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                                                                  EXHIBIT 10.2.1




                               QLOGIC CORPORATION
                                STOCK AWARDS PLAN



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                                TABLE OF CONTENTS

<TABLE>
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<S>    <C>                                                                                <C>
1.     Purpose..............................................................................1

2.     Definitions..........................................................................1

       2.1     Award........................................................................1
       2.2     Board........................................................................1
       2.3     Code.........................................................................1
       2.4     Company......................................................................1
       2.5     Common Stock.................................................................1
       2.6     Deferred Stock Award.........................................................1
       2.7     Disabled or Disability.......................................................1
       2.8     Fair Market Value............................................................1
       2.9     Incentive Stock Option.......................................................2
       2.10    Nonqualified Stock option....................................................2
       2.11    Optionee.....................................................................2
       2.12    Other Stock-Based Award......................................................2
       2.13    Performance Unit Award.......................................................2
       2.14    Plan.........................................................................2
       2.15    Plan Administrator...........................................................2
       2.16    Restricted Stock Award.......................................................2
       2.17    Stock Appreciation Right.....................................................2
       2.18    Stock Option.................................................................2
       2.19    Unrestricted Stock Award.....................................................2

3.     Awards Under the Plan................................................................3

4.     Administration.......................................................................3

       4.1     Administration by Board......................................................3
       4.2     Administration by Compensation Committee.....................................3

5.     Eligibility..........................................................................4

6.     Shares Subject to the Plan...........................................................4

       6.1     Available Shares.............................................................4
       6.2     Capital Structure Adjustments................................................4

7.     Terms and Conditions of Stock Options................................................5

       7.1     Number of Shares Subject to Stock Option.....................................5
       7.2     Stock Option Price...........................................................5
       7.3     Notice and Payment...........................................................5
       7.4     Term of Stock Option.........................................................7
       7.5     Exercise of Stock Option.....................................................7
       7.6     No Transfer of Stock Option..................................................7
       7.7     Limit on Incentive Stock Options.............................................7
       7.8     No Fractional Shares.........................................................8
       7.9     Exercisability in the Event of Death.........................................8
       7.10    Modification, Extension, and Renewal of Stock
               Options......................................................................8
       7.11    1994 Distribution............................................................8
       7.12    Other Provisions............................................................10
</TABLE>

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<TABLE>
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<S>    <C>                                                                                <C>
8.     Stock Appreciation Rights...........................................................11
       8.1     General ....................................................................11
       8.2     Grant and Exercise..........................................................11
       8.3     Terms and Conditions of Stock Appreciation Rights...........................11
       8.4     Rules Relating to Exercise .................................................12

9.     Restricted Stock ...................................................................12
       9.1     General ....................................................................12
       9.2     Award Agreement and Certificates............................................13
       9.3     Rights as a Stockholder.....................................................13
       9.4     Restrictions................................................................13
       9.5     Section 83(b) Election......................................................14

10.    Unrestricted Stock..................................................................14

11.    Deferred Stock Awards...............................................................15
       11.1    General.....................................................................15
       11.2    Award Agreement.............................................................15
       11.3    Elective Deferral...........................................................15
       11.4    Termination.................................................................15
       11.5    Payments in Respect of Deferred Stock.......................................15

12.    Performance Unit Awards.............................................................16

       12.1    General.....................................................................16
       12.2    Award Agreement.............................................................16
       12.3    Termination.................................................................16
       12.4    Acceleration; waiver........................................................16
       12.5    Exercise....................................................................17

13.    Other Stock-Based Awards............................................................17

       13.1    General.....................................................................17
       13.2    Purchase Price; Form of Payment.............................................17
       13.3    Forfeiture of Awards; Repurchase of Stock;
               Acceleration of Waiver of Restrictions .....................................18
       13.4    Award Agreements............................................................18
       13.5    Deemed Dividend Payments; Deferrals.........................................18

14.    Supplemental Grants 18

       14.1    Loans ......................................................................18
       14.2    Cash Payments...............................................................19

15.    Termination or Amendment of the Plan................................................19

16.    Indemnification.....................................................................19

17.    Withholding.........................................................................20

       17.1    Irrevocable Election........................................................20
       17.2    Approval by Plan Administrator..............................................20
       17.3    Timing of Election..........................................................20
       17.4    Window Period...............................................................20
       17.5    Timing of Delivery..........................................................21
</TABLE>


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                               QLOGIC CORPORATION
                                STOCK AWARDS PLAN

               1. PURPOSE. The purpose of this QLogic Corporation Stock Awards
Plan is to further the growth and development of QLogic Corporation by providing
an incentive to officers and other key employees who are in a position to
contribute materially to the prosperity of the Company to participate in the
long-term growth of the company by receiving the opportunity to acquire shares
of the Company's common stock and to provide for additional compensation based
on appreciation in the Company's shares. The Plan provides a means to increase
such persons' interests in the Company's welfare, to encourage them to continue
their services to the Company or its subsidiaries, and to attract individuals of
outstanding ability to enter the employment of the Company or its subsidiaries.

               2. DEFINITIONS. The following definitions are applicable to the
Plan:

                      2.1 AWARD. Except where referring to a particular category
of grant under the Plan, "Award" or "Awards" shall include Incentive Stock
options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Unrestricted Stock Awards, Deferred Stock Awards, Performance Unit
Awards and Other Stock-Based Awards.

                      2.2 BOARD. The Board of Directors of the Company.

                      2.3 CODE. The Internal Revenue Code of 1986, as amended
from time to time.

                      2.4 COMPANY. QLogic corporation, a Delaware corporation.

                      2.5 COMMON STOCK. The shares of the common stock of the
Company.

                      2.6 DEFERRED STOCK AWARD. An Award made pursuant to
Section 11 below of the right to receive Common Stock at the end of a specified
deferral period.

                      2.7 DISABLED OR DISABILITY. For the purposes of Section
7.4, a disability of the type defined in Section 22(e)(3) of the Code. The
determination of whether an individual is Disabled or has a Disability shall be
determined under procedures established by the Plan Administrator.

                      2.8 FAIR MARKET VALUE. For purposes of the Plan, the "fair
market value" of any share of Common Stock of the Company at any date shall be
(a) if the Common Stock is listed on



<PAGE>   5
an established stock exchange or exchanges, the last reported sale price per
share on the last trading day immediately preceding such date on the principal
exchange on which it is traded, or if no sale was made on such day on such
principal exchange, at the closing reported bid price on such day on such
exchange, or (b) if the Common Stock is not then listed on an exchange, the last
reported sale price per share on the last trading day immediately preceding such
date reported by NASDAQ, or if sales are not reported by NASDAQ or no sale was
made on such date, the average of the closing bid and asked prices per share for
the Common Stock in the over-the-counter market as quoted on NASDAQ on the day
prior to such date, or (c) if the Common Stock is not then listed on an exchange
or quoted on NASDAQ, an amount determined in good faith by the Plan
Administrator.

