’s Common Stock to
replace all or any portion of the compensation (other than base salary) that
would otherwise become payable to a Recipient.


“Stock Option”
means a right to purchase stock of the Company granted under Section 6.1
of this Plan.


“Stock Sale”
means a sale of Common Stock to an Eligible Person under Section 6.7 of
this Plan.


“Subsidiary Corporation”
means any Subsidiary Corporation as defined in Section 424(f) of the IRC.



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