Document:

<PAGE>

                                                                   EXHIBIT 10.43

          CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST
            FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE
         SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED
                              WITH THE COMMISSION.

                                    AGREEMENT

This AGREEMENT (hereinafter called this "Agreement") made and effective as of
the 17th day of April, 2002 by and between;

Senju Pharmaceutical Co., Ltd., a legal entity duly organized and existing under
the laws of Japan, having its principal office of business at 5-8, Hiranomachi
2-chome, Chuo-ku, Osaka 541-0046, Japan (hereinafter called "SENJU") and;

AcSentient Inc., a legal entity duly organized and existing under the laws of
Delaware, having its principal office of business at 110 Doric Court,
Morrisville, North Carolina 27560, U.S.A. (hereinafter called "ACSENTIENT");

                                WITNESSETH THAT;

WHEREAS, SENJU is developing in U.S.A. an ophthalmic product for the treatment
of glaucoma containing a chemical compound named "timolol" (hereinafter called
"Compound") as the active ingredient and is the owner of the patent covering the
technology to make a long active solution of timolol;

WHEREAS, SENJU has provided ACSENTIENT with some technical information in its
possession pertaining to Preparation under Secrecy Agreement concluded between
two Parties effective as of the 8th day of August, 2001 (hereinafter called
"Secrecy Agreement") and Memorandum of Understanding Concerning Bromfenac
Ophthalmic Product and Timolol LA Ophthalmic Product of 7th day of January, 2002
(hereinafter called "MOU") for ACSENTIENT's evaluation of the feasibility to
commercialize the Preparation in the Territory;

WHEREAS, ACSENTIENT is willing to commercialize the Preparation in the Territory
subject to the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the foregoing, the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, SENJU and ACSENTIENT thereby agree
as follows:

(SENJU and ACSENTIENT collectively called "Parties" and/or individually called
"Party")

Article 1 - Definitions

The following terms used in this Agreement shall have the meanings set forth in
this Article unless the context clearly requires otherwise, and the singular
shall include the plural and vice versa.

<PAGE>

1.01     "Patent Rights" shall mean U.S. Patent No. 6,335,335, all divisions,
continuations, continuations-in-part as well as other patents including any
reissues, renewals, extensions or patents of addition thereto.

1.02     "Territory" shall mean United States of America as well as Puerto Rico,
Guam and the U.S. Virgin Islands.

1.03     "Preparation" shall mean any ophthalmic product containing the Compound
as an active ingredient, which is formulated and manufactured under the Patent
Rights.

1.04     "Technical Information & Know-How" shall mean technical information and
know-how which is available at the Effective Date or becomes available to Senju
during the term of this Agreement relating to the Preparation, which is
necessary or useful for the practice of the Patent Rights, including without
limitation, manufacture of the Preparation in the Territory in possession of or
under the control of Senju. Technical Information & Know-How shall include any
and all technical information and know-how disclosed by SENJU to ACSENTIENT
under MOU.

1.05     "Net Sales" shall mean the gross invoiced amount charged by ACSENTIENT
or ACSENTIENT Agent to sell the Preparation to Third Parties in the Territory
less (a) ordinary and reasonable trade discounts earned or granted for quantity
purchases, prompt payment discounts and reasonable cash discounts actually
allowed; (b) credits, and allowances actually granted on account of rejections,
returns, rejections, destructions or billing errors; (c) custom duties,
reasonable prepaid out bound transportation expenses and insurance, taxes and
other governmental charges actually paid. Provided, however, that such
reductions will be less than 10% of the gross invoiced price.

1.06     "First Commercialization" shall mean date of the first commercial sale
by ACSENTIENT or ACSENTIENT Agent of the Preparation in commercial quantities to
a Third Party under this Agreement.

1.07     "Governmental Approval" shall mean any kind of approvals by USFDA (U.S.
Food and Drug Administration) or equivalent future governmental authority,
necessary to commercialize the Preparation in the Territory, including, without
limitation, any approvals necessary to conduct pre-clinical or clinical studies
on the Compound or the Preparation, or necessary for the manufacture,
distribution, and sale of the Preparation.

1.08     "ACSENTIENT Agent" shall mean any agent who sells, markets,
distributes, promotes and offers to sell the Preparation in the Territory on
behalf of ACSENTIENT.

1.09     "Manufacturers" shall mean a manufacturer who manufactures the
Preparation on behalf of ACSENTIENT for commercialization of the Preparation in
the Territory.

1.10     "Effective Date" shall mean the date first above written on which this
Agreement shall become effective.

1.11     "Third Party" shall mean any party other than SENJU and ACSENTIENT and
Manufacturer and ACSENTIENT Agent.

1.12 "Development Activity" shall mean, SENJU's activities to perform all tests,
studies and other activities necessary to develop the Preparation and obtain
Governmental Approval of the Preparation in the Territory.

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       2

<PAGE>

1.13     "Transfer" shall mean transfer or assignment from SENJU to ACSENTIENT
of all of the title and interest in Governmental Approval.

1.14     "Trademark" shall mean any trademark, trade dress, brand mark, trade
name, brand name, logo or business symbol to be used in connection with the
marketing of the Preparation in the Territory.

Article 2 - Undertaking and Scope of this Agreement

2.01     Subject to terms and conditions of this Agreement, SENJU shall, at its
own expense;

         (i)      conduct Development Activities;

         (ii)     obtain Governmental Approval and transfer or assign said
Governmental Approval to ACSENTIENT; and

         (iii)    execute manufacturing agreement of the commercial Preparation
with Manufacturer and transfer or assign any and all title and interest in said
manufacturing agreement to ACSENTIENT.

2.02     Subject to terms and conditions of this Agreement, ACSENTIENT shall, at
its own expense, commercialize the Preparation manufactured by Manufacturer in
the Territory after Transfer of the Governmental Approval and transfer and
assignment of all title and interest in manufacturing agreement of the
Preparation from SENJU;

Article 3 - Grant

3.01     Upon the obtaining of Governmental Approval, SENJU shall transfer and
assign any and all title and interest in the Governmental Approval to ACSENTIENT
and shall grant ACSENTIENT an exclusive license to manufacture, import, market,
promote, sell and distribute the Preparation under the Governmental Approval.
Such license shall include exclusive right to use the Patent Right and Technical
Information & Know-How to the extent that it is necessary for the sole purpose
of manufacturing, importing, marketing, promoting, selling and distributing the
ophthalmic product containing the Compound in the Territory. Provided, however,
that the license granted to ACSENTIENT by SENJU herein shall not include the
right to grant sub-license in the Territory. SENJU hereby represents that it has
full right and authority to enter into this Agreement, to grant rights provided
herein and to perform its obligations hereunder.

3.02     The license granted to ACSENTIENT by SENJU herein shall include the
right to permit Manufacturer to practice or use the Patent Right and the
Technical Information & Know-How to manufacture the Preparation on behalf of
ACSENTIENT and ACSENTIENT Agent to sell, market, distribute, promote and offer
to sell the Preparation on behalf of ACSENTIENT in the Territory. Provided,
however, that ACSENTIENT shall acknowledge and confirm that by permitting
Manufacturer and ACSENTIENT Agent to manufacture, market, sell and offer to sell
the Preparation hereunder it shall not be released from any of its contractual
obligations under this Agreement and that it shall remain fully responsible for
the complete performance of such obligations under this Agreement.

3.03     SENJU agrees that during the term of this Agreement, SENJU nor its
Subsidiaries shall not (a) market or otherwise sell or distribute the
Preparation in the Territory or (b) grant any license to

                                       3

<PAGE>

the Patent Rights in the Territory that would entitle any other party to market
or otherwise sell or distribute during the term of this Agreement, any product
containing the Compound for use in the Territory. The term of Subsidiary
provided in this paragraph 3.03 shall mean any legal entity fully or
substantially fully owned or controlled by SENJU.

3.04     After Transfer, SENJU agrees to provide ACSENTIENT with reasonable
access to all Technical Information & Know-How, and with copies of any and all
patents and patent applications owned or controlled by SENJU covering the Patent
Rights or Technical Information & Know-How, including all patent office actions
received and amendments filed, if any, relative thereto.

Article 4 - Compensation

4.01     In consideration of SENJU's grant in accordance with the Article 3
hereof including Transfer of the Governmental Approval, ACSENTIENT shall, during
the term of this Agreement, pay SENJU the following milestone payments:

         Milestone:                                Amount of Payment due:

         (i)      Within 60 days from the        non refundable license fee of
                  Effective Date                 US$500,000.00-

         (ii)     [ * ]                          non refundable license fee of
                  [ * ]                          [ * ]
                  [ * ]

         (iii)    [ * ]                          non refundable license fee of
                  [ * ]                          [ * ]

4.02     Unless otherwise provided herein, no payments to Senju under this
Agreement shall be refundable in whole or in part.

Article 5 - Royalties

5.01     In consideration of the rights granted under this Agreement, ACSENTIENT
shall pay SENJU as running royalties a sum corresponding to [ * ] of the Net
Sales of the Preparation sold in the Territory during the period following the
First Commercialization in the Territory until cumulative Net Sales reaches
[ * ] from the First Commercialization. Thereafter, ACSENTIENT shall pay SENJU
as running royalties a sum corresponding to [ * ] [ * ]of the Net Sales of the
Preparation until the expiration of the Patent Right.

5.02     Notwithstanding above paragraph 5.01, ACSENTIENT shall pay SENJU
minimum annual royalty during the [ * ] the First Commercialization. The amount
of minimum annual royalty [ * ] of the [ * ] [ * ], which is acceptable to both
Parties. Such [ * ] shall be conducted within [ * ] following the First
Commercialization.

5.03     No multiple running royalty will be payable even if the Preparation,
its manufacture, use or sale, are or will be covered by more than one claim or
patent.