                      2.9 INCENTIVE STOCK OPTION. Any Stock Option intended to
be and designated as an "incentive stock option" within the meaning of Section
422 of the Code.

                      2.10 NONQUALIFIED STOCK OPTION. Any Stock Option that is
not an Incentive Stock Option.

                      2.11 OPTIONEE. The recipient of a Stock Option Award.

                      2.12 OTHER STOCK-BASED AWARD. An Award made pursuant to
Section 13 below of the right to receive debt or other securities convertible
into or exchangeable for Common Stock.

                      2.13 PERFORMANCE UNIT AWARD. An Award made pursuant to
Section 12 below of the right to receive cash or Common Stock upon the
attainment of specified performance goals.

                      2.14 PLAN. The QLogic Corporation Stock Awards Plan, as
amended from time to time.

                      2.15 PLAN ADMINISTRATOR. The Board or the Compensation
Committee designated pursuant to Section 4 to administer, construe and interpret
the terms of the Plan.

                      2.16 RESTRICTED STOCK AWARD. An Award of shares of Common
Stock that are subject to restrictions pursuant to Section 9.

                      2.17 STOCK APPRECIATION RIGHT. An Award made pursuant to
Section 8 below.

                      2.18 STOCK OPTION. Any option to purchase shares of Common
Stock granted pursuant to Section 7.

                      2.19 UNRESTRICTED STOCK AWARD. An Award made pursuant to
Section 10 below.

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               3. AWARDS UNDER THE PLAN. Two types of Stock Options (referred to
herein as "Stock options" without distinction between such two types) may be
granted under the Plan: Stock options intended to qualify as Incentive Stock
Options and Nonqualified Stock Options. The Plan also permits the Award of Stock
Appreciation Rights that provide additional compensation based on appreciation
in the Company's Common Stock, Restricted Stock Awards, Unrestricted Stock
Awards, Deferred Stock Awards, Performance Unit Awards and other Stock-Based
Awards.

               4. ADMINISTRATION.

                      4.1 ADMINISTRATION BY BOARD. Subject to Section 4.2, the
Plan Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are "disinterested
persons" as defined in Rule l6b-3(c)(2)(i) promulgated by the Securities and
Exchange Commission (a "disinterested person"). Subject to the provisions of the
Plan, the Plan Administrator shall have authority to construe and interpret the
Plan, to promulgate, amend, and rescind rules and regulations relating to its
administration, from time to time to select from among the eligible employees
(as determined pursuant to Section 5) of the Company and its subsidiaries those
employees to whom Awards will be granted, to determine the timing and manner of
the grant of the Awards, to determine the exercise price, the number of shares
covered by and all of the terms of the Awards, to determine the duration and
purpose of leaves of absence which may be granted to Award holders without
constituting termination of their employment for purposes of the Plan, and to
make all of the determinations necessary or advisable for administration of the
Plan. The interpretation and construction by the Plan Administrator of any
provision of the Plan, or of any agreement issued and executed under the Plan,
shall be final and binding upon all parties. No member of the Board shall be
liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.

                      4.2 ADMINISTRATION BY COMPENSATION COMMITTEE. The Board
may, in its sole discretion, delegate any or all of its duties as Plan
Administrator, and at any time the Board includes any person who is not a
disinterested person, the Board shall delegate all of its duties as Plan
Administrator during such period of time, to a committee (the "Compensation
Committee") of not fewer than two (2) members of the Board, all of the members
of which Compensation Committee shall be persons who, in the opinion of counsel
to the Company, are disinterested persons, to be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or decrease (to
not less than two members) the size of the Compensation Committee, and add
additional members to, or remove members from, the Compensation Committee. The
Compensation Committee shall act pursuant to a majority vote, or the written
consent of a majority of its

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<PAGE>   7
members, and minutes shall be kept of all of its meetings and copies thereof
shall be provided to the Board. Subject to the provisions of the Plan and the
directions of the Board, the Compensation Committee may establish and follow
such rules and regulations for the conduct of its business as it may deem
advisable. No member of the Compensation Committee shall be liable for any
action or determination undertaken or made in good faith with respect to the
Plan or any agreement executed pursuant to the Plan.

               5. ELIGIBILITY. Any employee (including any officer who is an
employee) of the Company or any of its subsidiaries shall be eligible to receive
an Award under the Plan; provided, however, that no person who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its parent or subsidiary corporations shall be
eligible to receive an Incentive Stock Option under the Plan unless at the time
such Stock Option is granted the Stock Option price (determined in the manner
provided in Section 7.2) is at least 110% of the Fair Market Value of the shares
subject to the Stock Option and such Stock Option by its terms is not
exercisable after the expiration of five years from the date such Stock Option
is granted. An employee may receive more than one Award under the Plan.

               6. SHARES SUBJECT TO THE PLAN.

                      6.1 AVAILABLE SHARES. The shares available for grant of
Awards under the Plan shall be shares of the Company's authorized but unissued,
or reacquired, Common Stock. The aggregate number of shares which may be issued
pursuant to exercise of Awards granted under the Plan shall not exceed 1,100,000
shares of Common Stock (after giving effect to a one-for-two reverse stock split
and as subject to further adjustment as provided in Section 6.2). In the event
that the grant of any Award under the Plan for any reason expires, is terminated
or surrendered without being exercised in full or is exercised or surrendered
without the distribution of shares, the shares of Common Stock allocable to the
unexercised portion of the Award shall again be available for grant and
distribution under the Plan as if no Award had been granted with respect to such
shares.

                      6.2 CAPITAL STRUCTURE ADJUSTMENTS. Except as otherwise
provided herein, appropriate and proportionate capital structure adjustments
shall be made in the number and class of shares subject to the Plan, to the
Award rights granted under the Plan, and the exercise price of such Award
rights, in the event of a stock dividend (but only on Common Stock), stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the corporate or capital structure
of the Company. In the event of a liquidation of the Company, or a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
wholly

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<PAGE>   8
owned subsidiary of another corporation, any unexercised Award rights
theretofore granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization, or consolidation
elects to assume the Award rights under the Plan or to use substitute Award
rights in place thereof; provided, however, that, notwithstanding the foregoing,
if such Award rights would otherwise be cancelled in accordance with the
foregoing, the Award recipient shall have the right, exercisable during a
ten-day period ending on the fifth day prior to such liquidation, merger, or
consolidation, to exercise the Award rights without regard to any restrictions
on exercisability. To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the Plan
Administrator, the determination of which in that respect shall be final,
binding, and conclusive, provided that each Incentive Stock option granted
pursuant to the Plan shall not be adjusted in a manner that causes it to fail to
continue to qualify as an incentive stock option within the meaning of Section
422 of the Code.

