Exhibit
10.1


 


ULTRATECH,
INC.


1993
STOCK OPTION/STOCK ISSUANCE PLAN


 


(Amended and Restated as of March 2, 2004)


 


 


ARTICLE ONE



GENERAL


 


I.                                         PURPOSE OF THE PLAN


 


This 1993 Stock
Option/Stock Issuance Plan (“Plan”) is intended to promote the interests of
Ultratech, Inc., a Delaware corporation (the “Corporation”), by providing (i)
key employees (including officers) of the Corporation (or its parent or
subsidiary corporations) who are responsible for the management, growth and
financial success of the Corporation (or its parent or subsidiary
corporations), (ii) the non-employee members of the Corporation’s Board of
Directors and (iii) independent consultants and other advisors who provide
valuable services to the Corporation (or its parent or subsidiary corporations)
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation (or its parent or subsidiary
corporations).


 


A.                                   The Plan became effective on
September 29, 1993, the date on which the shares of the Corporation’s
Common Stock were registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the “1934 Act”).  Such date is hereby designated as the Effective Date for the
Plan.


 


B.                                     This Plan shall serve as the
successor to the Corporation’s existing 1993 Stock Option and 1993 Stock
Issuance Plans (the “Predecessor Plans”), and no further option grants or share
issuances shall be made under the Predecessor Plans from and after the
Effective Date of this Plan.  All
outstanding stock options and unvested share issuances under the Predecessor
Plans on the Effective Date are hereby incorporated into this Plan and shall
accordingly be treated as outstanding stock options and unvested share
issuances under this Plan.  However,
each outstanding option grant and unvested share issuance so incorporated shall
continue to be governed solely by the express terms and conditions of the
instrument evidencing such grant or issuance, and no provision of this Plan
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such incorporated options with respect to their acquisition of
shares of Common Stock thereunder.  All
unvested shares of Common Stock outstanding under the Predecessor Plans on the
Effective Date shall continue to be governed solely by the express terms and
conditions of the instruments evidencing such issuances, and no provision of
this Plan shall be deemed to affect or modify the rights or obligations of the
holders of such unvested shares.


 

















 


II.                                     DEFINITIONS


 


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


 


Board:  the Corporation’s Board of Directors.


 


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


 


Committee:  the committee of two (2) or more
non-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 the
Corporation effected through either of the following transactions:


 


a.                                       any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation’s outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders; or


 


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


 


Corporate Transaction:  any of the following stockholder-approved
transactions to which the Corporation is a party:


 


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


 


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


 


c.                                       any
reverse merger in which the Corporation is the surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation’s outstanding securities are transferred to
person or persons different from the persons holding those securities
immediately prior to such merger.


 


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Employee:  an individual who performs services while in
the 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 the
work to be performed but also as to the manner and method of performance.


 


Fair Market Value:  the Fair Market Value per share of Common
Stock determined in accordance with the following provisions:


 


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


 


b.                                      If
the Common Stock is at the time listed or admitted to trading on any national
stock exchange, then the Fair Market Value shall be the closing selling price
per share on the date in question on the exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange.  If there is no reported sale of Common Stock
on such exchange on the date in question, then the Fair Market Value shall be
the closing selling price on the exchange on the last preceding date for which
such quotation exists.


 


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


 


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


 


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


 


Plan Administrator:  the Committee in its capacity as the
administrator of the Plan.


 


Permanent Disability
or Permanently
Disabled:  the inability of
the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.


 


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Service:  the performance of services on a periodic
basis to the Corporation (or any parent or subsidiary corporation) in the
capacity of an Employee, a non—employee member of the board of directors or an
independent consultant or advisor, except to the extent otherwise specifically
provided in the applicable stock option or stock issuance agreement.


 


Take-Over Price:  the greater of (a) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (b) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over.  However, if the
surrendered option is an Incentive Option, the Take-Over Price shall not exceed
the clause (a) price per share.


 


B.                                     The following provisions shall be
applicable in determining the parent and subsidiary corporations of the
Corporation:


 


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


 


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


 


III.                                 STRUCTURE OF THE PLAN


 


A.                                   Stock Programs. 
The Plan shall be divided into three separate components: the
Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three and the Stock Issuance
Program specified in Article Four. 
Under the Discretionary Option Grant Program, eligible individuals may,
at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock in accordance with the provisions of
Article Two.  Under the Automatic
Option Grant Program, non-employee Board members will receive a series of
automatic option grants over their period of continued Board service to
purchase shares of Common Stock in accordance with the provisions of
Article Three.  Under the Stock
Issuance Program, eligible individuals may be issued shares of Common Stock
directly, either through the immediate purchase of such shares at Fair Market
Value at the time of issuance or as a bonus tied to the performance of services
or the Corporation’s attainment of financial objectives, without any cash
payment required of the recipient.


 


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


 


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IV.                                ADMINISTRATION OF THE PLAN


 


A.                                   Both the Discretionary Option Grant
Program 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 for
such period of time as the Board may determine and shall be subject to removal
by the Board at any time.


