**Exhibit10.1**

 

**ULTRATECH,INC.**

**1993STOCK OPTION/STOCK ISSUANCE PLAN**

 

(Amended and Restated as of March 2, 2004)

 

 

# **ARTICLE ONEGENERAL**

 

## **I.****                                        ****PURPOSE OF THE PLAN**

 

This 1993 StockOption/Stock Issuance Plan (“Plan”) is intended to promote the interests ofUltratech, Inc., a Delaware corporation (the “Corporation”), by providing (i)key employees (including officers) of the Corporation (or its parent orsubsidiary corporations) who are responsible for the management, growth andfinancial success of the Corporation (or its parent or subsidiarycorporations), (ii) the non-employee members of the Corporation’s Board ofDirectors and (iii) independent consultants and other advisors who providevaluable services to the Corporation (or its parent or subsidiary corporations)with the opportunity to acquire a proprietary interest, or otherwise increasetheir proprietary interest, in the Corporation as an incentive for them toremain in the service of the Corporation (or its parent or subsidiarycorporations).

 

### A.                                   The Plan became effective onSeptember 29, 1993, the date on which the shares of the Corporation’sCommon Stock were registered under Section 12(g) of the SecuritiesExchange Act of 1934, as amended (the “1934 Act”).  Such date is hereby designated as the Effective Date for thePlan.

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### B.                                     This Plan shall serve as thesuccessor to the Corporation’s existing 1993 Stock Option and 1993 StockIssuance Plans (the “Predecessor Plans”), and no further option grants or shareissuances shall be made under the Predecessor Plans from and after theEffective Date of this Plan.  Alloutstanding stock options and unvested share issuances under the PredecessorPlans on the Effective Date are hereby incorporated into this Plan and shallaccordingly be treated as outstanding stock options and unvested shareissuances under this Plan.  However,each outstanding option grant and unvested share issuance so incorporated shallcontinue to be governed solely by the express terms and conditions of theinstrument evidencing such grant or issuance, and no provision of this Planshall be deemed to affect or otherwise modify the rights or obligations of theholders of such incorporated options with respect to their acquisition ofshares of Common Stock thereunder.  Allunvested shares of Common Stock outstanding under the Predecessor Plans on theEffective Date shall continue to be governed solely by the express terms andconditions of the instruments evidencing such issuances, and no provision ofthis Plan shall be deemed to affect or modify the rights or obligations of theholders of such unvested shares.

 

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## **II.****                                    ****DEFINITIONS**

 

### A.                                   For purposes of the Plan, thefollowing definitions shall be in effect:

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**Board**:  the Corporation’s Board of Directors.

 

**Code**:  the Internal Revenue Code of 1986, as amended.

 

**Committee**:  the committee of two (2) or morenon-employee Board members appointed by the Board to administer the Plan.

 

**Common Stock**:  shares of the Corporation’s common stock.

 

**Change in Control**:  a change in ownership or control of theCorporation effected through either of the following transactions:

 

a.                                       anyperson or related group of persons (other than the Corporation or a person thatdirectly or indirectly controls, is controlled by, or is under common controlwith, the Corporation) directly or indirectly acquires beneficial ownership(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessingmore than fifty percent (50%) of the total combined voting power of theCorporation’s outstanding securities pursuant to a tender or exchange offermade directly to the Corporation’s stockholders; or

 

b.                                      thereis 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 ceases, byreason of one or more proxy contests for the election of Board members, to becomprised of individuals who either (A) have been Board members continuouslysince the beginning of such period or (B) have been elected or nominated forelection as Board members during such period by at least a majority of theBoard members described in clause (A) who were still in office at the time suchelection or nomination was approved by the Board.

 

**Corporate Transaction**:  any of the following stockholder-approvedtransactions to which the Corporation is a party:

 

a.                                       amerger or consolidation in which the Corporation is not the surviving entity,except for a transaction the principal purpose of which is to change the Statein which the Corporation is incorporated,

 

b.                                      thesale, transfer or other disposition of all or substantially all of the assetsof the Corporation in complete liquidation or dissolution of the Corporation,or

 

c.                                       anyreverse merger in which the Corporation is the surviving entity but in whichsecurities possessing more than fifty percent (50%) of the total combinedvoting power of the Corporation’s outstanding securities are transferred toperson or persons different from the persons holding those securitiesimmediately prior to such merger.

 

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**Employee**:  an individual who performs services while inthe employ of the Corporation or one or more parent or subsidiary corporations,subject to the control and direction of the employer entity not only as to thework to be performed but also as to the manner and method of performance.

 

**Fair Market Value**:  the Fair Market Value per share of CommonStock determined in accordance with the following provisions:

 

a.                                       Ifthe Common Stock is not at the time listed or admitted to trading on any nationalstock exchange but is traded on the Nasdaq National Market, the Fair MarketValue shall be the closing selling price per share on the date in question, assuch price is reported by the National Association of Securities Dealers on theNasdaq National Market or any successor system.  If there is no reported closing selling price for the CommonStock on the date in question, then the closing selling price on the lastpreceding date for which such quotation exists shall be determinative of FairMarket Value.

 

b.                                      Ifthe Common Stock is at the time listed or admitted to trading on any nationalstock exchange, then the Fair Market Value shall be the closing selling priceper share on the date in question on the exchange determined by the PlanAdministrator to be the primary market for the Common Stock, as such price isofficially quoted in the composite tape of transactions on such exchange.  If there is no reported sale of Common Stockon such exchange on the date in question, then the Fair Market Value shall bethe closing selling price on the exchange on the last preceding date for whichsuch quotation exists.

 

**Hostile Take-Over**:  the acquisition, directly or indirectly, byany person or related group of persons (other than the Corporation or a personthat directly or indirectly controls, is controlled by, or is under commoncontrol with, the Corporation) of beneficial ownership (within the meaning ofRule 13d-3 of the 1934 Act) of securities possessing more than fifty percent(50%) of the total combined voting power of the Corporation’s outstandingsecurities pursuant to a tender or exchange offer made directly to theCorporation’s stockholders which the Board does not recommend such stockholdersto accept.

 

**Optionee**:  any person to whom an option is granted underthe Discretionary Option Grant or Automatic Option Grant Program in effectunder the Plan.

 

**Participant**:  any person who receives a direct issuance ofCommon Stock under the Stock Issuance Program in effect under the Plan.

 

**Plan Administrator**:  the Committee in its capacity as theadministrator of the Plan.

 

**Permanent Disability**or **PermanentlyDisabled**:  the inability ofthe Optionee or the Participant to engage in any substantial gainful activityby reason of any medically determinable physical or mental impairment expectedto result in death or to be of continuous duration of twelve (12) months ormore.

 

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**Service**:  the performance of services on a periodicbasis to the Corporation (or any parent or subsidiary corporation) in thecapacity of an Employee, a non—employee member of the board of directors or anindependent consultant or advisor, except to the extent otherwise specificallyprovided in the applicable stock option or stock issuance agreement.

 

**Take-Over Price**:  the greater of (a) the Fair MarketValue per share of Common Stock on the date the option is surrendered to theCorporation in connection with a Hostile Take-Over or (b) the highest reportedprice per share of Common Stock paid by the tender offeror in effecting suchHostile Take-Over.  However, if thesurrendered option is an Incentive Option, the Take-Over Price shall not exceedthe clause (a) price per share.

 

### B.                                     The following provisions shall beapplicable in determining the parent and subsidiary corporations of theCorporation:

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Any corporation(other than the Corporation) in an unbroken chain of corporations ending withthe Corporation shall be considered to be a **parent** of the Corporation,provided each such corporation in the unbroken chain (other than theCorporation) owns, at the time of the determination, stock possessing fiftypercent (50%) or more of the total combined voting power of all classes ofstock in one of the other corporations in such chain.

 

Each corporation(other than the Corporation) in an unbroken chain of corporations which beginswith the Corporation shall be considered to be a **subsidiary** of theCorporation, provided each such corporation (other than the last corporation)in the unbroken chain owns, at the time of the determination, stock possessingfifty percent (50%) or more of the total combined voting power of all classesof stock in one of the other corporations in such chain.

 

## **III.****                                ****STRUCTURE OF THE PLAN**

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### A.                                   Stock Programs. The Plan shall be divided into three separate components: theDiscretionary Option Grant Program specified in Article Two, the AutomaticOption Grant Program specified in Article Three and the Stock IssuanceProgram specified in Article Four. Under the Discretionary Option Grant Program, eligible individuals may,at the discretion of the Plan Administrator, be granted options to purchaseshares of Common Stock in accordance with the provisions ofArticle Two.  Under the AutomaticOption Grant Program, non-employee Board members will receive a series ofautomatic option grants over their period of continued Board service topurchase shares of Common Stock in accordance with the provisions ofArticle Three.  Under the StockIssuance Program, eligible individuals may be issued shares of Common Stockdirectly, either through the immediate purchase of such shares at Fair MarketValue at the time of issuance or as a bonus tied to the performance of servicesor the Corporation’s attainment of financial objectives, without any cashpayment required of the recipient.