               7. TERMS AND CONDITIONS OF STOCK OPTIONS. Stock options granted
under the Plan shall be evidenced by agreements (which need not be identical) in
such form and containing such provisions which are consistent with the Plan as
the Plan Administrator shall from time to time approve. Such agreements may
incorporate all or any of the terms hereof by reference and shall comply with
and be subject to the following terms and conditions:

                      7.1 NUMBER OF SHARES SUBJECT TO STOCK OPTION. Each Stock
option agreement shall specify the number of shares subject to the Stock Option.

                      7.2 STOCK OPTION PRICE. The purchase price for the shares
subject to any Stock option shall be such amount as is determined by the Plan
Administrator, but not less than par value per share. Anything to the contrary
notwithstanding, the purchase price for the shares subject to any Incentive
Stock Option shall not be less than 100% of the Fair Market Value of the shares
of Common Stock of the Company on the date the Stock Option is granted. In the
case of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its parent or subsidiary corporations, the Stock
Option price shall not be less than 110% of the Fair Market Value of the shares
of Common Stock of the Company on the date the Stock Option is granted.

                      7.3 NOTICE AND PAYMENT. Any exercisable portion of a Stock
Option may be exercised only by:

                             (a) delivery of a written notice to the
Company, prior to the time when such Stock Option becomes unexercisable under
Section 7.4, stating the number of shares

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<PAGE>   9
being purchased and complying with all applicable rules established by the Plan
Administrator;

                             (b) payment in full of the exercise price of such
Option by, as applicable, (i) cash or check for an amount equal to the aggregate
Stock Option exercise price for the number of shares being purchased, (ii) in
the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, a copy of instructions to a broker directing such
broker to sell the Common Stock for which such Option is exercised, and to remit
to the Company the aggregate exercise price of such options (a "cashless
exercise"), or (iii) in the discretion of the Plan Administrator, upon such
terms as the Plan Administrator shall approve, the Optionee may pay all or a
portion of the purchase price for the number of shares being purchased by
tendering shares of the Company's Common Stock owned by the Optionee, duly
endorsed for transfer to the Company, with a Fair Market Value on the date of
delivery equal to the aggregate purchase price of the shares with respect to
which such Stock option or portion is thereby exercised (a "stock-for-stock
exercise");

                             (c) payment of the amount of tax required to be
withheld (if any) by the Company or any parent or subsidiary corporation as a
result of the exercise of a Stock Option. At the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve, the
Optionee may pay all or a portion of the tax withholding by (i) cash or check
payable to the Company, (ii) cashless exercise, (iii) stock-for-stock exercise,
or (iv) a combination of (1), (2) and (3); and

                             (d) delivery of a written notice to the Company
requesting that the Company direct the transfer agent to issue to the optionee
(or to his designee) a certificate for the number of shares of Common Stock for
which the Option was exercised or, in the case of a cashless exercise, for any
shares that were not sold in the cashless exercise.

Notwithstanding the foregoing, the Company may extend and maintain, or arrange
for the extension and maintenance of, credit to any optionee to finance the
Optionee's purchase of shares pursuant to exercise of any Stock option, on such
terms as may be approved by the Plan Administrator, subject to applicable
regulations of the Federal Reserve Board and any other laws or regulations in
effect at the time such credit is extended. The Plan Administrator may, at any
time and in its discretion, authorize a cash payment, determined in accordance
with Section 8.3(f), which shall not exceed the amount required to pay in full
the federal, state and local tax consequences of an exercise of any Stock Option
granted under the Plan.





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<PAGE>   10
                      7.4 TERM OF STOCK OPTION. No Stock Option shall be
exercisable after the expiration of the earliest of (a) ten years after the date
the Stock option is granted, (b) three months after the date the Optionee's
employment with the Company and its subsidiaries terminates if such termination
is for any reason other than Disability or death, or (c) one year after the date
the Optionee's employment with the Company and its subsidiaries terminates if
such termination is a result of death or Disability; provided, however, that the
Stock Option agreement for any Stock Option may provide for shorter periods in
each of the foregoing instances. In the case of an Incentive Stock option
granted to an employee who owns stock possessing more than lot of the total
combined voting power of all classes of stock of the Company or any of its
parent or subsidiary corporations, the term set forth in (a), above, shall not
be more than five years after the date the Stock Option is granted.

                      7.5 EXERCISE OF STOCK OPTION. No Stock Option shall be
exercisable during the lifetime of an Optionee by any person other than the
Optionee. Subject to the foregoing, the Plan Administrator shall have the power
to set the time or times within which each Stock Option shall be exercisable and
to accelerate the time or times of exercise. Unless otherwise provided by the
Plan Administrator, each Stock Option granted under the Plan shall become
exercisable an a cumulative basis as to 25% of the total number of shares
covered thereby at any time after one year from the date the Stock Option is
granted and an additional 6-1/4% of such total number of shares at any time
after the end of each consecutive calendar quarter thereafter until the Stock
Option has become exercisable as to all of such total number of shares. To the
extent that an Optionee has the right to exercise a Stock Option and purchase
shares pursuant thereto, the Stock Option may be exercised from time to time as
provided in Section 7.3.

                      7.6 NO TRANSFER OF STOCK OPTION. No Stock Option shall be
transferable by an Optionee otherwise than by will or the laws of descent and
distribution.

                      7.7 LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate fair
market value (determined at the time the option is granted) of the stock with
respect to which Incentive Stock Options granted under this Plan are exercisable
for the first time by an Optionee during any calendar year shall not exceed
$100,000. To the extent that the aggregate Fair Market Value (determined at the
time the Stock option is granted) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by an Optionee during any
calendar year (under all Incentive Stock Option plans of the Company and any
parent or subsidiary corporations) exceeds $100,000, such Stock Options shall be
treated as Nonqualified Stock options. The determination of which Stock Options
shall be treated as Nonqualified Stock Options shall be made by taking Stock
Options into account in the order in which they were granted.

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<PAGE>   11
                      7.8 NO FRACTIONAL SHARES. In no event shall the Company be
required to issue fractional shares upon the exercise of a Stock option.

                      7.9 EXERCISABILITY IN THE EVENT OF DEATH. In the event of
the death of the Optionee, any Stock Option or unexercised portion thereof
granted to the Optionee, to the extent exercisable by him or her on the date of
death, may be exercised by the Optionee's personal representatives, heirs, or
legatees subject to the provisions of Section 7.4 hereof.