 


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


 


C.                                     Administration of the Automatic
Option Grant Program shall be self-executing in accordance with the express
terms and conditions of Article Three, and the Committee as Plan
Administrator shall exercise no discretionary functions with respect to option
grants made pursuant to that program.


 


V.                                    OPTION GRANTS AND STOCK ISSUANCES


 


A.                                   The persons eligible to participate
in the Discretionary Option Grant Program under Article Two or the Stock
Issuance Program under Article Four shall be limited to the following:


 


1.                                       officers
and other key employees of the Corporation (or its parent or subsidiary
corporations) who render services which contribute to the management, growth
and financial success of the Corporation (or its parent or subsidiary
corporations);


 


2.                                       non-employee
members of the Board; and


 


3.                                       those
independent consultants or other advisors who provide valuable services to the
Corporation (or its parent or subsidiary corporations).


 


B.                                     The
Plan Administrator shall have full authority to determine, (I) with respect to
the option grants made under the Discretionary Option Grant Program, which
eligible individuals are to receive option grants, the time or time when such
grants 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 of
the Code or a non-statutory option not intended to meet such requirements, the
time or times at which each granted option is to become exercisable and the
maximum term for which the option may remain outstanding and (II), with respect
to stock issuances under the Stock Issuance Program, the number of shares to be
issued to each Participant, the vesting schedule (if any) to be applicable
to the issued shares, and the consideration to be paid by the individual for
such shares.


 


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VI.                                STOCK SUBJECT TO THE PLAN


 


A.                                   Shares of Common Stock shall be
available for issuance under the Plan and shall be drawn from either the
Corporation’s authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the
open market.  Subject to the automatic
share increase provisions of Section VI. B. of this Article One, the
maximum number of shares of Common Stock reserved for issuance over the term of
the 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 the
Predecessor Plans on the Effective Date, (ii) an additional 600,000-share
increase authorized by the Board on March 21, 1996 and approved by the
stockholders at the 1996 Annual Stockholders Meeting, (iii) an additional
277,239 shares attributable to the automatic annual share increase for fiscal
1996 which was effected on January 2, 1996, (iv) an additional 284,346
shares attributable to the automatic annual share increase for fiscal 1997
which was effected on January 2, 1997, (v) an additional 450,000 shares
authorized by the Board on March 18, 1997 and approved by the stockholders
at the 1997 Annual Meeting, (vi) an additional 291,008 shares attributable to
the automatic annual share increase for fiscal 1998 which was effected on
January 2, 1998, (vii)  an
additional 295,480 shares attributable to the automatic annual share increase
for fiscal 1999 which was effected on January 4, 1999, (viii) an
additional 299,490 shares attributable to the automatic annual share increase
for fiscal 2000 which was effected on January 3, 2000, (ix) an additional
898,045 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 this
Article One, (x) an additional 905,088 shares of Common Stock added to the
share reserve on January 2, 2003 by reason of the automatic increase
provision of Section VI.B of this Article One and (xi) an additional
943,285 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 this
Article One..  The share reserve in
effect from time to time under the Plan shall be subject to periodic adjustment
in accordance with the provisions of this Section VI.  To the extent one or more outstanding
options under the Predecessor Plans which have been incorporated into this Plan
are subsequently exercised, the number of shares issued with respect to each
such option shall reduce, on a share-for-share basis, the number of shares
available for issuance under this Plan.


 


B.                                     The number of shares of Common Stock
available for issuance under the Plan shall automatically increase on the first
trading day of January of each calendar year, beginning with calendar year
2002 and continuing through calendar year 2006, by an amount equal to four
percent (4%) of the total number of shares of Common Stock outstanding on the
last trading day of the calendar year immediately preceding the calendar year
of each such share increase, but in no event shall any such annual increase
exceed 1,700,000 shares.


 


C.                                     In no event may the aggregate number
of shares of Common Stock for which any one individual participating in the
Plan may be granted stock options, separately-exercisable stock appreciation
rights 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 her
initial stock option grant or direct stock issuance under the Plan, the limit
shall 


 












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


 


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


 


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D.                                    Should one or more outstanding
options under this Plan (including outstanding options under the Predecessor
Plans incorporated into this Plan) expire or terminate for any reason prior to
exercise in full (including any option cancelled in accordance with the
cancellation-regrant provisions of Section IV of Article Two of the
Plan), then the shares subject to the portion of each option not so exercised
shall be available for subsequent issuance under the Plan.  Unvested shares issued under the Plan and
subsequently repurchased by the Corporation, at the original exercise or issue
price paid per share, pursuant to the Corporation’s repurchase rights under the
Plan shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under
the Plan.  Shares subject to any option
or portion thereof surrendered or cancelled in accordance with Section V
of Article Two shall reduce on a share-for-share basis the number of
shares of Common Stock available for subsequent issuance under the Plan.  In addition, should the exercise price of an
outstanding option under the Plan (including any option incorporated from the
Predecessor Plans) be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation
in satisfaction of the withholding taxes incurred in connection with the
exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares 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 the
holder of such option or share issuance.