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### B.                                     General Provisions. Unless the context clearly indicates otherwise, the provisions ofArticles One and Five shall apply to the Discretionary Option Grant Program,the Automatic Option Grant Program and the Stock Issuance Program and shallaccordingly govern the interests of all individuals under the Plan.

 

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## **IV.****                               ****ADMINISTRATION OF THE PLAN**

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### A.                                   Both the Discretionary Option GrantProgram and the Stock Issuance Program shall be administered by a committee(“Committee”) of two or more non-employee Board members.  Members of the Committee shall serve forsuch period of time as the Board may determine and shall be subject to removalby the Board at any time.

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### B.                                     The Committee as Plan Administratorshall have full power and authority (subject to the express provisions of thePlan) to establish rules and regulations for the proper administration of theDiscretionary Option Grant and Stock Issuance Programs and to make suchdeterminations under, and issue such interpretations of, the provisions of suchprograms and any outstanding option grants or stock issuances thereunder as itmay deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on allparties who have an interest in the Discretionary Option Grant or StockIssuance Program or any outstanding option or share issuance thereunder.

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### C.                                     Administration of the AutomaticOption Grant Program shall be self-executing in accordance with the expressterms and conditions of Article Three, and the Committee as PlanAdministrator shall exercise no discretionary functions with respect to optiongrants made pursuant to that program.

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## **V.****                                   ****OPTION GRANTS AND STOCK ISSUANCES**

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### A.                                   The persons eligible to participatein the Discretionary Option Grant Program under Article Two or the StockIssuance Program under Article Four shall be limited to the following:

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#### 1.                                       officersand other key employees of the Corporation (or its parent or subsidiarycorporations) who render services which contribute to the management, growthand financial success of the Corporation (or its parent or subsidiarycorporations);

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#### 2.                                       non-employeemembers of the Board; and

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#### 3.                                       thoseindependent consultants or other advisors who provide valuable services to theCorporation (or its parent or subsidiary corporations).

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B.                                     ThePlan Administrator shall have full authority to determine, (I) with respect tothe option grants made under the Discretionary Option Grant Program, whicheligible individuals are to receive option grants, the time or time when suchgrants are to be made, the number of shares to be covered by each such grant,the status of the granted option as either an incentive stock option(“Incentive Option”) which satisfies the requirements of Section 422 ofthe Code or a non-statutory option not intended to meet such requirements, thetime or times at which each granted option is to become exercisable and themaximum term for which the option may remain outstanding and (II), with respectto stock issuances under the Stock Issuance Program, the number of shares to beissued to each Participant, the vesting schedule (if any) to be applicableto the issued shares, and the consideration to be paid by the individual forsuch shares.

 

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## **VI.****                               ****STOCK SUBJECT TO THE PLAN**

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### A.                                   Shares of Common Stock shall beavailable for issuance under the Plan and shall be drawn from either theCorporation’s authorized but unissued shares of Common Stock or from reacquiredshares of Common Stock, including shares repurchased by the Corporation on theopen market.  Subject to the automaticshare increase provisions of Section VI. B. of this Article One, themaximum number of shares of Common Stock reserved for issuance over the term ofthe Plan shall be limited to 8,872,647 shares(1).  Such share reserve includes (i) the initial number of shares  incorporated into this Plan from thePredecessor Plans on the Effective Date, (ii) an additional 600,000-shareincrease authorized by the Board on March 21, 1996 and approved by thestockholders at the 1996 Annual Stockholders Meeting, (iii) an additional277,239 shares attributable to the automatic annual share increase for fiscal1996 which was effected on January 2, 1996, (iv) an additional 284,346shares attributable to the automatic annual share increase for fiscal 1997which was effected on January 2, 1997, (v) an additional 450,000 sharesauthorized by the Board on March 18, 1997 and approved by the stockholdersat the 1997 Annual Meeting, (vi) an additional 291,008 shares attributable tothe automatic annual share increase for fiscal 1998 which was effected onJanuary 2, 1998, (vii)  anadditional 295,480 shares attributable to the automatic annual share increasefor fiscal 1999 which was effected on January 4, 1999, (viii) anadditional 299,490 shares attributable to the automatic annual share increasefor fiscal 2000 which was effected on January 3, 2000, (ix) an additional898,045 shares of Common Stock added to the share reserve on January 2,2002 by reason of the automatic increase provision of Section VI.B of thisArticle One, (x) an additional 905,088 shares of Common Stock added to theshare reserve on January 2, 2003 by reason of the automatic increaseprovision of Section VI.B of this Article One and (xi) an additional943,285 shares of Common Stock added to the share reserve on January 2,2004 by reason of the automatic increase provision of Section VI.B of thisArticle One..  The share reserve ineffect from time to time under the Plan shall be subject to periodic adjustmentin accordance with the provisions of this Section VI.  To the extent one or more outstandingoptions under the Predecessor Plans which have been incorporated into this Planare subsequently exercised, the number of shares issued with respect to eachsuch option shall reduce, on a share-for-share basis, the number of sharesavailable for issuance under this Plan.

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### B.                                     The number of shares of Common Stockavailable for issuance under the Plan shall automatically increase on the firsttrading day of January of each calendar year, beginning with calendar year2002 and continuing through calendar year 2006, by an amount equal to fourpercent (4%) of the total number of shares of Common Stock outstanding on thelast trading day of the calendar year immediately preceding the calendar yearof each such share increase, but in no event shall any such annual increaseexceed 1,700,000 shares.

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### C.                                     In no event may the aggregate numberof shares of Common Stock for which any one individual participating in thePlan may be granted stock options, separately-exercisable stock appreciationrights and direct stock issuances exceed 400,000 shares per fiscal year,beginning with the 1995 fiscal year. However, for the fiscal year in which an individual receives his or herinitial stock option grant or direct stock issuance under the Plan, the limitshall 

 

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(1)  All figures have been adjusted to reflectthe 2:1 stock split the Corporation effected May 10, 1995.

 

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be increased to 600,000shares.  Such limitations shall besubject to adjustment from time to time in accordance with the provisions ofthis Section VI.

 

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### D.                                    Should one or more outstandingoptions under this Plan (including outstanding options under the PredecessorPlans incorporated into this Plan) expire or terminate for any reason prior toexercise in full (including any option cancelled in accordance with thecancellation-regrant provisions of Section IV of Article Two of thePlan), then the shares subject to the portion of each option not so exercisedshall be available for subsequent issuance under the Plan.  Unvested shares issued under the Plan andsubsequently repurchased by the Corporation, at the original exercise or issueprice paid per share, pursuant to the Corporation’s repurchase rights under thePlan shall be added back to the number of shares of Common Stock reserved forissuance under the Plan and shall accordingly be available for reissuancethrough one or more subsequent option grants or direct stock issuances underthe Plan.  Shares subject to any optionor portion thereof surrendered or cancelled in accordance with Section Vof Article Two shall reduce on a share-for-share basis the number ofshares of Common Stock available for subsequent issuance under the Plan.  In addition, should the exercise price of anoutstanding option under the Plan (including any option incorporated from thePredecessor Plans) be paid with shares of Common Stock or should shares ofCommon Stock otherwise issuable under the Plan be withheld by the Corporationin satisfaction of the withholding taxes incurred in connection with theexercise of an outstanding option under the Plan or the vesting of a directshare issuance made under the Plan, then the number of shares of Common Stockavailable for issuance under the Plan shall be reduced by the gross number ofshares for which the option is exercised or which vest under the share issuance,and not by the net number of shares of Common Stock actually issued to theholder of such option or share issuance.

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### E.                                      Should any change be made to theCommon Stock issuable under the Plan by reason of any stock split, stockdividend, recapitalization, combination of shares, exchange of shares or otherchange affecting the outstanding Common Stock as a class without theCorporation’s receipt of consideration, then appropriate adjustments shall bemade to (i) the maximum number and/or class of securities issuable under thePlan, (ii) the maximum number and/or class of securities for which any oneperson may be granted stock options, separately exercisable stock appreciationsrights and direct stock issuances under this Plan per calendar year, (iii) thenumber and/or class of securities for which automatic option grants are to besubsequently made per eligible non-employee Board member under the AutomaticOption Grant Program, (iv) the number and/or class of securities and price pershare in effect under each option outstanding under either the DiscretionaryOption Grant or Automatic Option Grant Program and (v) the number and/or classof securities and price per share in effect under each outstanding optionincorporated into this Plan from the Predecessor Plans.  Such adjustments to the outstanding optionsare to be effected in a manner which shall preclude the enlargement or dilutionof rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final,binding and conclusive.