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       4

<PAGE>

5.04     All of the running royalties including minimum royalties in paragraph
5.01 and 5.02 shall be paid within [ * ] following the end of ACSENTIENT's
fiscal year which commences following the First Commercialization. ACSENTIENT's
fiscal year commences January 1st of a year and ends December 31 in the same
year.

5.05     Unless otherwise expressly provided herein, no running royalty payment
to Senju under this Agreement shall be refundable in whole or in part.

Article 6 - Payments and Records

6.01     Within [ * ] after the end of each fiscal year during the term of this
Agreement, ACSENTIENT shall furnish SENJU with an accurate report stating the
total quantity of the Preparation in units sold by ACSENTIENT and ACSENTIENT
Agent during the preceding fiscal year, the grossed invoiced sales price and the
Net Sales thereof and amount of the royalties accrued, together with written
reports regarding marketing activities stipulated in paragraph 8.02 and 8.03
herein.

6.02     ACSENTIENT shall pay SENJU milestone payments under paragraph 4.01 and
royalties under 5.01 and 5.02 pursuant to the applicable U.S. laws and to the
regulation of the Convention for Avoiding Double Taxation between Japan and
U.S.A. The official certificates issued by the U.S. taxation authority, which
shall be acceptable to Japanese Taxation Authority, shall evidence taxes paid in
U.S.A. SENJU shall be responsible for any withholding tax imposed on payments
made by ACSENTIENT to SENJU.

6.03     ACSENTIENT shall make and keep true and accurate records of the
production and sales of the Preparation by ACSENTEINT and ACSENTIENT Agent.

6.04     SENJU shall have the right to inspect, at its own expense, the records
prepared and kept in accordance with paragraph 6.03 above. This inspection shall
be carried out by a certified public accountant reasonably acceptable to
ACSENTIENT for the sole purpose of verifying the accuracy of ACSENTIENT running
royalty payments. This inspection shall be carried out during usual business
hours at ACSENTIENT's appropriate facility.

6.05     ACSENTIENT shall not have any obligation to keep the records kept
pursuant to paragraph 6.03 for more than [ * ] from the date of a given running
royalty payment.

6.06     Any payment from ACSENTIENT to SENJU under this Agreement shall be
remitted to the bank account designated by SENJU.

Article 7 - Development Activities

7.01     SENJU shall continue to conduct its Development Activities currently on
going in the Territory and shall obtain Governmental Approval no later than
[ * ], at its own risks and expense.

7.02     SENJU shall provide ACSENTIENT at least semi-annually with its written
report in English language concerning the status and progress of its Development
Activities in the Territory.

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       5

<PAGE>

7.03     Upon the completion of its Development Activities and obtaining
Governmental Approval, SENJU shall immediately notify ACSENTIENT of such effect
and transfer any and all title and interest in Governmental Approval to
ACSENTIENT.

7.04     SENJU shall have a right, [ * ] to ACSENTIENT, to use or make Third
Parties outside the Territory use, the report generated from the Development
Activities conducted by SENJU and a copy of certificate of Governmental Approval
of the Preparation for the purpose of development, obtaining governmental
approval, manufacture and the commercialization of the Preparation solely
outside the Territory.

7.05     SENJU shall [ * ] [ * ] [ * ] in the event of the termination of this
Agreement due to the following events;

         (i)      SENJU decides, in its bona fide business judgement, to
discontinue Development Activities or to give up its efforts to obtain
Governmental Approval in the Territory due to the circumstance beyond the
SENJU's control and notify ACSENTIENT of such effect in writing, or

         (ii)     In spite of SENJU's diligence performance of Development
Activity, SENJU fails to obtain Governmental Approval until [ * ] and notifies
ACSENTIENT of such effect in writing.

Article 8 - Marketing Activities and Promotional Materials

8.01     After Transfer of the Governmental Approval from SENJU according to
paragraph 7.03, ACSENTIENT shall use reasonable effort to commercialize the
Preparation within [ * ] after Transfer. Provided, however that if ACSENTIENT
fails to commercialize said [ * ] period of term, this period of term shall be
extended for reasonable period of term through the negotiation of SENJU and
ACSENTIENT.

8.02     ACSENTIENT shall and shall cause ACSENTIENT Agent to, use their
reasonable best efforts to make a minimum of [ * ] [ * ] during each of the
[ * ] following the First Commercialization.

8.03     ACSENTIENT shall spend a cumulative minimum of US$3,000,000.00 (in
addition to sales force costs) for marketing during the first three (3) years
following the First Commercialization.

8.04     ACSENTIENT shall conduct, [ * ] all sales, marketing and distribution
of the Preparation in the Territory. ACSENTIENT shall prepare, [ * ] appropriate
marketing, advertising and promotional material for the Preparation in the
Territory. ACSENTIENT shall furnish SENJU with those materials for SENJU's
review.

8.05     ACSENTIENT shall not, nor shall it permit ACSENTIENT Agent and
Manufacturers to submit for written or oral publication any manuscript, abstract
or the like which includes data or other information relating to the
Preparation, without first obtaining the prior written consent of SENJU, which
shall not be unreasonably withheld.

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       6

<PAGE>

Article 9 - Exchange of Information/Reports

9.01     From time to time during the term of this Agreement, SENJU shall
provide ACSENTIENT with Technical Information & Know-How in English writing.
Such Technical Information & Know-How is in possession of or under the control
of Senju, has not been provided to ACSENTIENT under the Secrecy Agreement and
MOU, will become available to SENJU thereafter and is useful for planning a
marketing strategy of ACSENTIENT.

9.02     SENJU shall prepare level and package inserts of the Preparation taking
ACSENTIENT opinion into consideration.

9.03     From time to time during the term of this Agreement, the Parties shall
exchange information concerning any new finding relevant to the safety,
efficacy, dosage formulation and new indications of the Preparation (including
any process improvements which related solely to the Preparation) (hereinafter
called "Improvements") when they become available to either Party.

9.04     SENJU may freely use or make any Third Party use, [ * ] Improvements
made by ACSENTIENT under paragraph 9.03 in any countries outside the Territory.
ACSENTIENT may freely use, [ * ] all Improvements made or otherwise obtained by
SENJU under paragraph 9.03.

9.05     From time to time during the term of this Agreement, Parties shall
exchange clinical and commercial information concerning the Preparation which is
deemed useful for the sale and marketing of the Preparation. Furthermore, Party
shall notify the other of any important regulatory advises or instructions which
come to either Party's attention during the term of this Agreement concerning
quality, safety, efficacy of Compound and/or Preparation.

Article 10 - Availability of the Preparation

10.01    Upon the execution of this Agreement, SENJU shall enter into a
negotiation with Third Party to conclude a manufacturing agreement for
commercial Preparation under which said Third Party manufactures and supplies
the Preparation to ACSENTIENT.

10.02    Upon obtaining of Governmental Approval, SENJU shall transfer and
assign any and all title and interest in the manufacturing agreement of the
Preparation to ACSENTIENT. Financial obligation under the manufacturing
agreement after the transfer and assignment of the manufacturing agreement from
SENJU to ACSENTIENT shall be sole responsibility of ACSENTIENT under terms of
the manufacturing agreement.

Article 11 - Adverse Event

11.01    As used in this Article the term of "Regulatory Information" shall mean
any information regarding threatened or pending action by any regulatory
authorities of the country where each party markets the Preparation, including,
but not limited to, cancellation of the approval or order to terminate sales of
its Preparation, to recall and destroy the Preparation on the market or to
revise the approved indication, dosage and administration or important caution
for use of the Preparation, or the government issue of Dear Doctor Letter
regarding the Preparation which may give serious impact to the sales of
Preparation. As used in this Article, the term of "Adverse Event" (as described
in the most current U.S. Code of Federal Regulations) shall mean any noxious,
pathological or unintended

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       7

<PAGE>

change in anatomical, physiological or metabolic function as indicated by
physical signs, symptoms occurring in clinical trials, post-marketing
surveillance, or clinical practice during the use of Preparation, or published
in the medical literature, whether or not considered casually related to
Preparation. This includes an exacerbation of a pre-existing condition,
inter-current illness, drug interaction, significant failure of expected
pharmacological or biological action. With respect to Adverse Event, the
following shall apply:

         (a)      As long as each Party maintains governmental approval of the
Preparation in any country of the world, ACSENTIENT and SENJU shall report any
Adverse Event known to it in respect of the Preparation or Compound to the
appropriate regulatory authorities in the countries in which it is developing or
commercializing the Preparation or Compound, in accordance with the laws and
regulations of the relevant countries and authorities, provided that in the
Territory, ACSENTIENT shall control all communications by the Parties to the FDA
(including any its successor agency);

         (b)      ACSENTIENT will submit safety data on the Preparation in the
Territory to FDA in accordance with the regulations of FDA;

         (c)      Promptly after the Effective Date, each Party shall appraise
the other Party of the standard operating procedures for the investigation and
reporting of Adverse Event and Regulatory Information regarding its products.
The Parties shall then promptly develop and agree upon procedures to exchange
information concerning Adverse Event and Regulatory Information of Preparation.
The Parties shall immediately implement such agreed procedures and shall provide
each other on a regular basis with any appropriate information which enables the
other Party to meet its regulatory obligations including but not limited to
submission of periodic safety update report (PSUR) in countries in which it is
developing or commercializing and/or distributing the Preparation or which is
relevant to the safe use of the Preparation. The agreed procedures will be
reviewed jointly on a regular basis or when there is a change in regulations
governing Adverse Event and Regulatory Information reporting;

         (d)      All Adverse Event reports and queries for SENJU should be
addressed to Director, Post Marketing Surveillance Department, SENJU
Pharmaceutical Co., Ltd., 4-9, Hiranomachi 2-chome, Chuo-ku, Osaka 541-0046,
Japan (facsimile number: 81-6-6229-3293, telephone number: 81-6-6201-9621) and
for ACSENTIENT should be addressed to Manager of Drug Safety, ACSENTIENT Inc.,
110 Doric Court, Morrisville, North Carolina 27560, U.S.A. (facsimile number:
919-460-8729, telephone number: 813-631-9551) or such other safety
representative as may be designated by SENJU for SENJU or by ACSENTIENT for
ACSENTIENT.