 


E.                                      Should any change be made to the
Common Stock issuable under the Plan by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, then appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciations
rights and direct stock issuances under this Plan per calendar year, (iii) the
number and/or class of securities for which automatic option grants are to be
subsequently made per eligible non-employee Board member under the Automatic
Option Grant Program, (iv) the number and/or class of securities and price per
share in effect under each option outstanding under either the Discretionary
Option Grant or Automatic Option Grant Program and (v) the number and/or class
of securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plans.  Such adjustments to the outstanding options
are to be effected in a manner which shall preclude the enlargement or dilution
of rights and benefits under such options. 
The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.


 


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ARTICLE TWO



DISCRETIONARY OPTION GRANT PROGRAM


 


I.                                         TERMS AND CONDITIONS OF OPTIONS


 


Options granted
pursuant to the Discretionary Option Grant Program shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator’s
discretion, be either Incentive Options or non-statutory options.  Individuals who are not Employees of the
Corporation or its parent or subsidiary corporations may only be granted
non-statutory options.  Each granted
option shall be evidenced by one or more instruments in the form approved by
the Plan Administrator; provided, however, that each such instrument shall
comply with the terms and conditions specified below.  Each instrument evidencing an Incentive Option shall, in
addition, be subject to the applicable provisions of Section II of this
Article Two.


 


A.                                   Option Price.


 


1.                                       The
option price per share shall be fixed by the Plan Administrator and shall in no
event be less than one hundred percent (100%) of the fair market value of such
Common Stock on the grant date.


 


2.                                       The
option price shall become immediately due upon exercise of the option and,
subject to the provisions of Section I of Article Four and the
instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:


 


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


 


•                                          full payment
in shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation’s earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date (as such term is defined
below); or


 


•                                          full payment
in a combination of shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation’s earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date and
cash or check drawn to the Corporation’s order; or


 


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


 


9

















 


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


 


For purposes of
this subparagraph (2), the Exercise Date shall be the date on which written
notice of the option exercise is delivered to the Corporation.  Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the 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 shall
be exercisable at such time or times and during such period as is determined by
the Plan Administrator and set forth in the instrument evidencing the
grant.  No such option, however, shall
have a maximum term in excess of ten (10) years from the grant date.


 


C.                                     Limited Transferability. 
During the lifetime of the Optionee, Incentive Options shall be
exercisable only by the Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following the
Optionee’s death.  However,
non-statutory options may, in connection with the Optionee’s estate plan, be
assigned in whole or in part during the Optionee’s lifetime to one or more
members of the Optionee’s immediate family or to a trust established
exclusively for one or more such family members.  The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment.  The terms applicable to the
assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.


 


D.                                    Termination of Service.


 


1.                                       The
following provisions shall govern the exercise period applicable to any
outstanding options held by the Optionee at the time of cessation of Service or
death.


 


•                                          Should an
Optionee cease Service for any reason (including death or Permanent Disability)
while holding one or more outstanding options under this Article Two, then
none of those options shall (except to the extent otherwise provided pursuant
to subparagraph D.(3) below) remain exercisable for more than a thirty-six
(36)-month period (or such shorter period determined by the Plan Administrator
and set forth in the instrument evidencing the grant) measured from the date of
such cessation of Service.


 


•                                          Any option
held by the Optionee under this Article Two and exercisable in whole or in
part on the date of his or her death may be subsequently exercised by the
personal representative of the Optionee’s estate or by the person or persons to
whom the option is transferred pursuant to the Optionee’s will or in accordance
with 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) the
specified expiration date of the option term. 
Upon the occurrence of the earlier event, the option shall terminate.


 


•                                          Under no
circumstances shall any such option be exercisable after the specified
expiration date of the option term.


 


•                                          During the
applicable post-Service exercise period, the option may not be exercised in the
aggregate for more than the number of shares (if any) in which the Optionee is
vested at the time of his or her cessation of Service.  Upon the expiration of the limited
post-Service exercise period or (if earlier) upon the specified expiration date
of the option term, each such option shall terminate and cease to be
outstanding with respect to any vested shares for which the option has not otherwise
been exercised.  However, each
outstanding option shall, immediately upon the Optionee’s cessation of Service
for any reason, terminate and cease to be outstanding with respect to any
shares for which the option is not otherwise at that time exercisable or in
which the Optionee is not otherwise at that time vested.


 


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


 


2.                                       The
Plan Administrator shall have complete discretion, exercisable either at the
time 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 Two
to be exercised, during the limited post-Service exercise period applicable
under subparagraph (1) above, not only with respect to the number of vested
shares of Common Stock for which each such option is exercisable at the time of
the Optionee’s cessation of Service but also with respect to one or more
subsequent installments of the option shares in which the Optionee would have
otherwise vested had such cessation of Service not occurred.


 


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


 


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E.                                      Stockholder Rights.


 


An Optionee shall
have no stockholder rights with respect to any shares covered by the option
until such individual shall have exercised the option and paid the option price
for the purchased shares.