 

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# **ARTICLE TWODISCRETIONARY OPTION GRANT PROGRAM**

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## **I.****                                        ****TERMS AND CONDITIONS OF OPTIONS**

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Options grantedpursuant to the Discretionary Option Grant Program shall be authorized byaction of the Plan Administrator and may, at the Plan Administrator’sdiscretion, be either Incentive Options or non-statutory options.  Individuals who are not Employees of theCorporation or its parent or subsidiary corporations may only be grantednon-statutory options.  Each grantedoption shall be evidenced by one or more instruments in the form approved bythe Plan Administrator; provided, however, that each such instrument shallcomply with the terms and conditions specified below.  Each instrument evidencing an Incentive Option shall, inaddition, be subject to the applicable provisions of Section II of thisArticle Two.

 

### A.                                   Option Price.

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#### 1.                                       Theoption price per share shall be fixed by the Plan Administrator and shall in noevent be less than one hundred percent (100%) of the fair market value of suchCommon Stock on the grant date.

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#### 2.                                       Theoption price shall become immediately due upon exercise of the option and,subject to the provisions of Section I of Article Four and theinstrument evidencing the grant, shall be payable in one of the followingalternative forms specified below:

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•                                          full paymentin cash or check drawn to the Corporation’s order; or

 

•                                          full paymentin shares of Common Stock held for the requisite period necessary to avoid acharge to the Corporation’s earnings for financial reporting purposes andvalued at Fair Market Value on the Exercise Date (as such term is definedbelow); or

 

•                                          full paymentin a combination of shares of Common Stock held for the requisite periodnecessary to avoid a charge to the Corporation’s earnings for financialreporting purposes and valued at Fair Market Value on the Exercise Date andcash or check drawn to the Corporation’s order; or

 

•                                          full paymentthrough a broker-dealer sale and remittance procedure pursuant to which the Optionee(I) shall provide irrevocable written instructions to a Corporation-designatedbrokerage firm to effect the immediate sale of the purchased shares and remitto the Corporation, out of the sale proceeds available on the settlement date,sufficient funds to cover the aggregate option price payable for the purchasedshares plus all applicable 

 

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Federal and State income and employment taxes requiredto be withheld by the Corporation in connection with such purchase and (II)shall provide written directives to the Corporation to deliver the certificatesfor the purchased shares directly to such brokerage firm in order to completethe sale transaction.

 

For purposes ofthis subparagraph (2), the Exercise Date shall be the date on which writtennotice of the option exercise is delivered to the Corporation.  Except to the extent the sale and remittanceprocedure is utilized in connection with the exercise of the option, payment ofthe option price for the purchased shares must accompany such notice.

 

### B.                                     Term and Exercise of Options. Each option granted under this Discretionary Option Grant Program shallbe exercisable at such time or times and during such period as is determined bythe Plan Administrator and set forth in the instrument evidencing thegrant.  No such option, however, shallhave a maximum term in excess of ten (10) years from the grant date.

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### C.                                     Limited Transferability. During the lifetime of the Optionee, Incentive Options shall beexercisable only by the Optionee and shall not be assignable or transferableother than by will or by the laws of descent and distribution following theOptionee’s death.  However,non-statutory options may, in connection with the Optionee’s estate plan, beassigned in whole or in part during the Optionee’s lifetime to one or moremembers of the Optionee’s immediate family or to a trust establishedexclusively for one or more such family members.  The assigned portion may only be exercised by the person orpersons who acquire a proprietary interest in the option pursuant to theassignment.  The terms applicable to theassigned portion shall be the same as those in effect for the optionimmediately prior to such assignment and shall be set forth in such documentsissued to the assignee as the Plan Administrator may deem appropriate.

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### D.                                    Termination of Service.

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#### 1.                                       Thefollowing provisions shall govern the exercise period applicable to anyoutstanding options held by the Optionee at the time of cessation of Service ordeath.

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•                                          Should anOptionee cease Service for any reason (including death or Permanent Disability)while holding one or more outstanding options under this Article Two, thennone of those options shall (except to the extent otherwise provided pursuantto subparagraph D.(3) below) remain exercisable for more than a thirty-six(36)-month period (or such shorter period determined by the Plan Administratorand set forth in the instrument evidencing the grant) measured from the date ofsuch cessation of Service.

 

•                                          Any optionheld by the Optionee under this Article Two and exercisable in whole or inpart on the date of his or her death may be subsequently exercised by thepersonal representative of the Optionee’s estate or by the person or persons towhom the option is transferred pursuant to the Optionee’s will or in accordancewith the laws of descent and distribution. Such 

 

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exercise, however, must occur prior to the earlier of(i) the first anniversary of the date of the Optionee’s death or (ii) thespecified expiration date of the option term. Upon the occurrence of the earlier event, the option shall terminate.

 

•                                          Under nocircumstances shall any such option be exercisable after the specifiedexpiration date of the option term.

 

•                                          During theapplicable post-Service exercise period, the option may not be exercised in theaggregate for more than the number of shares (if any) in which the Optionee isvested at the time of his or her cessation of Service.  Upon the expiration of the limitedpost-Service exercise period or (if earlier) upon the specified expiration dateof the option term, each such option shall terminate and cease to beoutstanding with respect to any vested shares for which the option has not otherwisebeen exercised.  However, eachoutstanding option shall, immediately upon the Optionee’s cessation of Servicefor any reason, terminate and cease to be outstanding with respect to anyshares for which the option is not otherwise at that time exercisable or inwhich the Optionee is not otherwise at that time vested.

 

•                                          Should (i)the Optionee’s Service be terminated for misconduct (including, but not limitedto, any act of dishonesty, willful misconduct, fraud or embezzlement) or (ii)the Optionee make any unauthorized use or disclosure of confidentialinformation or trade secrets of the Corporation or its parent or subsidiarycorporations, then in any such event all outstanding options held by theOptionee under this Article Two shall terminate immediately and cease tobe outstanding.

 

#### 2.                                       ThePlan Administrator shall have complete discretion, exercisable either at thetime the option is granted or at any time while the option remains outstanding,to permit one or more options held by the Optionee under this Article Twoto be exercised, during the limited post-Service exercise period applicableunder subparagraph (1) above, not only with respect to the number of vestedshares of Common Stock for which each such option is exercisable at the time ofthe Optionee’s cessation of Service but also with respect to one or moresubsequent installments of the option shares in which the Optionee would haveotherwise vested had such cessation of Service not occurred.

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#### 3.                                       ThePlan Administrator shall also have full power and authority to extend theperiod of time for which the option is to remain exercisable following theOptionee’s cessation of Service or death from the limited period in effectunder subparagraph (1) above to such greater period of time as the PlanAdministrator shall deem appropriate. In no event, however, shall such option be exercisable after thespecified expiration date of the option term.

 

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### E.                                      Stockholder Rights.

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An Optionee shallhave no stockholder rights with respect to any shares covered by the optionuntil such individual shall have exercised the option and paid the option pricefor the purchased shares.

 

### F.                                      Repurchase Rights.

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The shares ofCommon Stock acquired upon the exercise of any Article Two option grantmay be subject to repurchase by the Corporation in accordance with thefollowing provisions:

 

##### (a)                                  ThePlan Administrator shall have the discretion to authorize the issuance ofunvested shares of Common Stock under this Article Two.  Should the Optionee cease Service whileholding such unvested shares, the Corporation shall have the right torepurchase any or all of those unvested shares at the option price paid pershare.  The terms and conditions uponwhich such repurchase right shall be exercisable (including the period andprocedure for exercise and the appropriate vesting schedule for thepurchased shares) shall be established by the Plan Administrator and set forthin the instrument evidencing such repurchase right.

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##### (b)                                 Allof the Corporation’s outstanding repurchase rights under this Article Twoshall automatically terminate, and all shares subject to such terminated rightsshall immediately vest in full, upon the occurrence of a Corporate Transaction,except to the extent:  (i) any suchrepurchase right is expressly assigned to the successor corporation (or parentthereof) in connection with the Corporate Transaction or (ii) such acceleratedvesting is precluded by other limitations imposed by the Plan Administrator atthe time the repurchase right is issued.

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##### (c)                                  ThePlan Administrator shall have the discretionary authority, exercisable eitherbefore or after the Optionee’s cessation of Service, to cancel theCorporation’s outstanding repurchase rights with respect to one or more sharespurchased or purchasable by the Optionee under this Option Grant Program andthereby accelerate the vesting of such shares in whole or in part at any time.