                      7.10 MODIFICATION, EXTENSION, AND RENEWAL OF STOCK
OPTIONS. Subject to the terms and conditions and within the limitations of the
Plan, the Plan Administrator may modify, extend, or renew outstanding Stock
Options granted under the Plan, accept the surrender of outstanding Stock
Options (to the extent not theretofore exercised) and authorize the granting of
new Stock Options in substitution therefor (to the extent not theretofore
exercised). The Plan Administrator may modify any outstanding Stock Options so
as to specify a lower exercise price or accept the surrender of outstanding
Stock Options and authorize the grant of new Stock Options in substitution
therefor specifying a lower price. The Plan Administrator shall not, however,
without the consent of the Optionee, modify any outstanding Incentive Stock
Option in any manner which would cause the Stock Option not to qualify as an
Incentive Stock Option within the meaning of Section 422 of the Code.
Notwithstanding the foregoing, no modification of a Stock Option shall, without
the consent of the Optionee, alter or impair any rights of the Optionee under
the Stock Option.

                      7.11 1994 DISTRIBUTION. The following provisions shall
apply to the options issued under this Plan in connection with the conversion
and adjustment of options which are outstanding under the Emulex Corporation
Employee Stock Option Plan (the "Emulex Plan") on the "Distribution Date"
specified in the Distribution Agreement (the "Distribution Agreement") providing
for the distribution of all of the outstanding common stock of the Company (the
"Distribution") to the stockholders of Emulex Corporation, a Delaware
corporation ("Emulex"), on the Distribution Date and a reverse stock split of
the outstanding shares of common stock of the Company in connection with the
Distribution pursuant to which each two outstanding shares of common stock of
the Company on the Distribution Date will be combined to become one share of
common stock of the Company (the "Reverse Stock Split"), with all fractional
shares being acquired by the Company for cash:

                             (a) Adjustment of options for Reverse Stock Split.
Upon the effectiveness of the Reverse Stock Split, each option then outstanding
under the Emulex Plan shall be automatically adjusted pursuant to the terms of
the Emulex Plan so that the total number of shares of common stock of Emulex
purchasable under such option and the number of shares of such

                                       -8-



<PAGE>   12
common stock purchasable as of any given point in time shall be halved and the
purchase price per share of such common stock shall be doubled.

                             (b) Conversion of Options Upon the Distribution.
Upon the Distribution, except as otherwise provided in a written instrument with
respect to a specified option outstanding under the Plan on the date of the
Distribution, each option then outstanding under the Emulex Plan (an
"Outstanding Option") shall be automatically converted into two separately
exercisable options (collectively, the "New Options"), one to purchase common
stock of the Company (a "Company Option") and the other to purchase common stock
of Emulex (a "New Emulex Option"). Each Company Option will be deemed granted
under the Plan and each New Emulex Option will be deemed granted under the
Emulex Plan. Each New Option shall be exercisable for a number of shares equal
to the number of shares subject to purchase under the unexercised portion of the
related outstanding Option (as adjusted as a result of the Reverse Stock Split
as provided herein).

                             (c) Option Terms and Conditions. Except as
otherwise provided in this Section 7.11, each New Option shall contain and
continue to be subject to the same terms and conditions of the related
Outstanding Option, including, without limitation, provisions relating to the
term and expiration of the option; exercisability of the option; payment for
shares purchased upon exercise of the option; adjustments in the shares and
exercise price under the option, cancellation of the option, and/or acceleration
of exercisability of the option in the event of any stock dividend, stock split,
reverse stock split, merger, consolidation, liquidation, recapitalization or
reorganization of the Company or Emulex, as the case may be; or acceleration of
exercisability of the option as a result of a change in control of the Company
or Emulex, as the case may be. For purposes of determining expiration of the
term and vesting of the right to exercise a Company Option received in
connection with the conversion of an outstanding Option held by a person who is
employed by Emulex immediately after the Distribution (an "Emulex Employee"),
such Emulex Employee's employment with Emulex following the Distribution shall
be treated the same as if such Emulex Employee had continued to be employed by
the Company or one of its subsidiaries; and termination of such Emulex
Employee's employment with Emulex and its subsidiaries after the Distribution
shall be treated as termination of such Emulex Employee's employment with the
Company and its subsidiaries, irrespective of whether such Emulex Employee may
become employed by the Company or one of its subsidiaries following termination
of his or her employment with Emulex and its subsidiaries. For purposes of
determining expiration of the term and vesting of the right to exercise a New
Emulex Option received in connection with the conversion of an Outstanding
Option held by a person who is employed by the Company or one of its
subsidiaries immediately after the Distribution (a "Company Employee"), such
Company

                                       -9-

<PAGE>   13
Employee's employment with the Company (or any of its subsidiaries) following
the Distribution shall be treated the same as if such Company Employee were
employed by Emulex or one of its subsidiaries; and termination of such Company
Employee's employment with the Company and its subsidiaries after the
Distribution shall be treated as termination of his or her employment with
Emulex and its subsidiaries, irrespective of whether such Company Employee may
become employed by Emulex or one of its subsidiaries following termination of
his or her employment with the Company and its subsidiaries.

                             (d) Option Price. Upon the Distribution, the
purchase price per share of stock purchasable under each New Option shall be
adjusted to give effect to the Distribution by allocating the purchase price per
share of the stock purchasable under the related Outstanding Option between the
Company Option and the New Emulex Option proportionately such that the purchase
price per share under the Company Option shall be equal to the product of the
purchase price per share under the related Outstanding Option (adjusted as a
result of the Reverse Stock Split as provided herein) multiplied by a fraction,
the numerator of which is the fair market value of a share of common stock of
the Company and the denominator of which is the sum of the fair market value of
a share of common stock of the Company plus the fair market value of a share of
common stock of Emulex; and the purchase price per share under the Emulex Option
shall be equal to the product of the purchase price per share under the related
Outstanding Option (adjusted as a result of the Reverse Stock Split as provided
herein) multiplied by a fraction, the numerator of which is the fair market
value of a share of common stock of Emulex and the denominator of which is the
sum of the fair market value of a share of common stock of Emulex plus the fair
market value of a share of common stock of the Company.

                             (e) Fair Market Value. For purposes of this Section
7.11, the fair market value of a share of common stock of the Company and a
share of common stock of Emulex shall be the average of the closing sales prices
per share of common stock of the Company and common stock of Emulex,
respectively, as quoted on the NASDAQ National Market System as reported in the
Wall Street Journal for each of the 20 trading days beginning on the day
following the Distribution Date, and if there is no closing sale price reported
on the NASDAQ National Market System for either common stock of the Company or
common stock of Emulex for one or more days during such period, the
determination shall be made utilizing the earliest 20 days following the day
following the Distribution Date on which closing sales prices are reported for
such stock.