 


F.                                      Repurchase Rights.


 


The shares of
Common Stock acquired upon the exercise of any Article Two option grant
may be subject to repurchase by the Corporation in accordance with the
following provisions:


 


(a)                                  The
Plan Administrator shall have the discretion to authorize the issuance of
unvested shares of Common Stock under this Article Two.  Should the Optionee cease Service while
holding such unvested shares, the Corporation shall have the right to
repurchase any or all of those unvested shares at the option price paid per
share.  The terms and conditions upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the instrument evidencing such repurchase right.


 


(b)                                 All
of the Corporation’s outstanding repurchase rights under this Article Two
shall automatically terminate, and all shares subject to such terminated rights
shall immediately vest in full, upon the occurrence of a Corporate Transaction,
except to the extent:  (i) any such
repurchase right is expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator at
the time the repurchase right is issued.


 


(c)                                  The
Plan Administrator shall have the discretionary authority, exercisable either
before or after the Optionee’s cessation of Service, to cancel the
Corporation’s outstanding repurchase rights with respect to one or more shares
purchased or purchasable by the Optionee under this Option Grant Program and
thereby accelerate the vesting of such shares in whole or in part at any time.


 


II.                                     INCENTIVE OPTIONS


 


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


 


A.                                   Dollar Limitation. 
The aggregate fair market value (determined as of the respective date or
dates of grant) of the Common Stock for which one or more options granted to
any Employee after December 31, 1986 under this Plan (or any other option
plan of the Corporation or its parent or subsidiary corporations) may for the
first time become exercisable as incentive stock options under the Federal tax
laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000).  To the
extent the Employee holds two 


 


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(2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as incentive stock
options under the Federal tax laws shall be applied on the basis of the order
in which such options are granted. 
Should the number of shares of Common Stock for which any Incentive
Option first becomes exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation, then that option may
nevertheless be exercised in that calendar year for the excess number of shares
as a non-statutory option under the Federal tax laws.


 


B.                                     10% Stockholder. 
If any individual to whom an Incentive Option is granted is the owner of
stock (as determined under Section 424(d) of the Code) possessing ten
percent (10%) or more of the total combined voting power of all classes of
stock 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 ten
percent (110%) of the fair market value per share of Common Stock on the grant
date, and the option term shall not exceed five (5) years, measured from the
grant date.


 


Except as modified
by the preceding provisions of this Section II, the provisions of Articles
One, Two and Five of the Plan shall apply to all Incentive Options granted
hereunder.


 


III.                                 CORPORATE TRANSACTIONS/CHANGES IN CONTROL


 


A.                                   In the event of any Corporate
Transaction, each option which is at the time outstanding under this
Article Two shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for all or any portion of such shares as fully-vested shares.  However, an outstanding option under this
Article Two shall not so accelerate if and to the
extent:  (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation or parent thereof or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation or
parent thereof, (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the option spread existing
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option, or
(iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant.  The determination of option comparability
under clause (i) above shall be made by the Plan Administrator, and its
determination shall be final, binding and conclusive.


 


B.                                     Immediately following the
consummation of the Corporate Transaction, all outstanding options under this
Article Two shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation or its parent company.


 


C.                                     Each outstanding option under this
Article Two which is assumed in connection with the Corporate Transaction
or is otherwise to continue in effect shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and
pertain to the number and class of securities which would have been issued to
the option holder, in consummation of such Corporate Transaction, had such
person exercised the option immediately


 


13

















 


prior to such Corporate
Transaction.  Appropriate adjustments
shall also be made to the option price payable per share, provided the
aggregate option price payable for such securities shall remain the same.  In addition, appropriate adjustments to
reflect the Corporate Transaction shall be made to (i) the class and number of
securities available for issuance over the remaining term of the Plan, (ii) the
maximum number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under this Plan per calendar year and (iii) the maximum
number and/or class of securities which may be issued pursuant to Incentive
Options granted under the Plan.


 


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


 


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


 


F.                                      The Plan Administrator shall have
the discretionary authority, exercisable either at the time the option is
granted or at any time while the option remains outstanding, to provide for the
automatic acceleration of one or more outstanding options under this
Article Two (and the termination of one or more of the Corporation’s outstanding
repurchase rights under this Article Two) upon the occurrence of any
Change in Control.  The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee’s Service within a specified
period following the Change in Control.


 


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


 


H.                                    The exercisability as incentive
stock options under the Federal tax laws of any options accelerated under this
Section III in connection with a Corporate Transaction or Change in
Control shall remain subject to the dollar limitation of Section II of
this Article Two.  To the extent
such dollar limitation is exceeded, the accelerated option shall be exercisable
as a non-statutory option under the Federal tax laws.


 


IV.                                CANCELLATION AND REGRANT OF OPTIONS


 


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


 


14

















 


V.                                    STOCK APPRECIATION RIGHTS


 


A.                                   Provided and only if the Plan
Administrator determines in its discretion to implement the stock appreciation
right provisions of this Section V, one or more Optionees may be granted
the right, exercisable upon such terms and conditions as the Plan Administrator
may establish, to surrender all or part of an unexercised option under this
Article Two in exchange for a distribution from the Corporation in an
amount equal to the excess of (i) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time
vested 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 be
effective hereunder unless it is approved by the Plan Administrator.  If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section V may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and partly in
cash, as the Plan Administrator shall in its sole discretion deem appropriate.