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## **II.****                                    ****INCENTIVE OPTIONS**

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The terms andconditions specified below shall be applicable to all Incentive Options grantedunder this Article Two.  IncentiveOptions may only be granted to individuals who are Employees of theCorporation.  Options which are specificallydesignated as “non-statutory” options when issued under the Plan shall not be subjectto such terms and conditions.

 

### A.                                   Dollar Limitation. The aggregate fair market value (determined as of the respective date ordates of grant) of the Common Stock for which one or more options granted toany Employee after December 31, 1986 under this Plan (or any other optionplan of the Corporation or its parent or subsidiary corporations) may for thefirst time become exercisable as incentive stock options under the Federal taxlaws during any one calendar year shall not exceed the sum of One HundredThousand Dollars ($100,000).  To theextent the Employee holds two 

 

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(2) or more such optionswhich become exercisable for the first time in the same calendar year, theforegoing limitation on the exercisability of such options as incentive stockoptions under the Federal tax laws shall be applied on the basis of the orderin which such options are granted. Should the number of shares of Common Stock for which any IncentiveOption first becomes exercisable in any calendar year exceed the applicable OneHundred Thousand Dollar ($100,000) limitation, then that option maynevertheless be exercised in that calendar year for the excess number of sharesas a non-statutory option under the Federal tax laws.

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### B.                                     10% Stockholder. If any individual to whom an Incentive Option is granted is the owner ofstock (as determined under Section 424(d) of the Code) possessing tenpercent (10%) or more of the total combined voting power of all classes ofstock of the Corporation or any one of its parent or subsidiary corporations,then the option price per share shall not be less than one hundred and tenpercent (110%) of the fair market value per share of Common Stock on the grantdate, and the option term shall not exceed five (5) years, measured from thegrant date.

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Except as modifiedby the preceding provisions of this Section II, the provisions of ArticlesOne, Two and Five of the Plan shall apply to all Incentive Options grantedhereunder.

 

## **III.****                                ****CORPORATE TRANSACTIONS/CHANGES IN CONTROL**

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### A.                                   In the event of any CorporateTransaction, each option which is at the time outstanding under thisArticle Two shall automatically accelerate so that each such option shall,immediately prior to the specified effective date for the CorporateTransaction, become fully exercisable with respect to the total number ofshares of Common Stock at the time subject to such option and may be exercisedfor all or any portion of such shares as fully-vested shares.  However, an outstanding option under thisArticle Two shall **not** so accelerate if and to theextent:  (i) such option is, inconnection with the Corporate Transaction, either to be assumed by thesuccessor corporation or parent thereof or to be replaced with a comparableoption to purchase shares of the capital stock of the successor corporation orparent thereof, (ii) such option is to be replaced with a cash incentiveprogram of the successor corporation which preserves the option spread existingat the time of the Corporate Transaction and provides for subsequent payout inaccordance with the same vesting schedule applicable to such option, or(iii) the acceleration of such option is subject to other limitations imposedby the Plan Administrator at the time of the option grant.  The determination of option comparabilityunder clause (i) above shall be made by the Plan Administrator, and itsdetermination shall be final, binding and conclusive.

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### B.                                     Immediately following theconsummation of the Corporate Transaction, all outstanding options under thisArticle Two shall terminate and cease to be outstanding, except to theextent assumed by the successor corporation or its parent company.

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### C.                                     Each outstanding option under thisArticle Two which is assumed in connection with the Corporate Transactionor is otherwise to continue in effect shall be appropriately adjusted,immediately after such Corporate Transaction, to apply andpertain to the number and class of securities which would have been issued tothe option holder, in consummation of such Corporate Transaction, had suchperson exercised the option immediately

 

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prior to such CorporateTransaction.  Appropriate adjustmentsshall also be made to the option price payable per share, provided theaggregate option price payable for such securities shall remain the same.  In addition, appropriate adjustments toreflect the Corporate Transaction shall be made to (i) the class and number ofsecurities available for issuance over the remaining term of the Plan, (ii) themaximum number and/or class of securities for which any one person may begranted stock options, separately exercisable stock appreciation rights anddirect stock issuances under this Plan per calendar year and (iii) the maximumnumber and/or class of securities which may be issued pursuant to IncentiveOptions granted under the Plan.

###  

### D.                                    The Plan Administrator shall havethe discretion,  exercisable either atthe time the option is granted or at any time while the option remainsoutstanding, to provide (upon such terms as it may deem appropriate) for theautomatic acceleration of one or more outstanding options which are assumed orreplaced in the Corporate Transaction and do not otherwise accelerate at thattime, in the event the Optionee’s Service should subsequently terminate withina designated period following the effective date of such Corporate Transaction.

###  

### E.                                      The grant of options under thisArticle Two shall in no way affect the right of the Corporation to adjust,reclassify, reorganize or otherwise change its capital or business structure orto merge, consolidate, dissolve, liquidate or sell or transfer all or any partof its business or assets.

###  

### F.                                      The Plan Administrator shall havethe discretionary authority, exercisable either at the time the option isgranted or at any time while the option remains outstanding, to provide for theautomatic acceleration of one or more outstanding options under thisArticle Two (and the termination of one or more of the Corporation’s outstandingrepurchase rights under this Article Two) upon the occurrence of anyChange in Control.  The PlanAdministrator shall also have full power and authority to condition any suchoption acceleration (and the termination of any outstanding repurchase rights)upon the subsequent termination of the Optionee’s Service within a specifiedperiod following the Change in Control.

###  

### G.                                     Any options accelerated inconnection with the Change in Control shall remain fully exercisable until theexpiration or sooner termination of the option term.

###  

### H.                                    The exercisability as incentivestock options under the Federal tax laws of any options accelerated under thisSection III in connection with a Corporate Transaction or Change inControl shall remain subject to the dollar limitation of Section II ofthis Article Two.  To the extentsuch dollar limitation is exceeded, the accelerated option shall be exercisableas a non-statutory option under the Federal tax laws.

###  

## **IV.****                               ****CANCELLATION AND REGRANT OF OPTIONS**

##  

The Plan Administratorshall have the authority to effect, at any time and from time to time, with theconsent of the affected optionees, the cancellation of any or all outstandingoptions under this Article Two (including outstanding options under thePredecessor Plans incorporated into this Plan) and to grant in substitution newoptions under the Plan covering the same or different numbers of shares ofCommon Stock but with an option price per share not less than the Fair MarketValue of the Common Stock on the new grant date.

 

14

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## **V.****                                   ****STOCK APPRECIATION RIGHTS**

 

### A.                                   Provided and only if the PlanAdministrator determines in its discretion to implement the stock appreciationright provisions of this Section V, one or more Optionees may be grantedthe right, exercisable upon such terms and conditions as the Plan Administratormay establish, to surrender all or part of an unexercised option under thisArticle Two in exchange for a distribution from the Corporation in anamount equal to the excess of (i) the Fair Market Value (on the optionsurrender date) of the number of shares in which the Optionee is at the timevested under the surrendered option (or surrendered portion thereof) over (ii)the aggregate option price payable for such vested shares.

###  

### B.                                     No surrender of an option shall beeffective hereunder unless it is approved by the Plan Administrator.  If the surrender is so approved, then thedistribution to which the Optionee shall accordingly become entitled under thisSection V may be made in shares of Common Stock valued at Fair MarketValue on the option surrender date, in cash, or partly in shares and partly incash, as the Plan Administrator shall in its sole discretion deem appropriate.

###  

### C.                                     If the surrender of an option isrejected by the Plan Administrator, then the Optionee shall retain whateverrights the Optionee had under the surrendered option (or surrendered portionthereof) on the option surrender date and may exercise such rights at any timeprior to the later of (i) five (5) business days after the receipt of therejection notice or (ii) the last day on which the option is otherwiseexercisable in accordance with the terms of the instrument evidencing suchoption, but in no event may such rights be exercised more than ten (10) yearsafter the date of the option grant.