                      7.12 Other Provisions. Each Stock Option may contain such
other terms, provisions, and conditions not inconsistent with the Plan as may be
determined by the Plan Administrator.


                                      -10-



<PAGE>   14
               8. STOCK APPRECIATION RIGHTS.

                      8.1 GENERAL. A stock Appreciation Right is a grant
entitling the recipient to receive an amount in cash or shares of the Common
Stock of the Company or a combination thereof having a value equal to (or if the
Plan Administrator shall so determine at time of grant, less than) the excess of
the Fair Market Value of a share on the date of exercise over the Fair Market
Value of a share on the date of grant (or over the Stock Option exercise price,
if the Stock Appreciation Rights are granted in tandem with a Stock Option)
multiplied by the number of shares with respect to which the Stock Appreciation
Rights shall have been exercised, with the Plan Administrator having the sole
discretion to determine the form of payment. In any event, cash shall be paid in
lieu of fractional shares.

                      8.2 GRANT AND EXERCISE. Stock Appreciation Rights may be
granted in tandem with the grant of any Stock Option or independent of any Stock
Option granted under the Plan. In the case of a tandem grant with a Nonqualified
Stock Option, such Stock Appreciation Rights may be granted either at or after
the grant of such Nonqualified Stock Option. In the case of a tandem grant with
an Incentive Stock Option, Stock Appreciation Rights may be granted only at the
time of the grant of such Incentive Stock Option. Stock Appreciation Rights or
any applicable portion thereof granted in tandem with a given Stock Option shall
terminate and no longer be exercisable upon the termination or exercise of the
related Stock Option, except that, unless otherwise provided by the Plan
Administrator at the time of grant, a right granted with respect to less than
the full number of shares covered by a related tandem Stock Option shall be
reduced only if and to the extent that the number of shares covered by the
exercise or termination of the related tandem Stock Option exceeds the number of
shares not covered by the Stock Appreciation Rights.

                      8.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights shall be subject to the following terms and conditions
and to such other terms and conditions not inconsistent with the Plan as the
Plan Administrator may from time to time determine:

                             (a) No Stock Appreciation Rights shall be
exercisable in whole or in part during the first six months of the grant term.

                             (b) Stock Appreciation Rights granted in tandem
with a Stock Option shall be exercisable by the Optionee (or such other person
entitled under the Plan to exercise the Stock Option contained in the tandem
grant) only at such time or times, and to the extent, that the related tandem
Stock Option is exercisable and only when the Fair Market Value of the stock
subject to the tandem Stock Option exceeds the exercise price of such Stock
Option. Upon the exercise of Stock Appreciation

                                      -11-



<PAGE>   15
Rights, the applicable portion of any related tandem Stock Option shall be
surrendered. Stock Appreciation Rights granted independent of any Stock Option
shall be exercisable by the holder in such manner and within such period or
periods as shall be determined by the Plan Administrator pursuant to the terms
of the Stock Appreciation Rights agreement evidencing the grant.

                             (c) Stock Appreciation Rights granted in tandem
with a Stock Option shall be transferable only with such Stock Option. Stock
Appreciation Rights shall not be transferable otherwise than by will or the laws
of descent and distribution. All Stock Appreciation Rights shall be exercisable
during the holder's lifetime only by the holder or the holder's legal
representative or guardian.

                             (d) The Plan Administrator may, at any time and in
its discretion, authorize a cash payment in respect of a grant or exercise under
the Plan which shall not exceed the amount required to pay in full the federal,
state and local tax consequences of an exercise of any Award granted under this
Plan. The Plan Administrator shall have sole and complete authority to decide
whether to make such cash payments in any case, to make provision for such
payments either simultaneously with or after any grant, and to determine the
amount of any such payment.

                      8.4 RULES RELATING TO EXERCISE. In the case of a holder
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended from
time to time, no Stock Appreciation Rights shall be exercised except in
compliance with any applicable requirements of Rule 16b-3(e) promulgated by the
Securities and Exchange Commission or any successor rule. The Plan Administrator
may impose such conditions on the exercise of Stock Appreciation Rights
(including, without limitation, to limit the time of exercise to specified
window periods following the release of quarterly and annual statements of sales
and earnings or to fixed dates that are outside the control of the Stock
Appreciation Rights holder) as may be required to satisfy the requirements of
Rule 16b-3 or any successor rule.

               9. RESTRICTED STOCK.

                      9.1 GENERAL. A Restricted Stock Award is an Award
entitling the recipient to acquire shares of Common Stock, subject to such
conditions, including the right of the Company during a specified period or
periods to repurchase such shares at their original price or to require
forfeiture of such shares (if no cash consideration was paid) upon the
participant's termination of employment, as the Plan Administrator may determine
at the time of grant. The Plan Administrator may award shares of Restricted
Stock (i) at no cost to the recipient (or for a purchase price not in excess of
the par value of the shares) or (ii) for a purchase price determined by the Plan
Administrator on the date of grant. Shares of Restricted Stock


                                      -12-



<PAGE>   16
may be granted or sold in respect of past services or other valid consideration.

                      9.2 AWARD AGREEMENT AND CERTIFICATES. A participant who is
granted a Restricted Stock Award shall have no rights with respect to such Award
unless the participant shall have accepted the Award within sixty days (or such
shorter period as the Plan Administrator may specify) following the Award date
by executing and delivering to the Company a Restricted Stock Award agreement in
such form as the Plan Administrator shall determine and by making payment to the
Company by certified or bank check or instrument acceptable to the Plan
Administrator any cash consideration required to be paid in connection with such
Restricted Stock Award. Each participant receiving a Restricted Stock Award
shall be issued a certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of the participant and
deposited with the Company or its designee, and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such Award,
substantially in the following form:

               "This certificate and the shares of stock represented hereby are
               subject to the terms and conditions (including forfeiture and
               restrictions against transfer) contained in the QLogic
               Corporation Stock Awards Plan and an agreement entered into
               between the registered owner and QLogic Corporation. Release from
               such terms and conditions shall be obtained only in accordance
               with the provisions of the Plan and the agreement, copies of
               which are on file in the office of the Secretary of QLogic
               Corporation."

The Plan Administrator may require that, as a condition of any Restricted Stock
Award, the participant shall have delivered to the Company a stock power,
endorsed in blank, relating to the Stock covered by such Award.

                      9.3 RIGHTS AS A STOCKHOLDER. Upon complying with Section
9.2 above, a participant shall have all the rights of a stockholder with respect
to the Restricted Stock including voting and dividend rights, subject to
nontransferability restrictions, Company repurchase or forfeiture rights and any
other condition described in this Section 9 or contained in the Restricted Stock
Award agreement. The Restricted Stock Award agreement may require or permit the
immediate payment, waiver, deferral, or investment of dividends paid on the
Restricted Stock.