11.02    Each Party shall immediately notify the other of any information
received regarding any threatened or pending action by any regulatory authority,
which may affect the Compound or the Preparation or the continued manufacture,
marketing and/or distribution of the Preparation. Upon receipt of any such
information, the Parties shall consult in an effort to arrive at a mutually
acceptable procedure for taking appropriate action; provided, however, that
nothing set forth in this Paragraph 11.02 shall be construed as restricting the
right of either Party to make a timely report of such matter to any governmental
agency or take other action that it deems appropriate or required by applicable
law or regulation.

                                       8

<PAGE>

Article 12 - Confidentiality

12.01    Parties hereto undertake to keep confidential all of the information
and reports, materials, data and results of the investigation and so on
regarding the Compound and/or the Preparation which is/are received from or
provided by the other Party under this Agreement, Secrecy Agreement and/or MOU,
and is/are marked or otherwise indicated that the same is/are confidential
nature (hereinafter collectively called "Information" in this Article 12),
provided, however, that such Information as itemized below shall be excluded
from this confidentiality obligation;

         (i)      Information which was at the time of disclosure in the public
domain,

         (ii)     Information which after the time of disclosure became a part
of the public domain, through no fault or act of omission by the recipient
Party,

         (iii)    Information which was at the time of disclosure lawfully in
the recipient's possession on a non-disclosure basis,

         (iv)     Information received from any Third Party who has no
obligation to keep the Information confidential against any of Parties hereto,

         (v)      Information which both Parties hereto agree in writing to
disclose to a Third Party or to make the same public, or

         (vi)     Information which is independently developed by recipient
Party without actual knowledge of the Information:

         provided, further, that the recipient Party shall have competent proof
for proving the fact that the Information in question falls into the category of
either one of the items herein above.

12.02    Notwithstanding the provision of Paragraph 12.01, ACSENTIENT may
disclose the Information disclosed by SENJU to its officers, employees,
consultants or contract workers engaging in any activity for the
commercialization of the Preparation, so far as the disclosure is necessary for
their performance of such activity, provided, however, that ACSENTIENT shall
take any adequate measure to cause them to keep the Information disclosed
confidential under the same conditions provided in any provision of this
Agreement.

12.03    Notwithstanding the provision of Paragraph 12.01, SENJU may, in
addition to the stipulations of paragraph 7.04 and paragraph 9.04, disclose the
Information disclosed by ACSENTIENT, to its licensees, officers, employees,
consultants or contract workers engaging in any activity for the
commercialization of the Preparation including clinical studies and other
activities for obtaining the governmental approval outside the Territory or for
obtaining patent right including any patent application and prosecution of the
patent application, so far as the disclosure is necessary for their performance
of such activity, provided, however, that SENJU shall take any adequate measure
to cause them to keep the Information disclosed confidential under the same
conditions provided in any provision of this Agreement.

12.04    The stipulations in Article 12 will survive for [ * ] after expiration
or termination of this Agreement.

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       9

<PAGE>

12.05    Notwithstanding the provision of Paragraph 12.01 and 12.02, it is
understood that Manufacturer and ACSENTIENT Agent shall be included in the
definition of ACSENTIENT in ACSENTIENT's performing the obligations stipulated
in this Article 12. ACSENTIENT undertakes to cause Manufacturer and ACSENTIENT
Agent same confidentiality obligations as ACSENTIENT undertakes under this
Agreement.

Article 13 - New Invention or Discovery

13.01    In the event that ACSENTIENT, Manufacturer, ACSENTIENT Agent, its
employees or consultant will solely make, conceive, reduce into practice or
generate any invention, discovery or know-how in the course or as a result of
their activities undertaken pursuant to this Agreement, ACSENTIENT shall notify
SENJU of the invention, discovery or know-how immediately. In the event that
SENJU including its employees, consultants or agents and ACSENTIENT,
Manufacturer, ACSENTIENT Agent including its employees or consultant will
jointly make, conceive, reduce into practice or generate any invention,
discovery or know-how in the course or as a result of their activities
undertaken pursuant to this Agreement, each Party shall notify the other Party
of the invention, discovery or know-how immediately.

13.02    Upon being notified of the invention, discovery or know-how under
paragraph 13.01, each Party shall initiate a negotiation with the other Party as
to;

         (i)      whether or not the application for patent regarding the
invention, discovery or know-how shall be filed (if the Parties fail to agree,
the Party who made, conceived, reduced into practice or generated any invention,
discovery or know-how shall have the right to file a patent application),

         (ii)     which party shall be responsible to prepare, file and
prosecute the patent application; and,

         (iii)    in which country such patent application shall be filed,
provided, however, that such patent application claiming the invention,
discovery or know-how recited in paragraph 13.01 shall be filed under the joint
names of SENJU and ACSENTIENT in any country or area in the world unless
otherwise agreed upon between the Parties;

13.03    Any external expense for the preparation, filing and prosecution of the
patent application to be filed under the joint names of the Parties under
paragraph 13.02 (iii) and for the maintenance of the patent rights incurred
therefrom shall equally be shared between the Parties unless otherwise agreed
upon between the Parties.

13.04    The ownership of such patent right covering the invention, discovery or
know-how recited in paragraph 13.02 (iii) shall be equally shared between the
Parties and SENJU shall have the right to use or make Third Party use freely
such invention, discovery or know-how recited in paragraph 13.01 for any purpose
outside the Territory and ACSENTIENT shall have the right to use or make Third
Party use freely such invention, discovery or know-how recited in paragraph
13.01 for any purpose. However, each Party shall not transfer, assign, license,
dispose or withdraw its share of the patent application under paragraph 13.02
(iii) and the patent rights generated therefrom without prior written consent of
the other Party, and SENJU agrees not to use such invention, discovery or
know-how in the Territory during the term of this Agreement.

                                       10

<PAGE>

13.05    In the event that SENJU including its employees, consultants or agents
will make, conceive, reduce into practice or generate solely any invention,
discovery or know-how regarding the Compound, such invention, discovery or
know-how shall be sole property of SENJU. And, SENJU shall have a right to file
a patent application in relation to the invention, discovery or know-how
throughout the world under SENJU's sole name. The costs and expenses for the
preparation, filing, prosecution and maintenance of such patent application
(including the patent) shall be burdened by SENJU. Provided, however that
ACSENTIENT shall have the right to use, during the term of this Agreement, the
invention, discovery or know-how as long as ACSENTIENT manufactures and
commercializes the Preparation. SENJU shall be compensated for ACSENTIENT' use
of the invention, discovery or know-how under Article 4 and 5.

Article 14 - Representations and Warranties

14.01    SENJU represents and warrants the following with respect to the Patent
Right and Technical Information & Know-How;

         (i)      SENJU solely owns the entire right, title and interest or
right to license in and to the Patent Right and Technical Information &
Know-How;

         (ii)     SENJU has not granted, at the Effective Date, any license or
sublicense or entered into any contract with any Third Party concerning the
Patent Right and Technical Information & Know-How within the Territory;

         (iii)    SENJU has not taken or failed to take any action that might
result in the invalidity or enforceability of the Patent Right against any Third
Party;

         (iv)     SENJU has no information, at the Effective Date after its
investigation using reasonable due diligence that the Patent Right and Technical
Information & Know-How may be subject to challenge or interference or be invalid
or unenforceable; and

         (v)      SENJU has the full legal power, authority and right to enter
into this Agreement and grant the exclusive license under the Patent Right to
the extent that it is necessary for the sole purpose of manufacturing,
importing, marketing, promoting, selling and distributing the ophthalmic product
containing the Compound in the Territory and to perform its obligations under
this Agreement. Upon execution and delivery by SENJU, this Agreement will
constitute a valid and binding agreement of SENJU enforceable in accordance with
its terms. The execution, delivery and consummation of this Agreement will not
result in the breach of or give rise to cause for termination of any agreement
to which SENJU may be a party which relates to the Patent Rights and Technical
Information & Know-How.

14.02    Nothing in this Agreement or any license pursuant to it shall be
construed or implied as a representation or warranty by SENJU that the Patent
Right and Technical Information & Know-How are valid or that the
commercialization of the Preparation or any other activities of ACSENTIENT under
this Agreement shall not be an infringement of the rights of Third Party
including, but not limited to, patent, know-how, trade-secret, trademark or
other intellectual property right of Third party.

                                       11

<PAGE>

14.03    SENJU SHALL MAKE NO WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PREPARATION MANUFACTURED AND/OR SOLD HEREUNDER INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF THE MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE
OF THE PREPARATION SOLD BY ACSENTIENT.

Article 15 - Patent Litigation

15.01    In the event that SENJU or ACSENTIENT become aware of any actual or
threatened infringement by any Third Party upon SENJU' proprietary right
relating to the Preparation, such Party shall immediately notify the other Party
in writing. SENJU shall have the right to take whatever steps are necessary to
stop the infringement and recover the damages. Nothing herein obligates SENJU to
enter into litigation against such Third Party.