###  

### D.                                    One or more officers of theCorporation subject to the short-swing profit restrictions of the Federalsecurities laws may, in the Plan Administrator’s sole discretion, be grantedlimited stock appreciation rights in tandem with their outstanding optionsunder the Plan.  Upon the occurrence ofa Hostile Take-Over effected at any time when the Corporation’s outstandingCommon Stock is registered under Section 12(g) of the 1934 Act, theofficer shall have a thirty (30)-day period in which he or she may surrenderany outstanding option with such a limited stock appreciation right to theCorporation, to the extent such option is at the time exercisable forfully-vested shares of Common Stock. The officer shall in return be entitled to a cash distribution from theCorporation in an amount equal to the excess of (i) the Take-Over Price of thevested shares of Common Stock at the time subject to each surrendered option(or surrendered portion of such option) over (ii) the aggregate exercise pricepayable for such shares.  The cashdistribution payable upon such option surrender shall be made within five (5)days following the consummation of the Hostile Take-Over.  The Plan Administrator shall pre-approve, atthe time the limited stock appreciation right is granted, the subsequentexercise of that right in accordance with the terms of the grant and theprovisions of this Section V.D.  Noadditional approval of the Plan Administrator or the Board shall be required atthe time of the actual option surrender and distribution.  Any unsurrendered portion of the optionshall continue to remain outstanding and become exercisable in accordance withthe terms of the instrument evidencing such grant.

 

15

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### E.                                      The shares of Common Stock subjectto any option surrendered for an appreciation distribution pursuant to thisSection V shall **not** be available for subsequent issuanceunder the Plan.

 

16

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# **ARTICLE THREEAUTOMATIC OPTION GRANT PROGRAM**

# ** **

## **I.****                                        ****ELIGIBILITY**

##  

The provisions ofthe Automatic Option Grant Program were revised, effective March 1, 1996,to eliminate the special one-time option grant for 28,800 shares of CommonStock to each newly-elected or newly-appointed non-employee Board member and toimplement a new program of periodic option grants to all eligible non-employeeBoard members.  Under the revisedAutomatic Option Grant Program, the following individuals shall be eligible toreceive automatic option grants over their period of Board service: (i) thoseindividuals who were serving as non-employee Board members on the date of the1996 Annual Stockholders Meeting but who first joined the Board afterSeptember 29, 1993, (ii) those individuals who first join the Board asnon-employee Board members after the date of the 1996 Annual StockholdersMeeting and (iii) those individuals who first joined the Board prior toSeptember 30, 1993 and continue to serve as non-employee Board membersthrough one or more Annual Stockholders Meetings, beginning with the 1996Annual Meeting.  However, a non-employeeBoard member who has previously been in the employ of the Corporation (or anyParent or Subsidiary) shall not be eligible to receive a 12,000-share optiongrant at the time of his or her initial election or appointment to the Board,but such individual shall be eligible to receive one or more 4,000-share annualoption grants (8,000-share annual option grants for grants made on or after thedate of the 2003 Annual Meeting) over his or her period of continued Boardservice.  Each non-employee Board membereligible to participate in the Automatic Option Grant Program pursuant to theforegoing criteria shall be designated an Eligible Director for purposes of thePlan.

 

## **II.****                                    ****TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS**

##  

### A.                                   Grant Date.

###  

#### 1.                                       Eachindividual serving as a non-employee Board member on the date of the 1996Annual Stockholders Meeting shall be granted on that date a non-statutory stockoption to purchase 12,000 shares of Common Stock upon the terms and conditionsof this Article Three, provided such individual (i) has not previouslybeen in the employ of the Corporation (or any Parent or Subsidiary) and (ii)did not join the Board prior to September 30, 1993.  If any such individual previously receivedan automatic option grant for 28,800 shares of Common Stock at the time of hisor her initial election or appointment to the Board, then that option wasautomatically cancelled upon stockholder approval of the revised AutomaticOption Grant Program at the 1996 Annual Meeting.

####  

#### 2.                                       Eachindividual who is first elected or appointed as a non-employee Board memberafter the date of the 1996 Annual Stockholders Meeting shall automatically begranted, on the date of such initial election or appointment, a non-statutorystock option to purchase 12,000 shares of Common Stock upon the terms andconditions of this Article Three, provided such individual has notpreviously been in the employ of the Corporation (or any Parent or Subsidiary).

 

17

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#### 3.                                       Onthe date of each Annual Stockholders Meeting, beginning with the 1996 AnnualStockholders Meeting, each individual who is to continue to serve as a non-employeeBoard member, whether or not he or she is standing for re-election to the Boardat that particular Annual Meeting, shall automatically be granted aNon-Statutory Option to purchase 4,000 shares of Common Stock (8,000-shares ofCommon Stock for grants made on or after the date of the 2003 Annual Meeting),provided such individual did not receive any other option grants under thisAutomatic Option Grant Program within the preceding six (6) months.  There shall be no limit on the number ofsuch 4,000-share option grants (8,000-share option grants for options grantedon or after the date of the 2003 Annual Meeting) any one Eligible Director mayreceive over his or her period of Board service, and individuals who havepreviously been in the employ of the Corporation (or any Parent or Subsidiary)shall be eligible to receive such annual option grants over their period ofcontinued Board service.

####  

### B.                                     Exercise Price. The exercise price per share ofCommon Stock subject to each automatic option grant made under thisArticle Three shall be equal to one hundred percent (100%) of the FairMarket Value per share of Common Stock on the automatic grant date.

###  

### C.                                     Payment.

###  

The exercise priceshall be payable in one of the alternative forms specified below:

 

###### (i)                                     fullpayment in cash or check made payable to the Corporation’s order; or

######  

###### (ii)                                  fullpayment in shares of Common Stock held for the requisite period necessary toavoid a charge to the Corporation’s reported earnings and valued at Fair MarketValue on the Exercise Date (as such term is defined below); or

######  

###### (iii)                               fullpayment in a combination of shares of Common Stock held for the requisiteperiod necessary to avoid a charge to the Corporation’s reported earnings andvalued at Fair Market Value on the Exercise Date and cash or check payable tothe Corporation’s order; or

######  

###### (iv)                              tothe extent the option is exercised for vested shares, full payment through asale and remittance procedure pursuant to which the non-employee Board member(I) shall provide irrevocable written instructions to a Corporation-designatedbrokerage firm to effect the immediate sale of the purchased shares and remitto the Corporation, out of the sale proceeds available on the settlement date,sufficient funds to cover the aggregate exercise price payable for thepurchased shares and shall (II) concurrently provide written directives to theCorporation to deliver the certificates for the purchased shares directly tosuch brokerage firm in order to complete the sale transaction.

######  

For purposes of thissubparagraph C, the Exercise Date shall be the date on which written notice ofthe option exercise is delivered to the Corporation.  Except to the extent the sale and remittance procedure specifiedabove is utilized in connection with the exercise of the option for vestedshares, payment of the option price for the purchased shares must accompany theexercise notice.  However, if the optionis exercised for any unvested shares, then the optionee 

 

18

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must also execute anddeliver to the Corporation a stock purchase agreement for those unvested shareswhich provides the Corporation with the right to repurchase, at the exerciseprice paid per share, any unvested shares held by the optionee at the time of cessationof Board service and which precludes the sale, transfer or other disposition ofany shares purchased under the option, to the extent those shares are subjectto the Corporation’s repurchase right.

 

### D.                                    Option Term. Each automatic grant under this Article Three shall have a maximumterm of ten (10) years measured from the automatic grant date.

###  

### E.                                      Exercisability/Vesting. Each automatic grant shall be immediately exercisable for any or all ofthe option shares.  However, any sharespurchased under the option shall be subject to repurchase by the Corporation,at the exercise price paid per share, upon the Optionee’s cessation of Boardservice prior to vesting in those shares. The shares subject to each 12,000-share initial automatic option grantshall vest as follows:  (i) fiftypercent (50%) of the shares shall vest upon the optionee’s completion of one(1) year of Board service measured from the grant date, and (ii) the remainingshares shall vest in three (3) successive equal annual installments upon theoptionee’s completion of each of the next three (3) years of Board servicethereafter.  The shares subject to each4,000-share annual automatic option grant (8,000-share annual automatic optiongrant for grants made on or after the date of the 2003 Annual Meeting) shallvest upon the ***earlier***of (i) the optionee’s completion of one (1) year of Board service measured fromthe grant date and (ii) the optionee’s continuation in Board service throughthe day immediately preceding the date of the first annual stockholders meetingfollowing the grant date of such option.(2) Vesting of the option shares shall be subject to acceleration asprovided in Section II.G and Section III of this Article Three.

###  

### F.                                      Limited Transferability. Each option granted under this Automatic Option Grant Program prior tothe 1997 Annual Stockholders Meeting shall, during the lifetime of theoptionee, be exercisable only by the optionee and shall not be assignable ortransferable by the optionee otherwise than by will or the by the laws ofdescent and distribution following the optionee’s death.  However, each option granted under this  Automatic Option Grant Program on or afterthe 1997 Annual Stockholders Meeting shall be assignable in whole or in part bythe optionee during his or her lifetime, but only to the extent such assignmentis made in connection with the optionee’s estate plan to one or more members ofthe optionee’s immediate family or to a trust established exclusively for oneor more such family members.  Theassigned portion may only be exercised by the person or persons who acquire aproprietary interest in the option pursuant to the assignment.  The terms applicable to the assigned portionshall be the same as those in effect for the option immediately prior to such assignmentand shall be set forth in such documents issued to the assignee as the PlanAdministrator may deem appropriate.