 


C.                                     If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall retain whatever
rights the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at any time
prior to the later of (i) five (5) business days after the receipt of the
rejection notice or (ii) the last day on which the option is otherwise
exercisable in accordance with the terms of the instrument evidencing such
option, but in no event may such rights be exercised more than ten (10) years
after the date of the option grant.


 


D.                                    One or more officers of the
Corporation subject to the short-swing profit restrictions of the Federal
securities laws may, in the Plan Administrator’s sole discretion, be granted
limited stock appreciation rights in tandem with their outstanding options
under the Plan.  Upon the occurrence of
a Hostile Take-Over effected at any time when the Corporation’s outstanding
Common Stock is registered under Section 12(g) of the 1934 Act, the
officer shall have a thirty (30)-day period in which he or she may surrender
any outstanding option with such a limited stock appreciation right to the
Corporation, to the extent such option is at the time exercisable for
fully-vested shares of Common Stock. 
The officer shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
vested shares of Common Stock at the time subject to each surrendered option
(or surrendered portion of such option) over (ii) the aggregate exercise price
payable for such shares.  The cash
distribution 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, at
the time the limited stock appreciation right is granted, the subsequent
exercise of that right in accordance with the terms of the grant and the
provisions of this Section V.D.  No
additional approval of the Plan Administrator or the Board shall be required at
the time of the actual option surrender and distribution.  Any unsurrendered portion of the option
shall continue to remain outstanding and become exercisable in accordance with
the terms of the instrument evidencing such grant.


 


15

















 


E.                                      The shares of Common Stock subject
to any option surrendered for an appreciation distribution pursuant to this
Section V shall not be available for subsequent issuance
under the Plan.


 


16

















 


ARTICLE THREE



AUTOMATIC OPTION GRANT PROGRAM


 


I.                                         ELIGIBILITY


 


The provisions of
the Automatic Option Grant Program were revised, effective March 1, 1996,
to eliminate the special one-time option grant for 28,800 shares of Common
Stock to each newly-elected or newly-appointed non-employee Board member and to
implement a new program of periodic option grants to all eligible non-employee
Board members.  Under the revised
Automatic Option Grant Program, the following individuals shall be eligible to
receive automatic option grants over their period of Board service: (i) those
individuals who were serving as non-employee Board members on the date of the
1996 Annual Stockholders Meeting but who first joined the Board after
September 29, 1993, (ii) those individuals who first join the Board as
non-employee Board members after the date of the 1996 Annual Stockholders
Meeting and (iii) those individuals who first joined the Board prior to
September 30, 1993 and continue to serve as non-employee Board members
through one or more Annual Stockholders Meetings, beginning with the 1996
Annual Meeting.  However, a non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive a 12,000-share option
grant 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 annual
option grants (8,000-share annual option grants for grants made on or after the
date of the 2003 Annual Meeting) over his or her period of continued Board
service.  Each non-employee Board member
eligible to participate in the Automatic Option Grant Program pursuant to the
foregoing criteria shall be designated an Eligible Director for purposes of the
Plan.


 


II.                                     TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS


 


A.                                   Grant Date.


 


1.                                       Each
individual serving as a non-employee Board member on the date of the 1996
Annual Stockholders Meeting shall be granted on that date a non-statutory stock
option to purchase 12,000 shares of Common Stock upon the terms and conditions
of this Article Three, provided such individual (i) has not previously
been 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 received
an automatic option grant for 28,800 shares of Common Stock at the time of his
or her initial election or appointment to the Board, then that option was
automatically cancelled upon stockholder approval of the revised Automatic
Option Grant Program at the 1996 Annual Meeting.


 


2.                                       Each
individual who is first elected or appointed as a non-employee Board member
after the date of the 1996 Annual Stockholders Meeting shall automatically be
granted, on the date of such initial election or appointment, a non-statutory
stock option to purchase 12,000 shares of Common Stock upon the terms and
conditions of this Article Three, provided such individual has not
previously been in the employ of the Corporation (or any Parent or Subsidiary).


 


17

















 


3.                                       On
the date of each Annual Stockholders Meeting, beginning with the 1996 Annual
Stockholders Meeting, each individual who is to continue to serve as a non-employee
Board member, whether or not he or she is standing for re-election to the Board
at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 4,000 shares of Common Stock (8,000-shares of
Common 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 this
Automatic Option Grant Program within the preceding six (6) months.  There shall be no limit on the number of
such 4,000-share option grants (8,000-share option grants for options granted
on or after the date of the 2003 Annual Meeting) any one Eligible Director may
receive over his or her period of Board service, and individuals who have
previously been in the employ of the Corporation (or any Parent or Subsidiary)
shall be eligible to receive such annual option grants over their period of
continued Board service.