15.02    Notwithstanding paragraph 14.02, in the event of a claim or suit made
by Third Party against SENJU and/or ACSENTIENT for patent infringement involving
the manufacture, use, sale, importation, distribution or marketing of the
Preparation in the Territory using the formulation which SENJU develops under
its Development Activities and obtains Governmental Approval, the Party sued
shall promptly notify the other Party in writing thereof. In this case following
shall apply;

         (i)      SENJU and ACSENTIENT shall discuss how to cope with the
situation under mutual cooperation;

         (ii)     If either Party wishes to settle the claim or suit or to
negotiate for a patent license with Third Party, the other party may defend such
claim or suit under its sole legal responsibility including the awards and sole
responsibility of litigation cost including attorney fees. In this case, the
Party who wishes to settle the claim or suit or to negotiate for a patent
license with Third Party shall not be liable for legal responsibility including
the awards and for litigation cost and attorney fees;

         (iii)    Except for the litigation cost and attorney fees under
paragraph 15.02 (ii), SENJU and ACSENTIENT shall share equally the damages
awarded to, all litigation cost and attorney fees as result of the suit or
settlement. However, SENJU's total liability shall not exceed the milestone
payments received from ACSENTIENT pursuant to paragraph 4.01 until such claim or
suits made;

         (iv)     If Parties is obliged to pay the running royalty to the Third
Party as a result of such claim or suit made by said Third Party, SENJU and
ACSENTIENT shall equally burden such running royalty. However, the running
royalty to be paid by SENJU to said Third Party shall not [ * ] of the Net
Sales:

15.03    In the event of a claim or suit made by Third Party against SENJU
and/or ACSENTIENT for patent infringement involving the manufacture, use, sale,
importation, distribution or marketing of the Preparation using the formulation
which ACSENTIENT develops by itself, the Party sued shall promptly notify the
other Party in writing thereof. In this case, ACSENTIENT shall settle or defend
the claim or suit under the sole responsibility of ACSENTIENT with its total
monetary obligation, and shall indemnify and hold harmless SENJU from said claim
or suit.

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       12

<PAGE>

Article 16 - Indemnification

16.01    Except for SENJU's obligations to be imposed under paragraph 15.02
herein, ACSENTIENT shall defend, indemnify and hold SENJU, its directors,
officers, shareholders, employees, consultants, contract workers and assigns
harmless from and against any lawsuit, claims, loss, damages or expenses
(including attorney's fees) arising from the the manufacture, use or sale of the
Preparation by ACSENTIENT, Manufacturer or ACSENTIENT Agent.

16.02    Prior to First Commercialization and for a period of [ * ] after the
expiration of this Agreement or earlier termination, ACSENTIENT shall obtain
and/or maintain, at its sole cost and expense, product liability insurance in an
amount which is reasonable and customary in the U.S. pharmaceutical industry for
companies of comparable size. Such product liability insurance shall insure
against all liability, including liability for personnel injury, physical injury
and property damage.

16.03    SENJU shall defend, indemnify and hold ACSENTIENT, its directors,
officers, shareholders, employees, consultants, contract workers and assigns
harmless from and against any lawsuit, claims, loss, damages or expenses
(including attorney's fees) arising from the Development Activity.

Article 17 - Trademark/Indication

17.01    Trademark shall be selected and filed by ACSENTIENT in the name of
ACSENTIENT and at ACSENTIENT's expense. Upon the registration of Trademark by
USPTO (United States Patent and Trademark Office) and at the request of SENJU,
ACSENTIENT shall promptly assign ownership of the Trademark to SENJU who will
thereafter be obliged to maintain the Trademark during the term of this
Agreement, provided that SENJU shall reimburse to ACSENTIENT the external actual
cost and fees incurred by ACSENTIENT.

17.02    If following the expiration or earlier termination of this Agreement,
neither SENJU nor Third Party on behalf of SENJU desires to market, sell and
distribute the Preparation in the Territory, SENJU will, upon the request of
ACSENTIENT and in consideration of reimbursement to SENJU of all fees and cost
incurred by SENJU to obtain the right to the Trademark under paragraph 17.01
above, assign and transfer said Trademark to ACSENTIENT for use by ACSENTIENT in
marketing, selling and distributing of the Preparation in the Territory.

17.03    If SENJU wishes so, ACSENTIENT shall indicate "developed by SENJU
PHARMACEUTICAL CO., LTD., Japan" or its synonym on each package including eye
drop bottle, outer packages, brochure, insert leaflet, advertising and/or
promotion materials of the Preparation. Provided, however, that in the case
where the space on the surface of the eye drop bottle does not technically
permit such indication, this paragraph shall not be applicable so far as such
eye drop bottle is concerned.

Article 18 - Term and Termination

18.01    This Agreement shall become effective as of the Effective Date and
shall terminate upon the expiration of the Patent Right.

18.02    Notwithstanding the stipulation of paragraph 18.01 above, either Party
may terminate this Agreement at any time by giving notice to the other party in
the event;

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       13

<PAGE>

         (i)      that either Party materially defaults or is in breach of the
performance of any material obligation imposed on it in this Agreement and such
default is not remedied in all material aspects within [ * ] of receipt of
written demand from the notifying Party to cure the default,

         (ii)     that either Party assigns or makes any composition or
sequestration of its assets for the benefit of its creditors, or assigns its
rights hereunder partially or in their entirety to any Third Party without
express written consent of the other Party in breach of the stipulation in
paragraph 22.01 herein; and

         (iii)    that either Party becomes insolvent, goes into liquidation,
files a petition in bankruptcy, is adjudicated a bankrupt, is placed in judicial
receivership or provisional administration, or dissolves, or its financial
condition is such that it is unable to pay bills and obligations as and when due
and payable to its creditors.

18.03    If and when SENJU notifies ACSENTIENT of discontinuance of the
Development Activities according to paragraph 7.05, this Agreement shall be
terminated upon receipt by ACSENTIENT of milestone payment returned from SENJU.

18.04    If and when ACSENTIENT decides in its bona fide business judgement, to
discontinue the commercialization of the Preparation in the Territory, this
Agreement shall be terminated, without any monetary obligations to either party,
upon receipt by SENJU of ACSENTIENT's notification thereof in writing.

18.05    If this Agreement is terminated by ACSENTIENT in accordance with
paragraph 18.04, ACSENTIENT shall promptly cease its commercial activities, as
the case may be, concerning the Preparation, and, at its option, destroy the
Preparation then stocked by ACSENTIENT including the cost of the inventory, or
sell the remaining inventory of the Preparation and settle its obligation, if
any, to pay any royalties or other payment due under this Agreement within [ * ]
[ * ] after the termination thereof. Upon SENJU's request, ACSENTIENT shall
return to SENJU all the Technical Information & Know-How provided by SENJU under
this Agreement and shall assign to SENJU, without any compensation all of the
rights, titles and interests pertaining to the Preparation including without
limitation, all rights to Governmental Approval in the Territory.

18.06    If this Agreement is terminated by SENJU in accordance with paragraph
18.02 (i), (ii) and/or (iii), ACSENTIENT shall promptly cease its commercial
activities of the Preparation, as the case may be, and, if requested by SENJU,
destroy the Preparation then stocked by ACSENTIENT including the cost of the
inventory, or, if requested by SENJU sell the remaining inventory of the
Preparation and settle its obligation, if any, to pay any royalties or other
payment due under this Agreement within [ * ] of ACSENTIENT's receipt of SENJU's
notice of the termination. Upon SENJU's request, ACSENTIENT shall return to
SENJU all the Technical Information & Know-How provided by SENJU under this
Agreement and shall assign to SENJU, without any compensation, all of the
rights, titles and interests pertaining to the Preparation including without
limitation, all rights to Governmental Approval in the Territory.

18.07    Notwithstanding anything to the contrary contained herein, in the event
of the execution by ACSENTIENT of any kind of agreement pursuant to which
ACSENTIENT would be controlled by, or be under common control with, or merge
into or consolidate with, any Third Party after Transfer of Governmental
Approval, and ACSENTIENT loses controlling interest in said Third Party
(hereinafter called "Change of Control"), SENJU shall have following options;

*  CONFIDENTIAL PORTIONS HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL
   TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
   HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.

                                       14

<PAGE>

         (i)      to continue this Agreement; or

         (ii)     to terminate this Agreement at the end of the one (1) year
period following the Change of Control. In this case, all of the rights granted
by SENJU to ACSENTIENT under this Agreement as well as Governmental Approval,
data and other information regarding the Preparation provided by SENJU shall be
returned to SENJU subject to SENJU's payment of the fair and reasonable market
value of such assets of the Preparation as negotiated and agreed by the Parties.
Upon such termination of this Agreement, ACSENTIENT will have no further
obligation to make any running royalty payment pursuant to this Agreement.

Article 19 - Governing Laws and Arbitration

19.01    This Agreement shall be governed by and interpreted in accordance with
the Laws of Japan.

19.02    All disputes, controversies or differences which may arise between the
Parties hereto or for the breach thereof shall be referred to and settled by
arbitration in accordance with the Arbitration Rules of the International
Chambers of Commerce as currently in force by one or more arbitrators appointed
under the Rules. Such arbitration hereunder shall be proceeded in English
language and shall be held in Japan. The determination of the arbitration shall
be final, binding and conclusive upon the Parties hereto.

Article 20 - Notice

Any notice to be given to a Party under or in connection with this Agreement
shall be in writing and shall be (i) personally delivered, (ii) delivered by a
nationally recognized overnight courier or (iii) delivered by certified mail,
postage prepaid, return receipt requested to the Party at the address set forth
below for such Party:

         to SENJU:                               to ACSENTIENT:
         Executive Vice President                Chief Business Officer
         SENJU Pharmaceutical Co., Ltd.          AcSentient, Inc.
         5-8, Hiranomachi 2-chome                110 Doric Court,
         Chuo-ku, Osaka, 541-0046                Morrisville, NC 27560
         Japan                                   U.S.A.

or to such other address as to which the Party has given notice thereof.

Article 21 - Force Majeure

21.01    Neither Party hereto shall be liable for any failure to perform as
required through this Agreement by reason of Force Majeure, to the extent such
failure to perform is due to circumstances reasonably beyond the control of such
Party, such as requisition or interference by any government, state or local
authorities, war, strikes, lockout or other labor disputes, accidents, failure
to secure required Governmental Approval, civil disorders or commotions, act of
aggression, acts of God, energy or other conservation shortages, disease, or
occurrences of a similar nature.