 

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(2)  The shares subject to each automatic annualoption grant made prior to June 3, 2004 will vest upon the optionee’scompletion of one (1) year of Board service measured from the grant date.

 

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### G.                                     Effect of Termination of BoardService.

 

#### 1.                                       Shouldthe Optionee cease to serve as a Board member for any reason (other than deathor Permanent Disability) while holding an automatic option grant under thisArticle Three, then such individual shall have a six (6)-month periodfollowing the date of such cessation of Board service in which to exercise suchoption for any or all of the option shares in which the Optionee is vested atthe time of such cessation of Board service. The option shall immediately terminate and cease to be outstanding, atthe time of such cessation of Board service, with respect to any option sharesin which the Optionee is not otherwise at that time vested.

####  

#### 2.                                       Shouldthe Optionee die within six (6) months after cessation of Board service, thenany automatic option grant held by the Optionee at the time of death maysubsequently be exercised, for any or all of the option shares in which theOptionee is vested at the time of his or her cessation of Board service (lessany vested option shares subsequently purchased by the Optionee prior todeath), by the personal representative of the Optionee’s estate or by the personor persons to whom the option is transferred pursuant to the Optionee’s will orin accordance with the laws of descent and distribution.  Any such exercise must occur within twelve(12) months after the date of the Optionee’s death.

####  

#### 3.                                       Shouldthe Optionee die or become Permanent Disabled while serving as a Board member,then the shares of Common Stock at the time subject to each automatic optiongrant held by such Optionee under this Article Three shall immediatelyvest in full, and the Optionee (or the representative of the Optionee’s estateor the person or persons to whom the option is transferred upon the Optionee’sdeath) shall have a twelve (12)-month period following the date of theOptionee’s cessation of Board service in which to exercise such option for anyor all of those vested shares of Common Stock.

####  

#### 4.                                       Inno event shall any automatic grant under this Article Three remainexercisable after the expiration date of the ten (10)-year option term.  Upon the expiration of the applicablepost-service exercise period under subparagraph 1, 2 or 3 above or (if earlier)upon the expiration of the ten (10)—year option term, the automatic grant shallterminate and cease to be outstanding for any option shares in which theOptionee was vested at the time of his or her cessation of Board service butwhich were not otherwise purchased thereunder.

####  

### H.                                    Stockholder Rights. The holder of an automatic option grant under this Article Threeshall have none of the rights of a stockholder with respect to any shares subjectto such option until such individual shall have exercised the option and paidthe exercise price for the purchased shares.

###  

### I.                                         Remaining Terms. The remaining terms and conditions of each automatic option grant shallbe as set forth in the form Non-statutory Stock Option Agreement attached asExhibit A.

 

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## **III.****                                ****CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER**

 

### A.                                   In the event of any CorporateTransaction, the shares of Common Stock at the time subject to each outstandingoption under this Article Three but not otherwise vested shallautomatically vest in full so that each such option shall, immediately prior tothe specified effective date for the Corporate Transaction, become fully exercisablefor all of the shares of Common Stock at the time subject to that option andmay be exercised for all or any portion of such shares as fully-vested sharesof Common Stock.  Immediately followingthe consummation of the Corporate Transaction, all automatic option grantsunder this Article Three shall terminate and cease to be outstanding,unless assumed by the successor corporation or its parent company.

###  

### B.                                     In connection with any Change inControl of the Corporation, the shares of Common Stock at the time subject toeach outstanding option under this Article Three but not otherwise vestedshall automatically vest in full so that each such option shall, immediatelyprior to the specified effective date for the Change in Control, become fullyexercisable for all of the shares of Common Stock at the time subject to thatoption and may be exercised for all or any portion of such shares asfully-vested shares of Common Stock. Each such option shall remain fully exercisable for the option shareswhich vest in connection with the Change in Control until the expiration orsooner termination of the option term.

###  

### C.                                     Upon the occurrence of a HostileTake-Over, the Optionee shall have a thirty (30)-day period in which tosurrender each option held by him or her under this Article Three to theCorporation.  The Optionee shall inreturn be entitled to a cash distribution from the Corporation in an amountequal to the excess of (i) the Take-Over Price of the shares of Common Stock atthe time subject to the surrendered option (whether or not the Optionee isotherwise at the time vested in those shares) over (ii) the aggregate exerciseprice payable for such shares.  Suchcash distribution shall be paid within five (5) days following the consummationof the Hostile Take-Over.  Stockholderapproval of this March 1997 restatement of the Plan shall constitutepre-approval of each option subsequently granted with a surrender provision andthe subsequent surrender of that option in accordance with the terms andprovisions of this Section III.C. No additional approval of the Plan Administrator or the Board shall berequired at the time of the actual option cancellation and cash distribution.

###  

### D.                                    The shares of Common Stock subjectto each option surrendered in connection with the Hostile Take-Over shall **not**be available for subsequent issuance under this Plan.

###  

### E.                                      The automatic option grantsoutstanding under this Article Three shall in no way affect the right ofthe Corporation to adjust, reclassify, reorganize or otherwise change itscapital or business structure or to merge, consolidate, dissolve, liquidate orsell or transfer all or any part of its business or assets.

 

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# **ARTICLE FOURSTOCK ISSUANCE PROGRAM**

# ** **

## **I.****                                        ****TERMS AND CONDITIONS OF STOCK ISSUANCES**

##  

Shares may beissued under the Stock Issuance Program through direct and immediate purchaseswithout any intervening stock option grants. The issued shares shall be evidenced by a Stock Issuance Agreement(“Issuance Agreement”) that complies with the terms and conditions of thisArticle Four.

 

### A.                                   Consideration.

###  

#### 1.                                       Sharesof Common Stock drawn from the Corporation’s authorized but unissued shares ofCommon Stock (“Newly Issued Shares”) shall be issued under the Stock IssuanceProgram for one or more of the following items of consideration which the PlanAdministrator may deem appropriate in each individual instance:

####  

###### (i)                                     cashor cash equivalents (such as a personal check or bank draft) paid theCorporation;

######  

###### (ii)                                  apromissory note payable to the Corporation’s order in one or more installments,which may be subject to cancellation in whole or in part upon terms andconditions established by the Plan Administrator; or

######  

###### (iii)                               pastservices rendered to the Corporation or any parent or subsidiary corporation.

######  

#### 2.                                       Theconsideration for any Newly Issued Shares issued under this Stock IssuanceProgram shall have a value determined by the Plan Administrator to be not lessthan one-hundred percent (100%) of the Fair Market Value of those shares at thetime of issuance.

####  

#### 3.                                       Sharesof Common Stock reacquired by the Corporation and held as treasury shares(“Treasury Shares”) may be issued under the Stock Issuance Program for suchconsideration (including one or more of the items of consideration specified insubparagraph 1. above) as the Plan Administrator may deem appropriate, whethersuch consideration is in an amount less than, equal to, or greater than theFair Market Value of the Treasury Shares at the time of issuance.  Treasury Shares may, in lieu of any cashconsideration, be issued subject to such vesting requirements tied to theParticipant’s period of future Service or the Corporation’s attainment ofspecified performance objectives as the Plan Administrator may establish at thetime of issuance.

 

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### B.                                     Vesting Provisions.

###  

#### 1.                                       Sharesof Common Stock issued under the Stock Issuance Program may, in the absolutediscretion of the Plan Administrator, be fully and immediately vested uponissuance or may vest in one or more installments over the Participant’s periodof Service.  The elements of the vestingschedule applicable to any unvested shares of Common Stock issued underthe Stock Issuance Program, namely:

####  

###### (i)                                     theService period to be completed by the Participant or the performance objectivesto be achieved by the Corporation,

######  

###### (ii)                                  thenumber of installments in which the shares are to vest,

######  

###### (iii)                               theinterval or intervals (if any) which are to lapse between installments, and

######  

###### (iv)                              theeffect which death, Permanent Disability or other event designated by the PlanAdministrator is to have upon the vesting schedule,

######  

shall be determined by the Plan Administrator and incorporated into theIssuance Agreement executed by the Corporation and the Participant at the timesuch unvested shares are issued.