                      9.4 RESTRICTIONS. Shares of Restricted Stock may not be
sold, assigned, transferred, pledged, or otherwise encumbered or disposed of
except as specifically provided herein and in the Restricted Stock Award
agreement. Unless the Plan

                                      -13-



<PAGE>   17
Administrator in its discretion provides otherwise, all shares of Restricted
Stock shall be subject to the restrictions against transfer and to the Company's
right to repurchase or require forfeiture set forth in this Section 9.4 for a
period of six months from the date of grant.

                      The Plan Administrator shall specify the date or dates
(which may depend upon or be related to the attainment of performance goals or
such other factors or criteria as the Plan Administrator shall determine) on
which the nontransferability of the Restricted Stock and the obligation to
forfeit or resell such shares to the Company shall lapse. The Plan Administrator
may provide for the lapse of such restrictions in installments and at any time
may accelerate such date or dates and otherwise waive or, subject to Section 15
below, amend any terms and conditions of the Award.

                      Except as otherwise may be provided in the Award agreement
or determined by the Plan Administrator at any time after the date of grant, in
the event of termination of employment of a participant with the Company and its
subsidiaries for any reason (including death), the participant or the
participant's legal representative shall resell to the Company, at the cash
consideration paid therefor, all Restricted Stock, and the Company shall
purchase such shares at that price, or if no cash consideration was paid, all
shares of Restricted Stock awarded to the participant shall automatically be
forfeited to the Company.

                      Any shares of Stock or other securities of the Company or
any other entity which are issued as a distribution on, or in exchange for,
Restricted Stock or into which Restricted Stock is converted as a result of a
recapitalization, stock dividend, distribution of securities, stock split or
combination of shares or a merger, consolidation or sale of substantially all of
the assets of the Company shall be subject to the restrictions set forth in the
Restricted Stock Award agreement, which shall inure to the benefit of any
surviving or successor corporation which is the issuer of such securities. Upon
the lapse of the restrictions applicable to a participant's Restricted Stock,
certificates for shares of Stock free of any restrictive legend shall be
delivered to the participant or his legal representative or guardian.

                      9.5 SECTION 83(b) ELECTION. Any Restricted Stock Award
agreement may provide that the participant may not elect to be taxed with
respect to such Award in accordance with Section 83(b) of the Code.

               10. UNRESTRICTED STOCK. The Plan Administrator may, in its sole
discretion, grant (or sell at a purchase price determined by the Plan
Administrator at the time of sale) to any participant shares of Common Stock
free of restrictions under the Plan ("Unrestricted Stock"). Shares of
Unrestricted Stock may be

                                      -14-



<PAGE>   18
granted or sold as described in the preceding sentence in respect of past
services or other valid consideration. Any purchase of Unrestricted Stock by a
recipient must take place within sixty days after the time of grant of the right
to purchase such shares. Notwithstanding the foregoing, any shares of
Unrestricted Stock granted to a participant subject to Section 16(b) of the Act
may not be sold or otherwise disposed of for value for a period of six months
from the date of grant.

               11. DEFERRED STOCK AWARDS.

                      11.1 GENERAL. A Deferred Stock Award is an Award entitling
the recipient to acquire shares of Common Stock without payment in one or more
installments at a future date or dates, all as determined by the Plan
Administrator. The Plan Administrator may also condition such acquisition on the
attainment of specified performance goals or such other factors or criteria as
the Plan Administrator shall determine. Unless the Plan Administrator in its
discretion provides otherwise, the deferral with respect to any Deferred Stock
Award shall be no less than six months from the date of grant.

                      11.2 AWARD AGREEMENT. A participant who is granted a
Deferred Stock Award shall have no rights with respect to such Award unless
within sixty days of the grant of such Award (or such shorter period as the Plan
Administrator may specify) the participant shall have accepted the Award by
executing and delivering to the Company a Deferred Stock Award agreement.

                      11.3 ELECTIVE DEFERRAL. A participant may elect to further
defer receipt of the Common Stock payable under a Deferred Stock Award (or an
installment of the Award) for a specified period or until a specified event,
subject in each case to the Plan Administrator's approval and under such terms
as determined by the Plan Administrator. Subject to any exceptions adopted by
the Plan Administrator, such election must generally be made at least 12 months
prior to completion of the deferral period for the Award (or for such
installment of the Award).

                      11.4 TERMINATION. Except as may otherwise be provided in
the Deferred Stock Award agreement, a participant's rights in all Deferred Stock
Awards shall automatically terminate upon the participant's termination of
employment with the Company and its Subsidiaries for any reason (including
death). At any time prior to the participant's termination of employment, the
Plan Administrator may in its discretion accelerate, waive, or, subject to
Section 15 below, amend any or all of the restrictions or conditions imposed
under any Deferred Stock Award.

                      11.5 PAYMENTS IN RESPECT OF DEFERRED STOCK. Without
limiting the right of the Plan Administrator to specify different terms, the
Deferred Stock Award agreement may either make no provisions for, or may require
or permit the immediate payment, deferral, or investment of amounts equal to, or
less

                                      -15-



<PAGE>   19
than, any cash dividends which would have been payable on the Deferred Stock had
such Stock been outstanding, all as determined by the Plan Administrator in its
sole discretion.

               12. PERFORMANCE UNIT AWARDS.

                      12.1 GENERAL. A Performance Unit Award is an Award
entitling the recipient to acquire cash or shares of Common Stock, or a
combination of cash and Common Stock, upon the attainment of specified
performance goals. The Plan Administrator in its sole discretion shall determine
whether and to whom Performance Unit Awards shall be made, the performance goals
applicable under each such Award, the periods during which performance is to be
measured, and all other limitations and conditions applicable to the Performance
Unit Award. Notwithstanding the foregoing, no Performance Unit Award shall be
exercisable in whole or in part during the first six months following the date
of grant. Performance goals may vary from participant to participant and between
groups of participants and shall be based upon such Company, business unit or
individual performance factors or criteria as the Plan Administrator may deed
appropriate. Performance periods may overlap and participants may participate
simultaneously with respect to Performance Unit Awards that are subject to
different performance periods and different performance goals. The Plan
Administrator may adjust the performance goals and periods applicable to a
Performance Unit Award to take into account changes in law and accounting and
tax rules, and to make such adjustments as the Plan Administrator deems
necessary or appropriate to reflect the inclusion or exclusion of the impact of
extraordinary or unusual items, events or circumstances in order to avoid
windfalls or hardships. Performance Units may be awarded independent of or in
connection with the grant of any other Award under the Plan.