 


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


 


C.                                     Payment.


 


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


 


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


 


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


 


(iii)                               full
payment in a combination of shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation’s reported earnings and
valued at Fair Market Value on the Exercise Date and cash or check payable to
the Corporation’s order; or


 


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


 


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


 


18

















 


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


 


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


 


E.                                      Exercisability/Vesting. 
Each automatic grant shall be immediately exercisable for any or all of
the option shares.  However, any shares
purchased under the option shall be subject to repurchase by the Corporation,
at the exercise price paid per share, upon the Optionee’s cessation of Board
service prior to vesting in those shares. 
The shares subject to each 12,000-share initial automatic option grant
shall vest as follows:  (i) fifty
percent (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 remaining
shares shall vest in three (3) successive equal annual installments upon the
optionee’s completion of each of the next three (3) years of Board service
thereafter.  The shares subject to each
4,000-share annual automatic option grant (8,000-share annual automatic option
grant for grants made on or after the date of the 2003 Annual Meeting) shall
vest upon the earlier
of (i) the optionee’s completion of one (1) year of Board service measured from
the grant date and (ii) the optionee’s continuation in Board service through
the day immediately preceding the date of the first annual stockholders meeting
following the grant date of such option.(2) 
Vesting of the option shares shall be subject to acceleration as
provided in Section II.G and Section III of this Article Three.


 


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


 












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


 


19

















 


G.                                     Effect of Termination of Board
Service.


 


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


 


2.                                       Should
the Optionee die within six (6) months after cessation of Board service, then
any automatic option grant held by the Optionee at the time of death may
subsequently be exercised, for any or all of the option shares in which the
Optionee is vested at the time of his or her cessation of Board service (less
any vested option shares subsequently purchased by the Optionee prior to
death), by the personal representative of the Optionee’s estate or by the person
or persons to whom the option is transferred pursuant to the Optionee’s will or
in 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.                                       Should
the 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 option
grant held by such Optionee under this Article Three shall immediately
vest in full, and the Optionee (or the representative of the Optionee’s estate
or the person or persons to whom the option is transferred upon the Optionee’s
death) shall have a twelve (12)-month period following the date of the
Optionee’s cessation of Board service in which to exercise such option for any
or all of those vested shares of Common Stock.


 


4.                                       In
no event shall any automatic grant under this Article Three remain
exercisable after the expiration date of the ten (10)-year option term.  Upon the expiration of the applicable
post-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 shall
terminate and cease to be outstanding for any option shares in which the
Optionee was vested at the time of his or her cessation of Board service but
which were not otherwise purchased thereunder.


 


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


 


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


 


20

















 


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


 


A.                                   In the event of any Corporate
Transaction, the shares of Common Stock at the time subject to each outstanding
option under this Article Three but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully exercisable
for all of the shares of Common Stock at the time subject to that option and
may be exercised for all or any portion of such shares as fully-vested shares
of Common Stock.  Immediately following
the consummation of the Corporate Transaction, all automatic option grants
under 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 in
Control of the Corporation, the shares of Common Stock at the time subject to
each outstanding option under this Article Three but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the specified effective date for the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. 
Each such option shall remain fully exercisable for the option shares
which vest in connection with the Change in Control until the expiration or
sooner termination of the option term.


 


C.                                     Upon the occurrence of a Hostile
Take-Over, the Optionee shall have a thirty (30)-day period in which to
surrender each option held by him or her under this Article Three to the
Corporation.  The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate exercise
price payable for such shares.  Such
cash distribution shall be paid within five (5) days following the consummation
of the Hostile Take-Over.  Stockholder
approval of this March 1997 restatement of the Plan shall constitute
pre-approval of each option subsequently granted with a surrender provision and
the subsequent surrender of that option in accordance with the terms and
provisions of this Section III.C. 
No additional approval of the Plan Administrator or the Board shall be
required at the time of the actual option cancellation and cash distribution.


 


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


 


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


 


21

















 


ARTICLE FOUR



STOCK ISSUANCE PROGRAM


 


I.                                         TERMS AND CONDITIONS OF STOCK ISSUANCES


 


Shares may be
issued under the Stock Issuance Program through direct and immediate purchases
without 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 this
Article Four.


 


A.                                   Consideration.


 


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


 


(i)                                     cash
or cash equivalents (such as a personal check or bank draft) paid the
Corporation;


 


(ii)                                  a
promissory 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 and
conditions established by the Plan Administrator; or


 


(iii)                               past
services rendered to the Corporation or any parent or subsidiary corporation.


 


2.                                       The
consideration for any Newly Issued Shares issued under this Stock Issuance
Program shall have a value determined by the Plan Administrator to be not less
than one-hundred percent (100%) of the Fair Market Value of those shares at the
time of issuance.


 


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


 


22

















 


B.                                     Vesting Provisions.


 


1.                                       Shares
of Common Stock issued under the Stock Issuance Program may, in the absolute
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period
of Service.  The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under
the Stock Issuance Program, namely:


 


(i)                                     the
Service period to be completed by the Participant or the performance objectives
to be achieved by the Corporation,


 


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


 


(iii)                               the
interval or intervals (if any) which are to lapse between installments, and


 


(iv)                              the
effect which death, Permanent Disability or other event designated by the Plan
Administrator is to have upon the vesting schedule,


 


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


 


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


 


3.                                       Should
the Participant cease to remain in Service while holding one or more unvested
shares of Common Stock under the Plan, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares.  To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant’s purchase-money promissory note), the
Corporation shall repay to the Participant the cash consideration paid for the
surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to such
surrendered shares.  The surrendered
shares may, at the Plan Administrator’s discretion, be retained by the
Corporation as Treasury Shares or may be retired to authorized but unissued
share status.