 

#### 2.                                       TheParticipant shall have full stockholder rights with respect to any shares ofCommon Stock issued to him or her under the Plan, whether or not his or herinterest in those shares is vested. Accordingly, the Participant shall have the right to vote such sharesand to receive any regular cash dividends paid on such shares.  Any new, additional or different shares ofstock or other property (including money paid other than as a regular cashdividend) which the Participant may have the right to receive with respect tohis or her unvested shares by reason of any stock dividend, stock split,reclassification of Common Stock or other similar change in the Corporation’scapital structure or by reason of any Corporate Transaction shall be issued,subject to (i) the same vesting requirements applicable to his or her unvestedshares and (ii) such escrow arrangements as the Plan Administrator shall deemappropriate.

####  

#### 3.                                       Shouldthe Participant cease to remain in Service while holding one or more unvestedshares of Common Stock under the Plan, then those shares shall be immediatelysurrendered to the Corporation for cancellation, and the Participant shall haveno further stockholder rights with respect to those shares.  To the extent the surrendered shares werepreviously issued to the Participant for consideration paid in cash or cashequivalent (including the Participant’s purchase-money promissory note), theCorporation shall repay to the Participant the cash consideration paid for thesurrendered shares and shall cancel the unpaid principal balance of anyoutstanding purchase-money note of the Participant attributable to suchsurrendered shares.  The surrenderedshares may, at the Plan Administrator’s discretion, be retained by theCorporation as Treasury Shares or may be retired to authorized but unissuedshare status.

 

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#### 4.                                       ThePlan Administrator may in its discretion elect to waive the surrender andcancellation of one or more unvested shares of Common Stock (or other assetsattributable thereto) which would otherwise occur upon the non-completion ofthe vesting schedule applicable to such shares.  Such waiver shall result in the immediate vesting of theParticipant’s interest in the shares of Common Stock as to which the waiverapplies.  Such waiver may be effected atany time, whether before or after the Participant’s cessation of Service or theattainment or non-attainment of the applicable performance objectives.

####  

## **II.****                                    ****CORPORATE TRANSACTIONS/CHANGE IN CONTROL**

##  

### A.                                   Upon the occurrence of any CorporateTransaction, all unvested shares of Common Stock at the time outstanding underthe Stock Issuance Program shall immediately vest in full, except to the extentthe Plan Administrator imposes limitations in the Issuance Agreement whichpreclude such accelerated vesting in whole or in part.

###  

### B.                                     The Plan Administrator shall havethe discretionary authority, exercisable either in advance of anyactually-anticipated Change in Control or at the time of an actual Change inControl, to provide for the immediate and automatic vesting of one or moreunvested shares outstanding under the Stock Issuance Program at the time ofsuch Change in Control.  The PlanAdministrator shall also have full power and authority to condition any suchaccelerated vesting upon the subsequent termination of the Participant’sService within a specified period following the Change in Control.

###  

## **III.****                                ****TRANSFER RESTRICTIONS/SHARE ESCROW**

##  

### A.                                   Unvested shares may, in the PlanAdministrator’s discretion, be held in escrow by the Corporation until theParticipant’s interest in such shares vests or may be issued directly to theParticipant with restrictive legends on the certificates evidencing suchunvested shares.  To the extent anescrow arrangement is utilized, the unvested shares and any securities or otherassets issued with respect to such shares (other than regular cash dividends)shall be delivered in escrow to the Corporation to be held until the Participant’sinterest in such shares (or other securities or assets) vests.  Alternatively, if the unvested shares areissued directly to the Participant, the restrictive legend on the certificatesfor such shares shall read substantially as follows:

###  

“THE SHARES REPRESENTED BY THIS CERTIFICATE AREUNVESTED AND ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND(II) CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HERPREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION’S SERVICE.  SUCH TRANSFER RESTRICTIONS AND THE TERMS ANDCONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCEAGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HERPREDECESSOR IN INTEREST) DATED                         199   , A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OFTHE CORPORATION.”

 

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### B.                                     The Participant shall have no rightto transfer any unvested shares of Common Stock issued to him or her under theStock Issuance Program.  For purposes ofthis restriction, the term “transfer” shall include (without limitation) anysale, pledge, assignment, encumbrance, gift, or other disposition of suchshares, whether voluntary or involuntary. Upon any such attempted transfer, the unvested shares shall immediatelybe cancelled, and neither the Participant nor the proposed transferee shallhave any rights with respect to those shares. However, the Participant shall have the right to make a gift of unvestedshares acquired under the Stock Issuance Program to his or her spouse or issue,including adopted children, or to a trust established for such spouse or issue,provided the donee of such shares delivers to the Corporation a writtenagreement to be bound by all the provisions of the Stock Issuance Program andthe Issuance Agreement applicable to the gifted shares.

 

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# **ARTICLE FIVE**

# ** **

# **MISCELLANEOUS**

# ** **

## **I.****                                        ****LOANS OR INSTALLMENT PAYMENTS**

##  

### A.                                   The Plan Administrator may, in itsdiscretion, assist any Optionee or Participant (including an Optionee orParticipant who is an officer of the Corporation) in the exercise of one ormore options granted to such Optionee under the Discretionary Option GrantProgram or the purchase of one or more shares issued to such Participant underthe Stock Issuance Program, including the satisfaction of any Federal and Stateincome and employment tax obligations arising therefrom, by (i) authorizing theextension of a loan from the Corporation to such Optionee or Participant or(ii) permitting the Optionee or Participant to pay the option price or purchaseprice for the purchased Common Stock in installments over a period ofyears.  The terms of any loan or installmentmethod of payment (including the interest rate and terms of repayment) shall beupon such terms as the Plan Administrator specifies in the applicable option orissuance agreement or otherwise deems appropriate under the circumstances.  Loans or installment payments may beauthorized with or without security or collateral.  However, the maximum credit available to the Optionee orParticipant may not exceed the option or purchase price of the acquired shares(less the par value of such shares) plus any Federal and State income andemployment tax liability incurred by the Optionee or Participant in connectionwith the acquisition of such shares.

###  

### B.                                     The Plan Administrator may, in itsabsolute discretion, determine that one or more loans extended under thisfinancial assistance program shall be subject to forgiveness by the Corporationin whole or in part upon such terms and conditions as the Plan Administratormay deem appropriate.

###  

## **II.****                                    ****AMENDMENT OF THE PLAN AND AWARDS**

##  

### A.                                   The Board has complete and exclusivepower and authority to amend or modify the Plan (or any component thereof) inany or all respects whatsoever. However, no such amendment or modification shall adversely affect rightsand obligations with respect to options at the time outstanding under the Plan,nor adversely affect the rights of any Participant with respect to Common Stockissued under the Stock Issuance Program prior to such action, unless theOptionee or Participant consents to such amendment.  In addition, certain amendments may require stockholder approvalpursuant to applicable laws or regulations.

###  

### B.                                     (i) Options to purchase shares ofCommon Stock may be granted under the Discretionary Option Grant Program and(ii) shares of Common Stock may be issued under the Stock Issuance Program,which are in both instances in excess of the number of shares then availablefor issuance under the Plan, provided any excess shares actually issued underthe Discretionary Option Grant Program or the Stock Issuance Program are heldin escrow until stockholder approval is obtained for a sufficient increase inthe number of shares available for issuance under the Plan.  If such stockholder approval is not obtainedwithin twelve (12) months 

 

26

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after the date the firstsuch excess option grants or excess share issuances are made, then (I) anyunexercised excess options shall terminate and cease to be exercisable and (II)the Corporation shall promptly refund the purchase price paid for any excessshares actually issued under the Plan and held in escrow, together withinterest (at the applicable Short Term Federal Rate) for the period the shareswere held in escrow.

 

## **III.****                                ****TAX WITHHOLDING**

 

The Corporation’sobligation to deliver shares of Common Stock upon the exercise of stock optionsfor such shares or the vesting of such shares under the Plan shall be subjectto the satisfaction of all applicable Federal, State and local income tax andemployment tax withholding requirements.

 

The PlanAdministrator may, in its discretion and in accordance with the provisions ofthis Section III of Article Five and such supplemental rules as thePlan Administrator may from time to time adopt (including the applicablesafe-harbor provisions of SEC Rule 16b-3), provide any or all holders ofnon-statutory options (other than the automatic grants made pursuant toArticle Three of the Plan) or unvested shares under the Plan with theright to use shares of Common Stock in satisfaction of all or part of theFederal, State and local income and employment withholding taxes to which suchholders may become subject in connection with the exercise of their options orthe vesting of their shares (the “Withholding Taxes”).  Such right may be provided to any suchholder in either or both of the following formats:

 

##### (a)                                  StockWithholding:  The holder of thenon-statutory option or unvested shares may be provided with the election tohave the Corporation withhold, from the shares of Common Stock otherwiseissuable upon the exercise of such non-statutory option or the vesting of suchshares, a portion of those shares with an aggregate Fair Market Value equal tothe percentage of the applicable Withholding Taxes (not to exceed one hundredpercent (100%)) designated by the holder.