21.02    If and when any Party is hindered in its performance of its obligations
under this Agreement by reason of Force Majeure, the performance of those
obligations shall be suspended for the duration of, but not longer than, the
continuance of such circumstances.

                                       15

<PAGE>

21.03    Either Party hereto whose performance of obligation has been hindered
by reason of Force Majeure shall inform the other Party immediately, and shall
use its reasonable best effort to overcome the effect of the Force Majeure.

Article 22 - Non-Assignability

22.01    This Agreement is personal to the Parties hereto and shall not be
assignable to any Third Party by either Party without the prior express written
consent of the other Party, such consent not to be unreasonably withheld;
provided, however, subject to paragraph 18.07, that no such approval shall be
required from SENJU if this Agreement is assigned in connection with the sale of
all or substantially all of the assets or stock of ACSENTIENT, whether by
merger, acquisition or otherwise.

22.02    In the event of the execution by ACSENTIENT of any kind of agreement
pursuant to which ACSENTIENT would be controlled by, or be under common control
with, or merge into or consolidate with, any Third Party before Transfer of
Governmental Approval, ACSENTIENT shall immediately notice SENJU of such effect
together with intention whether or not ACSENTIENT (including continued company)
commercializes the Preparation. If ACSENTIENT (including continued company)
intents not to commercialize the Preparation, this Agreement shall terminate,
without any monetary obligation to either party, upon SENJU's receipt of such
ACSENTIENT's intention.

Article 23 - Authentic Text

This Text of this Agreement in English language shall be the authentic text, and
any text in another language, even if such text is made by translation of this
Text of this Agreement or prepared by any of the Parties hereto for any purpose,
shall have no meaning for any purpose between the Parties hereto.

Article 24 - Entire Agreement

24.01    Secrecy Agreement and Article 10 through Article 18 of MOU shall be
replaced completely by this Agreement as of the Effective Date so that MOU shall
terminate simultaneously.

24.02    This Agreement shall constitute the entire agreement between the
Parties hereto concerning the subject matter hereof and shall supersede any
other agreements, whether oral or written, express or implied, and may not be
changed or modified or revised except as specifically agreed upon by the Parties
hereto in a written document bearing the respective signatures of the authorized
officers.

Article 25 - Separability

25.01    Even in the event that any portion of this Agreement shall be held
illegal, void, ineffective or unenforceable, the remaining portion shall remain
in full force and effect.

25.02    If any of the terms or provisions of this Agreement are in conflict
with any applicable statute or rule of law, such terms and provisions shall be
deemed inoperative to the extent that may conflict therewith and shall be deemed
to be modified to conform with such statute or rule of law.

                                       16

<PAGE>

25.03    in the event that the terms and conditions of this Agreement are
materially altered as a result of the provision in paragraph 25.02, the Parties
will re-negotiate the terms and conditions of this Agreement to resolve any
inequities.

IN WITNESS WHEREOF, SENJU and ACSENTIENT have caused this Agreement to be
executed in duplicate counterparts by their duly authorized officers, each fully
executed copy hereof to be deemed as original, as of the date and year first
above written.

         SENJU:                                  ACSENTIENT:

         Senju Pharmaceutical Co. Ltd.           AcSentient Inc.

signature: /s/ Shoji Yoshida                     signature: /s/ John T. Musante
          ----------------------------                      --------------------

name: Shoji Yoshida                              name: John T. Musante

title: President                                 title: Chief Business Officer

                                       17<PAGE>

                                                                    EXHIBIT 10.1

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                              1999 STOCK AWARD PLAN

(As Amended and Restated March 27, 2003, and as Further Amended on May 21, 2003)

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       PAGE
<S>      <C>                                                                                           <C>
I.       THE PLAN....................................................................................    1

         1.1      Purpose............................................................................    1

         1.2      Administration.....................................................................    1

         1.3      Participation......................................................................    2

         1.4      Stock Subject to the Plan..........................................................    3

         1.5      Grant of Awards....................................................................    3

         1.6      Exercise of Awards.................................................................    4

         1.7      No Transferability; Limited Exception to Transfer Restrictions.....................    4

II.      OPTIONS.....................................................................................    5

         2.1      Grants.............................................................................    5

         2.2      Option Price.......................................................................    5

         2.3      Option Period......................................................................    6

         2.4      Exercise of Options................................................................    6

         2.5      Limitations on Grant of Incentive Stock Options....................................    6

         2.6      Non-Employee Director Awards.......................................................    7

         2.7      Options and Rights in Substitution for Stock Options Granted by
                   Other Corporations................................................................    8

         2.8      Adjustments, No Repricing Without Prior Shareholder Approval.......................    8

III.     STOCK APPRECIATION RIGHTS...................................................................    9

         3.1      Grants.............................................................................    9

         3.2      Exercise of Stock Appreciation Rights..............................................    9

         3.3      Payment............................................................................    9

IV.      RESTRICTED STOCK AWARDS.....................................................................   10

         4.1      Grants.............................................................................   10

         4.2      Restrictions.......................................................................   11

         4.3      Return to the Corporation..........................................................   11

V.       PERFORMANCE SHARE AWARDS....................................................................   11

         5.1      Grants.............................................................................   11

         5.2      Special Performance-Based Share Awards.............................................   11

         5.3      Deferred Payments..................................................................   13
</TABLE>

                                      -i-

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                       PAGE
<S>      <C>                                                                                           <C>
VI.      OTHER PROVISIONS............................................................................   13

         6.1      Rights of Eligible Employees, Participants and Beneficiaries.......................   13

         6.2      Adjustments Upon Changes in Capitalization.........................................   14

         6.3      Termination of Employment..........................................................   15

         6.4      Acceleration of Awards.............................................................   16

         6.5      Government Regulations.............................................................   17

         6.6      Tax Withholding....................................................................   17

         6.7      Amendment, Termination and Suspension..............................................   17

         6.8      Privileges of Stock Ownership; Nondistributive Intent..............................   18

         6.9      Effective Date of the Plan.........................................................   18

         6.10     Term of the Plan...................................................................   18

         6.11     Governing Law......................................................................   19

         6.12     Plan Construction..................................................................   19

         6.13     Captions...........................................................................   19

         6.14     Non-Exclusivity of Plan............................................................   19

         6.15     No Corporate Action Restriction....................................................   20

         6.16     Other Company Benefit and Compensation Program.....................................   20

VII.     DEFINITIONS.................................................................................   20

         7.1      Definitions........................................................................   20
</TABLE>

                                      -ii-

<PAGE>

                       PACIFIC SUNWEAR OF CALIFORNIA, INC.

                              1999 STOCK AWARD PLAN

(As Amended and Restated March 27, 2003, and as Further Amended on May 21, 2003)

I.       THE PLAN.

         1.1      Purpose.

         The purpose of this Plan is to promote the success of the Company by
providing an additional means to attract, motivate, retain and reward key
personnel through the grant of Options and other Awards that provide added long
term incentives for high levels of performance and for significant efforts to
improve the financial performance of the Company. The purpose of this Plan is
also to attract, motivate and retain experienced and knowledgeable independent
directors through the Option grants provided under Section 2.6.

         1.2      Administration.

                  (a)      This Plan shall be administered and all Awards (other
than those under Section 2.6) shall be authorized by the Committee. Action of
the Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or the unanimous written consent of its members. In
the event action by the Committee is taken by written consent, the action shall
be deemed to have been taken at the time specified in the consent or, if none is
specified, at the time of the last signature. The Committee may delegate
administrative functions to individuals who are officers or employees of the
Company.

                  (b)      Subject to the express provisions of this Plan, the
Committee shall have the authority:

                  (i)      to grant Awards to Eligible Employees, determine the
         price at which securities will be offered or awarded and the amount of
         securities to be offered or awarded to any of such persons, and
         determine the other specific terms and conditions of such Awards
         consistent with the express limits of this Plan, and establish the
         installments (if any) in which such Awards shall become exercisable or
         shall vest, or determine that no delayed exercisability or vesting is
         required, and establish the events of termination or reversion of such
         Awards;

                  (ii)     to approve the forms of Award Agreements (which need
         not be identical either as to type of award or among Participants);

                  (iii)    to construe and interpret this Plan and any
         agreements defining the rights and obligations of the Company and
         Participants under this Plan, further define the terms used in this
         Plan, and prescribe, amend and rescind rules and regulations relating
         to the administration of this Plan;

<PAGE>

                  (iv)     to cancel, modify, or waive the Corporation's rights
         with respect to, or modify, discontinue, suspend, or terminate any or
         all outstanding Awards held by Eligible Employees, subject to any
         required consent under Section 6.7;

                  (v)      to accelerate or extend the exercisability or extend
         the term of any or all such outstanding Awards within the maximum
         ten-year term of Awards; and

                  (vi)     to make all other determinations and take such other
         action as contemplated by this Plan or as may be necessary or advisable
         for the administration of this Plan and the effectuation of its
         purposes.

Notwithstanding the foregoing, the provisions of Section 2.6 relating to
Non-Employee Director Options shall be automatic and, to the maximum extent
possible, self-effectuating.

                  (c)      Any action taken by, or inaction of, the Corporation,
any Subsidiary, the Board or the Committee relating or pursuant to this Plan and
within its authority hereunder or under applicable law shall be within the
absolute discretion of that entity or body and shall be conclusive and binding
upon all persons. Neither the Board nor any Committee, nor any member thereof or
person acting at the direction thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with this Plan (or any Award made under this Plan), and all such persons shall
be entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including, without limitation, attorneys'
fees) arising or resulting therefrom to the fullest extent permitted by law
and/or under any directors and officers liability insurance coverage that may be
in effect from time to time.

                  (d)      Subject to the requirements of Section 7.1, the
Board, at any time it so desires, may increase or decrease the number of members
of the Committee, may remove from membership on the Committee all or any portion
of its members, and may appoint such person or persons as it desires to fill any
vacancy existing on the Committee, whether caused by removal, resignation or
otherwise.