 


23

















 


4.                                       The
Plan Administrator may in its discretion elect to waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of
the vesting schedule applicable to such shares.  Such waiver shall result in the immediate vesting of the
Participant’s interest in the shares of Common Stock as to which the waiver
applies.  Such waiver may be effected at
any time, whether before or after the Participant’s cessation of Service or the
attainment or non-attainment of the applicable performance objectives.


 


II.                                     CORPORATE TRANSACTIONS/CHANGE IN CONTROL


 


A.                                   Upon the occurrence of any Corporate
Transaction, all unvested shares of Common Stock at the time outstanding under
the Stock Issuance Program shall immediately vest in full, except to the extent
the Plan Administrator imposes limitations in the Issuance Agreement which
preclude such accelerated vesting in whole or in part.


 


B.                                     The Plan Administrator shall have
the discretionary authority, exercisable either in advance of any
actually-anticipated Change in Control or at the time of an actual Change in
Control, to provide for the immediate and automatic vesting of one or more
unvested shares outstanding under the Stock Issuance Program at the time of
such Change in Control.  The Plan
Administrator shall also have full power and authority to condition any such
accelerated vesting upon the subsequent termination of the Participant’s
Service within a specified period following the Change in Control.


 


III.                                 TRANSFER RESTRICTIONS/SHARE ESCROW


 


A.                                   Unvested shares may, in the Plan
Administrator’s discretion, be held in escrow by the Corporation until the
Participant’s interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing such
unvested shares.  To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets 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’s
interest in such shares (or other securities or assets) vests.  Alternatively, if the unvested shares are
issued directly to the Participant, the restrictive legend on the certificates
for such shares shall read substantially as follows:


 


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


 


24

















 


B.                                     The Participant shall have no right
to transfer any unvested shares of Common Stock issued to him or her under the
Stock Issuance Program.  For purposes of
this restriction, the term “transfer” shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift, or other disposition of such
shares, whether voluntary or involuntary. 
Upon any such attempted transfer, the unvested shares shall immediately
be cancelled, and neither the Participant nor the proposed transferee shall
have any rights with respect to those shares. 
However, the Participant shall have the right to make a gift of unvested
shares 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 written
agreement to be bound by all the provisions of the Stock Issuance Program and
the 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 its
discretion, assist any Optionee or Participant (including an Optionee or
Participant who is an officer of the Corporation) in the exercise of one or
more options granted to such Optionee under the Discretionary Option Grant
Program or the purchase of one or more shares issued to such Participant under
the Stock Issuance Program, including the satisfaction of any Federal and State
income and employment tax obligations arising therefrom, by (i) authorizing the
extension of a loan from the Corporation to such Optionee or Participant or
(ii) permitting the Optionee or Participant to pay the option price or purchase
price for the purchased Common Stock in installments over a period of
years.  The terms of any loan or installment
method of payment (including the interest rate and terms of repayment) shall be
upon such terms as the Plan Administrator specifies in the applicable option or
issuance agreement or otherwise deems appropriate under the circumstances.  Loans or installment payments may be
authorized with or without security or collateral.  However, the maximum credit available to the Optionee or
Participant 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 and
employment tax liability incurred by the Optionee or Participant in connection
with the acquisition of such shares.


 


B.                                     The Plan Administrator may, in its
absolute discretion, determine that one or more loans extended under this
financial assistance program shall be subject to forgiveness by the Corporation
in whole or in part upon such terms and conditions as the Plan Administrator
may deem appropriate.


 


II.                                     AMENDMENT OF THE PLAN AND AWARDS


 


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


 


B.                                     (i) Options to purchase shares of
Common 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 available
for issuance under the Plan, provided any excess shares actually issued under
the Discretionary Option Grant Program or the Stock Issuance Program are held
in escrow until stockholder approval is obtained for a sufficient increase in
the number of shares available for issuance under the Plan.  If such stockholder approval is not obtained
within twelve (12) months 


 


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


 


III.                                 TAX WITHHOLDING


 


The Corporation’s
obligation to deliver shares of Common Stock upon the exercise of stock options
for such shares or the vesting of such shares under the Plan shall be subject
to the satisfaction of all applicable Federal, State and local income tax and
employment tax withholding requirements.


 


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


 


(a)                                  Stock
Withholding:  The holder of the
non-statutory option or unvested shares may be provided with the election to
have the Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such non-statutory option or the vesting of such
shares, a portion of those shares with an aggregate Fair Market Value equal to
the percentage of the applicable Withholding Taxes (not to exceed one hundred
percent (100%)) designated by the holder.


 


(b)                                 Stock
Delivery:  The Plan Administrator
may, in its discretion, provide the holder of the non-statutory option or the
unvested shares with the election to deliver to the Corporation, at the time
the non-statutory option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such individual (other than in connection
with the option exercise or share vesting triggering the Withholding Taxes)
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes incurred in connection with such option exercise or share vesting (not to
exceed one hundred percent (100%)) designated by the holder.