#####  

##### (b)                                 StockDelivery:  The Plan Administratormay, in its discretion, provide the holder of the non-statutory option or theunvested shares with the election to deliver to the Corporation, at the timethe non-statutory option is exercised or the shares vest, one or more shares ofCommon Stock previously acquired by such individual (other than in connectionwith the option exercise or share vesting triggering the Withholding Taxes)with an aggregate Fair Market Value equal to the percentage of the WithholdingTaxes incurred in connection with such option exercise or share vesting (not toexceed one hundred percent (100%)) designated by the holder.

#####  

## **IV.****                               ****EFFECTIVE DATE AND TERM OF PLAN**

##  

### A.                                   The Plan was adopted by the Board onJuly 23, 1993, and was approved by the stockholders on the same date.  The Plan became effective onSeptember 29, 1993, the date on which the shares of the Corporation’sCommon Stock were first registered under the 1934 Act.  No further option grants or stock issuancesshall be made under the Predecessor Plans from and after the Effective Date.

 

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### B.                                     Each stock option grant outstandingunder the Predecessor Plans immediately prior to the Effective Date of theDiscretionary Option Grant Program shall be incorporated into this Plan andtreated as an outstanding option under this Plan, but each such option shallcontinue to be governed solely by the terms and conditions of the instrumentevidencing such grant, and nothing in this Plan shall be deemed to affect orotherwise modify the rights or obligations of the holders of such options withrespect to their acquisition of shares of Common Stock thereunder.  Each unvested share of Common Stockoutstanding under the Predecessor Plans on the Effective Date of the StockIssuance Program shall continue to be governed solely by the terms andconditions of the instrument evidencing such share issuance, and nothing inthis Plan shall be deemed to affect or otherwise modify the rights orobligations of the holder of such unvested shares.

###  

### C.                                     The option/vesting accelerationprovisions of Section III of Article Two and Section II ofArticle Four relating to Corporate Transactions and Changes in Controlmay, in the Plan Administrator’s discretion, be extended to one or more stockoptions or unvested share issuances which are outstanding under the PredecessorPlans on the Effective Date of the Discretionary Option Grant and StockIssuance Programs but which do not otherwise provide for such acceleration.

###  

### D.                                    On March 16, 1995, the Boardadopted an amendment to the Plan which (i) increased the number of shares ofCommon Stock available for issuance under the Plan by an additional 600,000shares (as adjusted for the May 1995 stock split), (ii) provided for anautomatic annual increase to the existing share reserve on the first tradingday in each of the next five (5) fiscal years, beginning with the 1996 fiscalyear and continuing through fiscal year 2000, equal to 1.4% of the total numberof shares of Common Stock outstanding on the last trading day of the fiscal yearimmediately preceding the fiscal year of each such share increase and (iii)imposed certain limitations required under applicable Federal tax laws withrespect to Incentive Option grants.  Theamendment was approved by the stockholders at the 1995 Annual Meeting on May17, 1995.

###  

### E.                                      On March 21, 1996, the Boardadopted an amendment to the Plan which (i) increased the number of shares ofCommon Stock available for issuance under the Plan by an additional 600,000shares, (ii) increased the limit on the maximum number of shares of CommonStock issuable under the 1993 Plan prior to the required cessation of furtherIncentive Option grants to 3,780,000 shares plus an additional increase of277,000 shares per fiscal year over each of the next four (4) fiscal years,beginning with the 1997 fiscal year, (iii) revised the Automatic Option GrantProgram to eliminate the special one-time option grant for 28,800 shares ofCommon Stock to each newly-elected or newly-appointed non-employee Board memberand implement a new option grant program pursuant to which all eligiblenon-employee Board members will receive a series of automatic option grantsover their period of continued Board service. The amendment was approved by the stockholders at the 1996 AnnualMeeting.

###  

### F.                                      On March 18, 1997, the Boardadopted a series of amendments to the Plan which (i) increased the number ofshares of Common Stock reserved for issuance over the term of the Plan by anadditional 450,000 shares, (ii) rendered all non-employee Board members eligibleto receive option grants and direct stock issuances under the DiscretionaryOption Grant and Stock Issuance Programs, (iii) allowed unvested shares issuedunder the Plan and 

 

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subsequently repurchasedby the Corporation at the option exercise price or direct issue price paid pershare to be reissued under the Plan, (iv) eliminated the plan limitation whichprecluded the grant of additional Incentive Options once the number of sharesof Common Stock issued under the Plan, whether as vested or unvested shares,exceeded a certain level, (v) removed certain restrictions on the eligibilityof non-employee Board members to serve as Plan Administrator, and (vi) effecteda series of additional changes to the provisions of the Plan (including thestockholder approval requirements) in order to take advantage of the recentamendments to Rule 16b-3 of the 1934 Act which exempts certain officer anddirector transactions under the Plan from the short-swing liability provisionsof the federal securities laws.  TheMarch 18, 1997 amendments were approved by the stockholders at the 1997Annual Meeting.

 

### G.                                     On March 14, 2001, the Boardadopted an amendment to the Plan which (i) established an automatic shareincrease feature pursuant to which the share reserve under the Plan willautomatically increase on the first trading day in January of each of thenext five (5) calendar years, beginning with the 2002 calendar year andcontinuing through the 2006 calendar year, by an amount equal to 4% of thetotal number of shares of Common Stock outstanding on the last trading day ofthe calendar year immediately preceding the calendar year of each such shareincrease and (ii) extended the termination date of the Plan from June 30,2003 to February 28, 2011.  TheMarch 14, 2001 amendment was approved by the stockholders at the 2001Annual Meeting.

###  

### H.                                    On July 16, 2002, the Boardadopted an amendment to the Plan which revised the Automatic Option GrantProgram to increase the size of the annual option grant to be received by alleligible non-employee Board members over their period of continued Boardservice from 4,000 to 8,000 shares of Common Stock.  This amendment is subject to stockholder approval at the 2003Annual Meeting.

###  

### I.                                         The Plan shall terminate upon the earlierof (i) February 28, 2011 or (ii) the date on which all shares availablefor issuance under the Plan shall have been issued as vested shares orcancelled pursuant to the exercise of stock appreciation or other cash-outrights granted under the Plan.  If thedate of the plan termination is determined under clause (i) above, then alloption grants and unvested share issuances outstanding on such date shallthereafter continue to have force and effect in accordance with the provisionsof the instruments evidencing such grants or issuances.

###  

## **V.****                                   ****USE OF PROCEEDS**

##  

Any cash proceedsreceived by the Corporation from the sale of shares pursuant to option grantsor share issuances under the Plan shall be used for general corporate purposes.

 

## **VI.****                               ****REGULATORY APPROVALS**

##  

### A.                                   The implementation of the Plan, thegranting of any option under the Plan, the issuance of any shares under theStock Issuance Program, and the issuance of Common Stock upon the exercise orsurrender of the option grants made hereunder shall be subject to theCorporation’s procurement of all approvals and permits required by regulatoryauthorities having 

 

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jurisdiction over thePlan, the options granted under it, and the Common Stock issued pursuant to it.

 

### B.                                     No shares of Common Stock or otherassets shall be issued or delivered under this Plan unless and until thereshall have been compliance with all applicable requirements of Federal andState securities laws, including the filing and effectiveness of the Form S-8registration statement for the shares of Common Stock issuable under the Plan,and all applicable listing requirements of any securities exchange (or theNasdaq National Market, if applicable) on which shares of the Common Stock arethen listed for trading.

###  

## **VII.****                           ****NO EMPLOYMENT/SERVICE RIGHTS**

##  

Neither the actionof the Corporation in establishing the Plan, nor any action taken by the PlanAdministrator hereunder, nor any provision of the Plan shall be construed so asto grant any individual the right to remain in the employ or service of theCorporation (or any parent or subsidiary corporation) for any period ofspecific duration, and the Corporation (or any parent or subsidiary corporationretaining the services of such individual) may terminate such individual’semployment or service at any time and for any reason, with or without cause.

 

## **VIII.****                       ****MISCELLANEOUS PROVISIONS**

##  

### A.                                   The right to acquire Common Stock orother assets under the Plan may not be assigned, encumbered or otherwisetransferred by any Optionee or Participant.

###  

### B.                                     The provisions of the Plan relatingto the exercise of options and the vesting of shares shall be governed by thelaws of the State of California, as such laws are applied to contracts enteredinto and performed in such State.

###  

### C.                                     The provisions of the Plan shallinure to the benefit of, and be binding upon, the Corporation and itssuccessors or assigns, whether by Corporate Transaction or otherwise, and theParticipants and Optionees and the legal representatives, heirs or legatees oftheir respective estates.

 

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