                  (e)      In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including professional
advisors to the Company. No director, officer or agent of the Company shall be
liable for any such action or determination taken or made or omitted in good
faith.

         1.3      Participation.

         Awards may be granted only to Eligible Employees. An Eligible Employee
who has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine. Except as provided in Section 2.6
below, members of the Board who are not officers or employees of the Company
shall not be eligible to receive Awards.

                                       2

<PAGE>

         1.4      Stock Subject to the Plan.

                  (a)      Subject to Section 6.2, the stock to be offered under
this Plan shall be shares of the Corporation's authorized but unissued Common
Stock. The aggregate amount of Common Stock that may be issued or transferred
pursuant to Awards (including Incentive Stock Options and Options under Section
2.6) granted under this Plan shall not exceed 7,300,000 shares. In no event
shall more than 900,000 shares of Common Stock be available for Awards issued
(or reissued) under this Plan as time-based Restricted Stock for nominal or no
consideration other than the par value thereof. This limit on Restricted Stock
does not apply to shares issued principally for past services, in respect of
compensation earned but deferred, or as Performance-Based Awards under Section
5.2. The aggregate number of shares of Common Stock subject to Options and Stock
Appreciation Rights that may be granted to any employee in any calendar year may
not exceed 900,000. The aggregate number of shares of Common Stock subject to
all Awards (including Options, Stock Appreciation Rights, and Performance-Based
Awards (other than Cash-Based Awards)) that may be granted to any employee in
any calendar year may not exceed 900,000. The Board may amend the Option grant
levels contemplated by Section 2.6 from time to time; provided that no more than
1,000,000 shares of Common Stock shall be issued or delivered pursuant to the
exercise of Options granted to Non-Employee Directors pursuant to Section 2.6.
Each of the foregoing share limits is subject to adjustment as set forth in
Section 6.2.

                  (b)      No Award may be granted under this Plan unless, on
the date of grant, the sum of (i) the maximum number of shares issuable at any
time pursuant to such Award, plus (ii) the number of shares that have previously
been issued pursuant to Awards granted under this Plan, other than reacquired
shares available for reissue consistent with any applicable legal limitations,
plus (iii) the maximum number of shares that may be issued at any time after
such date of grant pursuant to Awards that are outstanding on such date, does
not exceed the share limit set forth in Section 1.4(a). Shares that are subject
to or underlie Awards which expire or for any reason are cancelled or
terminated, are forfeited, fail to vest, or for any other reason are not paid or
delivered under this Plan, as well as reacquired shares, shall again, except to
the extent prohibited by law, be available for subsequent Awards under the Plan.

         1.5      Grant of Awards.

         Subject to the express provisions of this Plan, the Committee shall
determine from the class of Eligible Employees those individuals to whom Awards
under this Plan shall be granted, the number of shares of Common Stock subject
to each Award, the price (if any) to be paid for the shares or the Award and, in
the case of performance share awards, in addition to matters addressed in
Section 1.2(b), the specific objectives, goals and performance criteria (such as
an increase in sales, market value, earnings or book value over a base period,
the years of service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
performance share award. Each Award shall be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
The Award Agreement shall set forth the material terms and conditions of the
Award established by

                                       3

<PAGE>

the Committee consistent with the specific provisions of this Plan. The grant of
an Award is made on the Award Date.

         1.6      Exercise of Awards.

         An Option or Stock Appreciation Right shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such exercise
from the Participant, together with payment of the purchase price made in
accordance with Section 2.2(a), except to the extent payment may be permitted to
be made following delivery of written notice of exercise in accordance with
Section 2.2(b). Notwithstanding any other provision of this Plan, the Committee
may impose, by rule and in Award Agreements, such conditions upon the exercise
of Awards (including, without limitation, conditions limiting the time of
exercise to specified periods) as may be required to satisfy applicable
regulatory requirements.

         1.7      No Transferability; Limited Exception to Transfer
Restrictions.

                  (a)      Limit On Exercise and Transfer. Unless otherwise
expressly provided in (or pursuant to) this Section 1.7, by applicable law and
by the Award Agreement, as the same may be amended, (i) all Awards are
non-transferable and shall not be subject in any manner to sale, transfer,
anticipation, alienation, assignment, pledge, encumbrance or charge; Awards
shall be exercised only by the Participant; and (ii) amounts payable or shares
issuable pursuant to an Award shall be delivered only to (or for the account of)
the Participant.

                  (b)      Exceptions. The Committee may permit Awards to be
exercised by and paid to certain persons or entities related to the Participant,
including but not limited to members of the Participant's immediate family,
charitable institutions, or trusts or other entities whose beneficiaries or
beneficial owners are members of the Participant's immediate family and/or
charitable institutions, pursuant to such conditions and procedures as the
Committee may establish. Any permitted transfer shall be subject to the
condition that the Committee receive evidence satisfactory to it that the
transfer is being made for estate and/or tax planning purposes on a gratuitous
or donative basis and without consideration (other than nominal consideration).
Notwithstanding the foregoing or Section 1.7(c), Incentive Stock Options and
Restricted Stock Awards shall be subject to any and all additional transfer
restrictions under the Code.

                  (c)      Further Exceptions to Limits On Transfer. The
exercise and transfer restrictions in Section 1.7(a) shall not apply to:

                  (i)      transfers to the Corporation,

                  (ii)     the designation of a beneficiary to receive benefits
         in the event of the Participant's death or, if the Participant has
         died, transfers to or exercise by the Participant's beneficiary, or, in
         the absence of a validly designated beneficiary, transfers by will or
         the laws of descent and distribution,

                  (iii)    transfers pursuant to a QDRO order if approved or
         ratified by the Committee,

                                       4

<PAGE>

                  (iv)     if the Participant has suffered a disability,
         permitted transfers or exercises on behalf of the Participant by his or
         her legal representative, or

                  (v)      the authorization by the Committee of "cashless
         exercise" procedures with third parties who provide financing for the
         purpose of (or who otherwise facilitate) the exercise of Awards
         consistent with applicable laws and the express authorization of the
         Committee.

II.      OPTIONS.

         2.1      Grants.

         One or more Options may be granted to any Eligible Employee. Each
Option so granted shall be designated by the Committee in the applicable Award
Agreement as either a Nonqualified Stock Option or an Incentive Stock Option.

         2.2      Option Price.

                  (a)      The purchase price per share of Common Stock covered
by each Option shall be determined by the Committee, but shall not be less than
100% (110% in the case of an Incentive Stock Option grant to a Participant who
owns more than 10% of the total combined voting power of all classes of stock of
the Corporation or a Subsidiary) of the Fair Market Value of the Common Stock on
the date the Option is granted. The purchase price of any shares purchased shall
be paid in full at the time of each purchase in one or a combination of the
following methods: (i) in cash or by check payable to the order of the
Corporation, (ii) if authorized by the Committee or specified in the Option
being exercised, by a promissory note made by the Participant in favor of the
Corporation, upon the terms and conditions determined by the Committee, and
secured by the Common Stock issuable upon exercise in compliance with applicable
law (including, without limitation, state corporate law and federal margin
requirements), or (iii) if authorized by the Committee or specified in the
Option being exercised, by shares of Common Stock of the Corporation already
owned by the Participant; provided, however, that the Committee may in its
absolute discretion limit the Participant's ability to exercise an Award by
means other than cash or check, and provided further that any shares delivered
which were initially acquired upon exercise of a stock option must have been
owned by the Participant at least six months as of the date of delivery. Shares
of Common Stock used to satisfy the exercise price of an Option shall be valued
at their Fair Market Value on the date of exercise.

                  (b)      In addition to the payment methods described in
subsection (a), the Option may provide that the Option can be exercised and
payment made by delivering a properly executed exercise notice together with
irrevocable instructions to a bank or broker to promptly deliver to the
Corporation the amount of sale or loan proceeds necessary to pay the exercise
price and, unless otherwise allowed by the Committee, any applicable tax
withholding under Section 6.6. The Company shall not be obligated to deliver
certificates for the shares unless and until it receives full payment of the
exercise price therefor.

                                       5

<PAGE>

         2.3      Option Period.

         Each Option and all rights or obligations thereunder shall expire on
such date as shall be determined by the Committee, but not later than 10 years
after the Award Date, and shall be subject to earlier termination as hereinafter
provided.

         2.4      Exercise of Options.

         Except as otherwise provided in Section 6.3 and 6.4, an Option may
become exercisable, in whole or in part, on the date or dates specified in the
Award Agreement and thereafter shall remain exercisable until the expiration or
earlier termination of the Option. No Option shall be exercisable for at least
six months after the Award Date, except in the case of death or Total
Disability. The Committee may, at any time after grant of the Option and from
time to time, increase the number of shares exercisable at any time so long as
the total number of shares subject to the Option is not increased. No Option
shall be exercisable except in respect of whole shares, and fractional share
interests shall be disregarded. Not less than 10 shares of Common Stock may be
purchased at one time unless the number purchased is the total number at the
time available for purchase under the terms of the Option.

         2.5      Limitations on Grant of Incentive Stock Options.

                  (a)      To the extent that the aggregate fair market value of
stock with respect to which incentive stock options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company, such
options shall be treated as nonqualified stock options. For purposes of
determining whether the $100,000 limit is exceeded, the fair market value of
stock subject to options shall be determined as of the date the options are
awarded. In reducing the number of options treated as incentive stock options to
meet the $100,000 limit, the most recently granted options shall be reduced
first. To the extent a reduction of simultaneously granted options is necessary
to meet the $100,000 limit, the Corporation may, in the manner and to the extent
permitted by law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive Stock Option.

                  (b)      There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and conditions as are required in
order that the Option be an "incentive stock option" as that term is defined in
Section 422 of the Code.

                  (c)      No Incentive Stock Option may be granted to any
person who, at the time the Incentive Stock Option is granted, owns shares of
outstanding Common Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation or a Subsidiary, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.