                      12.2 AWARD AGREEMENT. A participant shall have no rights
with respect to a Performance Unit Award unless within sixty days of the grant
of such Award (or such shorter period as the Plan Administrator may specify) the
participant shall have accepted the Award by executing and delivering to the
Company a Performance Unit Award agreement.

                      12.3 TERMINATION. Except as may otherwise be provided by
the Plan Administrator at any time prior to the termination of employment, a
participant's rights and all Performance Unit Awards shall automatically
terminate upon the participant's termination of employment by the Company and
its Subsidiaries for any reason (including death).

                      12.4 ACCELERATION; WAIVER. At any time prior to the
participant's termination of employment with the Company and its Subsidiaries,
the Plan Administrator may in its sole discretion accelerate, waive, or, subject
to Section 15 below, amend any or all of the goals, restrictions or conditions
imposed under any Performance Unit Award.

                                      -16-



<PAGE>   20
                      12.5 EXERCISE. The Plan Administrator in its sole
discretion shall establish procedures to be followed in exercising any
Performance Unit Award, which procedure shall be set forth in the Performance
Unit Award agreement. The Plan Administrator may at any time provide that
payment under a Performance Unit Award shall be made, upon satisfaction of the
applicable performance goals, without any exercise by the participant. Except as
otherwise specified by the Plan Administrator, (i) a Performance Unit granted in
tandem with a Stock Option is exercisable, and (ii) the exercise of a
Performance Unit granted in tandem with any Award shall reduce the number of
shares of Common Stock subject to the related Award on such basis as is
specified in the Performance Unit Award agreement.

               13. OTHER STOCK-BASED AWARDS.

                      13.1 GENERAL. The Plan Administrator may grant other
Awards under which Common Stock is or may in the future be acquired ("Other
Stock-Based Awards"). Such Awards may include, without limitation, debt
securities convertible into or exchangeable for shares of Common Stock upon such
conditions, including attainment of performance goals, as the Plan Administrator
shall determine. No Other Stock-Based Award shall be exercisable in whole or in
part during the first six months following the date of grant or, if shares of
Common Stock are awarded to a participant on the date of grant, such Stock shall
be subject to restrictions against transfer for a period of no less than six
months from the date of grant. Subject to the purchase price limitations in
section 13.2 below, such convertible or exchangeable securities may have such
terms and conditions as the Plan Administrator may determine at the time of
grant. However, no convertible or exchangeable debt shall be issued unless the
Plan Administrator shall have provided (by the Company's right of repurchase,
right to require conversion or exchange, or other means deemed appropriate by
the Plan Administrator) a means of avoiding any right of the holders of such
debt to prevent a Company transaction by reason of covenants in such debt.

                      13.2 PURCHASE PRICE; FORM OF PAYMENT. The Plan
Administrator may determine the consideration, if any, payable upon the issuance
or exercise of an Other Stock-Based Award. However, no shares of Common Stock
(whether acquired by purchase, conversion, or exchange or otherwise) shall be
issued unless (i) issued at no cost to the recipient (or for a purchase price
not in excess of the par value of the shares), or (ii) sold, exchanged, or
converted by the Company, and the Company shall have received payment for such
Stock or securities so sold, exchanged, or converted equal to at least 50% of
Fair Market Value of the Stock on the grant or effective date, or the exchange
or conversion date, under the Award, as specified by the Plan Administrator. The
Plan Administrator may permit payment by certified check or bank check or other
instrument acceptable to

                                      -17-



<PAGE>   21
the Plan Administrator or by surrender of other shares of Common Stock
(excluding shares then subject to restrictions under the Plan).

                      13.3 FORFEITURE OF AWARDS; REPURCHASE OF STOCK;
ACCELERATION OF WAIVER OF RESTRICTIONS. The Plan Administrator may determine the
conditions under which an Other Stock-Based Award shall be forfeited or, in the
case of an Award involving a payment by the recipient, the conditions under
which the Company may or must repurchase such Award or related Stock. At any
time the Plan Administrator may in its sole discretion accelerate, waive, or,
subject to Section 15 below, amend any or all of the limitations or conditions
imposed under any Other Stock-Based Award.

                      13.4 AWARD AGREEMENTS. A participant shall have no rights
with respect to any Other Stock-Based Award unless within sixty days after the
grant of such Award (or such shorter period as the Plan Administrator may
specify) the participant shall have accepted the Award by executing and
delivering to the Company an Other Stock-Based Award agreement.

                      13.5 DEEMED DIVIDEND PAYMENTS; DEFERRALS. Without limiting
the right of the Plan Administrator to specify different terms, an Other Stock-
Based Award agreement may require or permit the immediate payment, waiver,
deferral, or investment of dividends or deemed dividends payable or deemed
payable on Stock subject to the Award.

               14. SUPPLEMENTAL GRANTS.

                      14.1 LOANS. The Company may extend and maintain, or
arrange for the extension and maintenance of, credit to any Award recipient to
finance the participant's purchase of shares pursuant to the exercise of any
Award, on such terms as may be approved by the Plan Administrator, subject to
applicable regulations of the Federal Reserve Board and any other laws or
regulations in effect at the time such credit is extended, either on or after
the date of grant of such Award. Such loans may be either in connection with the
grant or exercise of any Award, or in connection with the payment of any
federal, state and local income taxes in respect of income recognized under an
Award. The Plan Administrator shall have full authority to decide whether to
make a loan hereunder and to determine the amount, term, and provisions of any
such loan, including the interest rate (which may be zero) charged in respect of
any such loan, whether the loan is to be secured or unsecured, the terms on
which the loan is to be repaid and the conditions, if any, under which it may be
forgiven. However, no loan hereunder shall provide or reimburse to the borrower
the amount used by him for the payment of the par value of any shares of Stock
issued, have a term (including extensions) exceeding ten years in duration, or
be an amount exceeding the total exercise or purchase price paid by the borrower
under an Award or for related Stock under the Plan plus

                                      -18-



<PAGE>   22
an amount equal to the cash payment permitted in Section 14.2 below.

                      14.2 CASH PAYMENTS. The Plan Administrator may, at any
time and in its discretion, authorize a cash payment, in respect of the grant or
exercise of an Award under the Plan or the lapse or waiver of restrictions under
an Award, which shall not exceed the amount which would be required in order to
pay in full the federal, state and local income taxes due as a result of income
recognized by the recipient as a consequence of (i) the receipt of an Award or
the exercise of rights thereunder and (ii) the receipt of such cash payment. The
Plan Administrator shall have complete authority to decide whether to make such
cash payments in any case, to make provisions for such payments either
simultaneously with or after the grant of the associated Award, and to determine
the amount of any such payment.