 


IV.                                EFFECTIVE DATE AND TERM OF PLAN


 


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


 


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B.                                     Each stock option grant outstanding
under the Predecessor Plans immediately prior to the Effective Date of the
Discretionary Option Grant Program shall be incorporated into this Plan and
treated as an outstanding option under this Plan, but each such option shall
continue to be governed solely by the terms and conditions of the instrument
evidencing such grant, and nothing in this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such options with
respect to their acquisition of shares of Common Stock thereunder.  Each unvested share of Common Stock
outstanding under the Predecessor Plans on the Effective Date of the Stock
Issuance Program shall continue to be governed solely by the terms and
conditions of the instrument evidencing such share issuance, and nothing in
this Plan shall be deemed to affect or otherwise modify the rights or
obligations of the holder of such unvested shares.


 


C.                                     The option/vesting acceleration
provisions of Section III of Article Two and Section II of
Article Four relating to Corporate Transactions and Changes in Control
may, in the Plan Administrator’s discretion, be extended to one or more stock
options or unvested share issuances which are outstanding under the Predecessor
Plans on the Effective Date of the Discretionary Option Grant and Stock
Issuance Programs but which do not otherwise provide for such acceleration.


 


D.                                    On March 16, 1995, the Board
adopted an amendment to the Plan which (i) increased the number of shares of
Common Stock available for issuance under the Plan by an additional 600,000
shares (as adjusted for the May 1995 stock split), (ii) provided for an
automatic annual increase to the existing share reserve on the first trading
day in each of the next five (5) fiscal years, beginning with the 1996 fiscal
year and continuing through fiscal year 2000, equal to 1.4% of the total number
of shares of Common Stock outstanding on the last trading day of the fiscal year
immediately preceding the fiscal year of each such share increase and (iii)
imposed certain limitations required under applicable Federal tax laws with
respect to Incentive Option grants.  The
amendment was approved by the stockholders at the 1995 Annual Meeting on May
17, 1995.


 


E.                                      On March 21, 1996, the Board
adopted an amendment to the Plan which (i) increased the number of shares of
Common Stock available for issuance under the Plan by an additional 600,000
shares, (ii) increased the limit on the maximum number of shares of Common
Stock issuable under the 1993 Plan prior to the required cessation of further
Incentive Option grants to 3,780,000 shares plus an additional increase of
277,000 shares per fiscal year over each of the next four (4) fiscal years,
beginning with the 1997 fiscal year, (iii) revised the Automatic Option Grant
Program to eliminate the special one-time option grant for 28,800 shares of
Common Stock to each newly-elected or newly-appointed non-employee Board member
and implement a new option grant program pursuant to which all eligible
non-employee Board members will receive a series of automatic option grants
over their period of continued Board service. 
The amendment was approved by the stockholders at the 1996 Annual
Meeting.


 


F.                                      On March 18, 1997, the Board
adopted a series of amendments to the Plan which (i) increased the number of
shares of Common Stock reserved for issuance over the term of the Plan by an
additional 450,000 shares, (ii) rendered all non-employee Board members eligible
to receive option grants and direct stock issuances under the Discretionary
Option Grant and Stock Issuance Programs, (iii) allowed unvested shares issued
under the Plan and 


 


28

















 


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


 


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


 


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


 


I.                                         The Plan shall terminate upon the earlier
of (i) February 28, 2011 or (ii) the date on which all shares available
for issuance under the Plan shall have been issued as vested shares or
cancelled pursuant to the exercise of stock appreciation or other cash-out
rights granted under the Plan.  If the
date of the plan termination is determined under clause (i) above, then all
option grants and unvested share issuances outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the instruments evidencing such grants or issuances.


 


V.                                    USE OF PROCEEDS


 


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


 


VI.                                REGULATORY APPROVALS


 


A.                                   The implementation of the Plan, the
granting of any option under the Plan, the issuance of any shares under the
Stock Issuance Program, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory
authorities having 


 


29

















 


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


 


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


 


VII.                            NO EMPLOYMENT/SERVICE RIGHTS


 


Neither the action
of the Corporation in establishing the Plan, nor any action taken by the Plan
Administrator hereunder, nor any provision of the Plan shall be construed so as
to grant any individual the right to remain in the employ or service of the
Corporation (or any parent or subsidiary corporation) for any period of
specific duration, and the Corporation (or any parent or subsidiary corporation
retaining the services of such individual) may terminate such individual’s
employment or service at any time and for any reason, with or without cause.


 


VIII.                        MISCELLANEOUS PROVISIONS


 


A.                                   The right to acquire Common Stock or
other assets under the Plan may not be assigned, encumbered or otherwise
transferred by any Optionee or Participant.


 


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


 


C.                                     The provisions of the Plan shall
inure to the benefit of, and be binding upon, the Corporation and its
successors or assigns, whether by Corporate Transaction or otherwise, and the
Participants and Optionees and the legal representatives, heirs or legatees of
their respective estates.


 


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