                                       6

<PAGE>

         2.6      Non-Employee Director Awards.

                  (a)      Participation. Awards under this Section 2.6 shall be
made only to Non-Employee Directors.

                  (b)      Option Grants. Effective on the day after the
Corporation's 1999 annual meeting, as and when any person who is not then an
officer or employee of the Company shall become a director of the Corporation,
there shall be granted automatically (without any action by the Board or the
Committee) a Nonqualified Stock Option (the grant or award date of which shall
be the date such person takes office) to such person to purchase 9,000 shares of
Common Stock.

                  (c)      Subsequent Annual Options. In each calendar year
during the term of the Plan, commencing with the 2000 annual meeting, there
shall be granted automatically (without any action by the Committee or the
Board) a Nonqualified Stock Option to purchase 9,000 shares of Common Stock to
each Non-Employee Director who is re-elected as a director of the Corporation or
who continues as a director (the grant or award date of which shall be the date
of the annual meeting of shareholders in each such year).

                  (d)      Option Price. The purchase price per share of the
Common Stock covered by each Option granted pursuant to this Section 2.6 shall
be one hundred percent of the Fair Market Value of the Common Stock on the Award
Date. The purchase price of any shares purchased shall be paid in full at the
time of each purchase in cash or by check or in shares of Common Stock valued at
their Fair Market Value on the business day next preceding the date of exercise
of the Option, or partly in such shares and partly in cash.

                  (e)      Option Period. Each Option granted under this Section
2.6 and all rights or obligations thereunder shall expire on the tenth
anniversary of the Award Date and shall be subject to earlier termination as
provided below.

                  (f)      Exercise of Options. Except as otherwise provided in
Sections 2.6(g) and 2.6(h), each Option granted under this Section 2.6 shall
become exercisable (i) as to one-quarter of the covered shares on the earlier of
(A) the first anniversary of the Award Date, or (B) the day immediately
preceding the first regularly scheduled Annual Meeting of shareholders first
occurring after the Award Date; and (ii) as to an additional 1/48th of the
covered shares in each of the 36 months thereafter (using the Award Date as the
date of monthly vesting).

                  (g)      Termination of Directorship. If a Non-Employee
Director Participant's services as a member of the Board terminate, each Option
granted pursuant to Section 2.6(b) or (c) hereof held by such Non-Employee
Director Participant which is not then exercisable shall terminate; provided,
however, that if a Non-Employee Director Participant's services as a member of
the Board terminate by reason of death or Total Disability, the Committee may,
in its discretion, consider to be exercisable a greater portion of any such
Option than would otherwise be exercisable, upon such terms as the Committee
shall determine. If a Non-Employee Director Participant's services as a member
of the Board terminate by reason of death or Total Disability, any portion of
any

                                       7

<PAGE>

such Option which is then exercisable may be exercised for one year after the
date of such termination or the balance of such Option's term, whichever period
is shorter. If a Non-Employee Director Participant's services as a member of the
Board terminate for any other reason, any portion of any such Option which is
then exercisable may be exercised for three months after the date of such
termination or the balance of such Option's term, whichever period is shorter.

                  (h)      Acceleration Upon an Event. Immediately prior to the
occurrence of an Event, in order to protect the holders of Options granted under
this Section 2.6, each Option granted under Section 2.6(b) or (c) hereof shall
become exercisable in full.

                  (i)      Adjustments. The specific numbers of shares stated in
the foregoing provisions of Section 2.6(b) and (c) hereof and the consideration
payable for such shares shall be subject to adjustment in certain events as
provided in Section 6.2 of this Plan; provided, however, that the specific
number of shares stated in Section 2.6(b) and in Section 2.6(c) shall not be
adjusted, unless such adjustment is approved by the Board, in connection with a
split or reverse split of the Common Stock.

         2.7      Options and Rights in Substitution for Stock Options Granted
by Other Corporations.

         Options and Stock Appreciation Rights may be granted to Eligible
Employees under this Plan in substitution for employee stock options granted by
other entities to persons who are or who will become Eligible Employees in
respect of the Company, in connection with a distribution, merger or
reorganization by or with the granting entity or an affiliated entity, or the
acquisition by the Company, directly or indirectly, of all or a substantial part
of the stock or assets of the other entity.

         2.8      Adjustments, No Repricing Without Prior Shareholder Approval.

         Subject to Section 1.4 and Section 6.7 and the specific limitations on
Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee
any adjustment in the exercise or repurchase price (except as set forth below),
vesting schedule, the number of shares subject to, the restrictions upon or the
term of, an Award granted under this Article by cancellation of an outstanding
Award and a subsequent regranting of an Award, by amendment, by substitution of
an outstanding Award, by waiver or by other legally valid means. Such amendment
or other action may result among other changes in an exercise or purchase price
which is higher or lower than the exercise or purchase price of the original or
prior Award (except as set forth below), provide for a greater or lesser number
of shares subject to the Award, or provide for a longer or shorter vesting or
exercise period. Notwithstanding the foregoing, in no case shall the per share
exercise price of any Option or related Stock Appreciation Right be reduced (by
amendment, substitution, cancellation and regrant or other means) without
stockholder approval to a price less than the Fair Market Value of a share of
Common Stock on the related Award Date.

                                       8

<PAGE>

III.     STOCK APPRECIATION RIGHTS.

         3.1      Grants.

         In its discretion, the Committee may grant Stock Appreciation Rights
concurrently with the grant of Options. A Stock Appreciation Right shall extend
to all or a portion of the shares covered by the related Option. A Stock
Appreciation Right shall entitle the Participant who holds the related Option,
upon exercise of the Stock Appreciation Right and surrender of the related
Option, or portion thereof, to the extent the Stock Appreciation Right and
related Option each were previously unexercised, to receive payment of an amount
determined pursuant to Section 3.3. Any Stock Appreciation Right granted in
connection with an Incentive Stock Option shall contain such terms as may be
required to comply with the provisions of Section 422 of the Code and the
regulations promulgated thereunder. In its discretion, the Committee may also
grant Stock Appreciation Rights independently of any Option subject to such
conditions as the Committee may in its absolute discretion provide.

         3.2      Exercise of Stock Appreciation Rights.

                  (a)      A Stock Appreciation Right granted concurrently with
an Option shall be exercisable only at such time or times, and to the extent,
that the related Option shall be exercisable and only when the Fair Market Value
of the stock subject to the related Option exceeds the exercise price of the
related Option.

                  (b)      In the event that a Stock Appreciation Right granted
concurrently with an Option is exercised, the number of shares of Common Stock
subject to the related Option shall be charged against the maximum amount of
Common Stock that may be issued or transferred pursuant to Awards under this
Plan. The number of shares subject to the Stock Appreciation Right and the
related Option of the Participant shall also be reduced by such number of
shares.

                  (c)      If a Stock Appreciation Right granted concurrently
with an Option extends to less than all the shares covered by the related Option
and if a portion of the related Option is thereafter exercised, the number of
shares subject to the unexercised Stock Appreciation Right shall be reduced only
if and to the extent that the remaining number of shares covered by such related
Option is less than the remaining number of shares subject to such Stock
Appreciation Right.

                  (d)      A Stock Appreciation Right granted independently of
any Option shall be exercisable pursuant to the terms of the Award Agreement but
in no event earlier than six months after the Award Date, except in the case of
death or Total Disability.

         3.3      Payment.

                  (a)      Upon exercise of a Stock Appreciation Right and
surrender of an exercisable portion of the related Option, the Participant shall
be entitled to receive payment of an amount determined by multiplying

                                       9

<PAGE>

                  (i)      the difference obtained by subtracting the exercise
         price per share of Common Stock under the related Option from the Fair
         Market Value of a share of Common Stock on the date of exercise of the
         Stock Appreciation Right, by

                  (ii)     the number of shares with respect to which the Stock
         Appreciation Right shall have been exercised.

                  (b)      The Committee, in its sole discretion, may settle the
amount determined under paragraph (a) above solely in cash, solely in shares of
Common Stock (valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right), or partly in such shares and partly in cash, provided that
the Committee shall have determined that such exercise and payment are
consistent with applicable law. In any event, cash shall be paid in lieu of
fractional shares. Absent a determination to the contrary, all Stock
Appreciation Rights shall be settled in cash as soon as practicable after
exercise. The exercise price for the Stock Appreciation Right shall be the
exercise price of the related Option. Notwithstanding the foregoing, the
Committee may, in the Award Agreement, determine the maximum amount of cash or
stock or a combination thereof which may be delivered upon exercise of a Stock
Appreciation Right.

                  (c)      Upon exercise of a Stock Appreciation Right granted
independently of any Option, the Participant shall be entitled to receive
payment of an amount based on a percentage, specified in the Award Agreement, of
the difference obtained by subtracting the Fair Market Value per share of Common
Stock on the Award Date from the Fair Market Value per share of Common Stock on
the date of exercise of the Stock Appreciation Right. Such amount shall be paid
as described in paragraph (b) above.

IV.      RESTRICTED STOCK AWARDS.

         4.1      Grants.

         Subject to Section 1.4, the Committee may, in its discretion, grant one
or more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock
Award agreement shall specify the number of shares of Common Stock to be issued
to the Participant, the date of such issuance, the price, if any, to be paid for
such shares by the Participant and the restrictions imposed on such shares,
which restrictions shall not terminate earlier than six months after the Award
Date. Stock certificates evidencing shares of Restricted Stock pending the lapse
of the restrictions shall bear a legend making appropriate reference to the
restrictions imposed hereunder and shall be held by the Corporation or by a
third party designated by the Committee until the restrictions on such shares
shall have lapsed and the shares shall have vested in accordance with the
provisions of the Award. Upon issuance of the Restricted Stock Award, the
Participant may be required to provide such further assurance and documents as
the Committee may require to enforce the restrictions.