               15. TERMINATION OR AMENDMENT OF THE PLAN. The Board may at any
time terminate or amend the Plan; provided that, without approval of the
stockholders of the Company, there shall be, except by operation of the
provisions of Section 6.2, no increase in the total number of shares covered by
the Plan, no change in the class of persons eligible to receive Awards granted
under the Plan or other material modification of the requirements as to
eligibility for participation in the Plan, no material increase in the benefits
accruing to participants under the Plan, no reduction in the exercise price of
Awards granted under the Plan, and no extension of the latest date upon which
Awards may be exercised; and provided further that, without the consent of the
Award recipient, no amendment may adversely affect any then outstanding Awards
or any unexercised portion thereof.

               16. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or the Compensation
Committee, the members of the Plan Administrator shall be indemnified by the
Company against reasonable expense, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any grant thereunder, and against all amounts paid
by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any action, suit, or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit, or
proceeding that such member is liable for negligence or misconduct in the
performance of his duties, provided that within 60 days after institution of any
such action, suit, or proceeding, the member shall in writing offer the Company
the opportunity, at its own expense, to handle and defend the same.



                                      -19-



<PAGE>   23
               17. WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
any federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares of Common Stock. If a
participant surrenders shares acquired pursuant to the exercise of an Incentive
Stock Option in payment of the exercise price of an Award and such surrender
constitutes a disqualifying disposition for purposes of obtaining Incentive
Stock Option treatment under the Code, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy any
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares. Whenever under the Plan
payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any federal, state and local withholding tax requirements.
A recipient may elect with respect to any Award which is paid in whole or in
part in shares of Common Stock, to surrender previously acquired shares of
Common Stock or authorize the Company to withhold shares (valued at Fair Market
Value on the date of surrender or withholding of the shares) in satisfaction of
all such withholding requirements (the "Share Surrender Withholding Election")
in accordance with the following:

                      17.1 IRREVOCABLE ELECTION. Any Share surrender Withholding
Election shall be made by written notice to the Company and thereafter shall be
irrevocable by the recipient.

                      17.2 APPROVAL BY PLAN ADMINISTRATOR. If a recipient is
subject to Section 16 of the Securities Exchange Act of 1934, as amended, or any
successor law, any Share Surrender Withholding Election shall be subject to the
consent or disapproval of the Plan Administrator in accordance with rules
established from time to time by the Plan Administrator.

                      17.3 TIMING OF ELECTION. Any Share Surrender Withholding
Election must be made prior to the date on which the recipient recognizes
taxable income with respect to the receipt of such shares (the "Tax Date").

                      17.4 WINDOW PERIOD. If a recipient is subject to Section
16 of the Securities Exchange Act of 1934, as amended, or any successor law,
such person must make any Share Surrender Withholding Election:

                             (a) more than six months after the date of grant
with respect to which such election is made (except whenever such election is
made by a Disabled recipient or the estate or personal representative of a
deceased recipient); and

                             (b) either at least six months prior to the Tax
Date or during the period of ten business days beginning

                                      -20-



<PAGE>   24
on the third business day following the release for publication of the Company's
summary statement of sales and earnings for a quarter or fiscal year.

                      17.5 TIMING OF DELIVERY. When the Tax Date falls after the
exercise of an Award and the recipient makes a Share Surrender Withholding
Election, the full number of shares subject to the Award being exercised will be
issued, but the recipient will be unconditionally obligated to deliver to the
Company on the Tax Date the number of shares having a value on the Tax Date
equal to the recipient's federal, state and local withholding tax requirements.

                      17.6 TERMS IN AGREEMENT. For purposes of this Section 15,
the Plan Administrator shall have the discretion to provide (by general rule or
a provision in the specific Award agreement) that, at the election of the
recipient, "federal, state and local withholding tax requirements" shall be
deemed to be any amount designated by the recipient which does not exceed his
estimated federal, state and local tax obligations associated with the
transaction, including FICA taxes to the extent applicable.

               18. UNFUNDED STATUS OF PLAN. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a participant by the Company, nothing set forth herein
shall give any such participant any rights that are greater than those of a
general unsecured creditor of the Company. In its sole discretion, the Plan
Administrator may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver shares or cash with respect to
the exercise of Awards hereunder, provided, however, that the existence of such
trusts or other arrangements is consistent with the unfunded status of the Plan.

               19. GENERAL PROVISIONS.

                      19.1 RESTRICTIONS ON ISSUANCE OF SHARES. The issuance of
Awards and shares of Common Stock shall be subject to compliance with all of the
applicable requirements of law with respect to the issuance and sale of
securities, including, without limitation, any required qualification under the
California Corporate Securities Law of 1968, as amended. If a participant
acquires shares of Common Stock pursuant to the exercise of an Award, the Plan
Administrator, in its sole discretion, may require as a condition of issuance of
shares covered by his or her Award, to represent that the shares to be acquired
pursuant to exercise of the Award will be acquired for investment and without a
view to distribution thereof; and in such case, the Company may place a legend
on the certificate evidencing the shares reflecting the fact that they were
acquired for investment and cannot be sold or transferred unless registered
under the Securities Act of 1933, as amended, or

                                      -21-



<PAGE>   25
unless counsel for the Company is satisfied that the circumstances of the
proposed transfer do not require such registration. The Company may place a
legend on the certificates evidencing the shares reflecting the fact that they
are subject to restrictions on transfer under the terms of this Section 20.1. In
addition, any participant may be required to execute a buy-sell or right of
first refusal agreement in favor of the Company or its designee with respect to
all or any of the shares so acquired. In such event, the terms of such agreement
shall apply to such shares.

                      19.2 RIGHTS AS A STOCKHOLDER OR EMPLOYEE. A participant or
transferee of an Award shall have no right as a stockholder of the Company with
respect to any shares covered by any grant under this Plan until the date of the
issuance of a share certificate for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether cash, securities, or other
property) or distributions or other rights for which the record date is prior to
the date such share certificate is issued, except as provided in Section 6.2.
Nothing in the Plan or in any Award agreement shall confer upon any participant
any right to continue in the employ of the Company or any of its subsidiaries or
interfere in any way with any right of the Company or any subsidiary to
terminate the participant's employment at any time.

                      19.3 GOVERNING LAW. This Plan shall be governed by, and
construed in accordance with, the laws of the state of California.

               20. EFFECTIVE DATE OF PLAN. The Plan shall be adopted and become
effective on the date of execution specified below subject, however, to the
approval of the Plan by the stockholders of the Company within twelve months of
the Effective Date. Unless stockholder approval is obtained within twelve months
of the Effective Date, this Plan and any Awards hereunder shall become void.

               21. TERM OF PLAN. Unless sooner terminated by the Board in its
sole discretion, the Plan will expire and no Awards may be made hereunder on and
after December 1, 2003.








                                      -22-