                                       10

<PAGE>

         4.2      Restrictions.

                  (a)      Shares of Common Stock included in Restricted Stock
Awards may not be sold, assigned, transferred, pledged or otherwise disposed of
or encumbered, either voluntarily or involuntarily, until such shares have
vested.

                  (b)      Unless otherwise provided in the applicable Award
Agreement, Participants receiving Restricted Stock shall be entitled to dividend
and voting rights for the shares issued even though they are not vested,
provided that such rights shall terminate immediately as to any forfeited
Restricted Stock.

                  (c)      In the event that the Participant shall have paid
cash in connection with the Restricted Stock Award, the Award Agreement shall
specify whether and to what extent such cash shall be returned upon a forfeiture
(with or without an earnings factor).

         4.3      Return to the Corporation.

         Unless the Committee otherwise expressly provides, shares of Restricted
Stock that remain subject to restrictions at the time of termination of
employment or are subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation in such manner and on such terms as the
Committee shall therein provide.

V.       PERFORMANCE SHARE AWARDS.

         5.1      Grants.

         The Committee may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors as the Committee shall determine. A
Performance Share Award agreement shall specify the number of shares of Common
Stock subject to the Performance Share Award, the price, if any, to be paid for
such shares by the Participant and the conditions upon which issuance to the
Participant shall be based, which issuance shall not be earlier than six months
after the Award Date.

         5.2      Special Performance-Based Share Awards.

         Without limiting the generality of the foregoing, and in addition to
Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "qualified
performance-based compensation" under Section 162(m) of the Code (with such
Awards hereinafter referred to as a "Qualifying Option" or "Qualifying Stock
Appreciation Right," respectively), other performance-based awards within the
meaning of Section 162(m) of the Code ("Performance-Based Awards"), whether in
the form of restricted stock, performance stock, phantom stock, Cash-Based
Awards or other rights, the grant, vesting, exercisability or payment of which
depends on the degree of achievement of the Performance Goals relative to
pre-established targeted levels for the Corporation on a consolidated, segment,
subsidiary, division or unit basis, may be granted under this Plan. Any
Qualifying Option or Qualifying Stock Appreciation Right shall be subject to the
requirements of Section 5.3(a), (c) and (f)

                                       11

<PAGE>

below in order for such Award to satisfy the requirements for "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.

                  (a)      Eligible Class. The eligible class of persons for
Performance-Based Awards under this Section shall be the key employees
(including officers) of the Company.

                  (b)      Performance Goal Alternatives. The specific
performance goals for Performance-Based Awards granted under this Section (other
than Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on
an absolute or relative basis, one or more of the Performance Goals, as selected
by the Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific targets shall be
determined within the time period permitted under Section 162(m) of the Code
(and any regulations issued thereunder) so that such targets are considered to
be pre-established and so that the attainment of such targets is substantially
uncertain at the time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10 years.

                  (c)      Maximum Performance-Based Award. Notwithstanding any
other provision of the Plan to the contrary, the maximum number of shares of
Common Stock which may be delivered pursuant to awards that are granted as
Performance-Based Awards under this Section 5.2 to any Participant in any
calendar year (plus the number of shares of Common Stock subject to Options and
Stock Appreciation Rights granted to that Participant in that calendar year)
shall not exceed 900,000 shares, either individually or in the aggregate,
subject to adjustment as provided in Section 6.2. Awards that are cancelled
during the year shall be counted against this limit to the extent required by
Section 162(m) of the Code. In addition, the aggregate amount of compensation
that may be paid to any Participant in respect of any Cash-Based Awards that are
granted to that Participant during any calendar year as Performance-Based Awards
shall not exceed $3,500,000.

                  (d)      Committee Certification. Before any Performance-Based
Award under this Section 5.2 (other than Qualifying Options or Qualifying Stock
Appreciation Rights) is paid, the Committee must certify in writing that the
Performance Goal(s) and any other material terms of the Performance-Based Award
were satisfied; provided, however, that a Performance-Based Award may be paid
without regard to the satisfaction of the applicable Performance Goal in the
event of a change in control event in accordance with Section 162(m) of the Code
and Section 6.2.

                  (e)      Terms and Conditions of Awards. The Committee will
have the discretion to determine the restrictions or other limitations of the
individual awards granted under this Section 5.2 including the authority to
reduce awards, payouts or vesting or to pay no awards, in its sole discretion,
if the Committee preserves such authority at the time of grant by language to
this effect in its authorizing resolutions or otherwise.

                                       12

<PAGE>

                  (f)      Adjustments for Changes in Capitalization and other
Material Changes. In the event of a change in corporate capitalization, such as
a stock split or stock dividend, or a corporate transaction, such as a merger,
consolidation, spinoff, reorganization or similar event, or any partial or
complete liquidation of the Company, or any similar event consistent with
regulations issued under Section 162(m) of the Code including, without
limitation, any material change in accounting policies or practices affecting
the Company and/or the Performance Goals or targets, then the Committee shall
make adjustments to the Performance Goals and targets relating to outstanding
Performance-Based Awards to the extent such adjustments are made to reflect the
occurrence of such an event; provided, however, that adjustments described in
this subsection may be made only to the extent that the occurrence of an event
described herein was unforeseen at the time the targets for a Performance-Based
Award were established by the Committee.

         5.3      Deferred Payments.

         The Committee may authorize for the benefit of any Eligible Employee
the deferral of any payment of cash or shares that may become due or of cash
otherwise payable under this Plan, and provide for accredited benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.

VI.      OTHER PROVISIONS.

         6.1      Rights of Eligible Employees, Participants and Beneficiaries.

                  (a)      Status as an Eligible Employee shall not be construed
as a commitment that any Award will be made under this Plan to any Eligible
Employee generally.

                  (b)      Nothing contained in this Plan (or in Award
Agreements or in any other documents related to this Plan or to Awards) shall
confer upon any Eligible Employee or Participant any right to continue in the
service or employ of the Company or constitute any contract or agreement of
service or employment, or interfere in any way with the right of the Company to
reduce such person's compensation or other benefits or to terminate the services
or employment of such Eligible Employee or Participant, with or without cause,
but nothing contained in this Plan or any document related thereto shall affect
any other contractual right of any Eligible Employee or Participant.

                  (c)      Awards payable under this Plan shall be payable in
shares or from the general assets of the Corporation, and no special or separate
reserve, fund or deposit shall be made to assure payment of any such Awards. No
Participant, Beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock) of the
Company by reason of any Award granted hereunder. Neither the provisions of this
Plan (or of any documents related hereto), nor the creation or adoption of this
Plan, nor any action taken pursuant to the provisions of this Plan shall create,
or be construed to create, a trust of any kind or a fiduciary

                                       13

<PAGE>

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

         6.2      Adjustments Upon Changes in Capitalization.

                  (a)      If the outstanding shares of Common Stock are changed
into or exchanged for cash or a different number or kind of shares or securities
of the Corporation or of another issuer, or if additional shares or new or
different securities are distributed with respect to the outstanding shares of
the Common Stock, through a reorganization or merger to which the Corporation is
a party, or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation or other capital change or adjustment, an appropriate adjustment
shall be made in the number and kind of shares or other consideration that is
subject to or may be delivered under this Plan and pursuant to outstanding
Awards. A corresponding adjustment to the consideration payable with respect to
Awards granted prior to any such change and to the price, if any, paid in
connection with Restricted Stock Awards or Performance Share Awards or
Performance-Based Awards shall also be made. Any such adjustment, however, shall
be made without change in the total payment, if any, applicable to the portion
of the Award not exercised but with a corresponding adjustment in the price for
each share. Corresponding adjustments shall be made with respect to Stock
Appreciation Rights based upon the adjustments made to the Options to which they
are related or, in the case of Stock Appreciation Rights granted independently
of any Option, based upon the adjustments made to Common Stock.

                  (b)      Upon the dissolution or liquidation of the
Corporation, or upon a reorganization, merger or consolidation of the
Corporation with one or more corporations as a result of which the Corporation
is not the surviving corporation, the Plan and outstanding Awards shall
terminate. Notwithstanding the foregoing, the Committee may provide in writing
in connection with, or in contemplation of, any such transaction for any or all
of the following alternatives (separately or in combinations): (i) for the
assumption by the successor corporation of the Awards theretofore granted or the
substitution by such corporation for such Awards of awards covering the stock of
the successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; (ii) for the
continuance of this Plan by such successor corporation in which event this Plan
and the Awards shall continue in the manner and under the terms so provided; or
(iii) for the payment in cash or shares of Common Stock in lieu of and in
complete satisfaction of such Awards.

                  (c)      In adjusting Awards to reflect the changes described
in this Section 6.2, or in determining that no such adjustment is necessary, the
Committee may rely upon the advice of independent counsel and accountants of the
Company, and the determination of the Committee shall be conclusive. No
fractional shares of stock shall be issued under this Plan on account of any
such adjustment.

                  (d)      In any of such events, the Committee may take such
action prior to such event to the extent that the Committee deems the action
necessary to permit the

                                       14

<PAGE>

Participant to realize the benefits intended to be conveyed with respect to the
underlying shares in the same manner as is or will be available to shareholders
generally.

         6.3      Termination of Employment.

                  (a)      If the Participant's service to or employment by the
Company terminates for any reason other than Retirement, death or Total
Disability, the Participant shall have, subject to earlier termination pursuant
to or as contemplated by Section 2.3, three months or such shorter period as is
provided in the Award Agreements from the date of termination of services or
employment to exercise any Option to the extent it shall have become exercisable
on the date of termination of employment, and any Option not exercisable on that
date shall terminate. Notwithstanding the preceding sentence, in the event the
Participant is discharged for cause as determined by the Committee in its sole
discretion, all Options shall lapse immediately upon such termination of
services or employment.

                  (b)      If the Participant's service to or employment by the
Company terminates as a result of Retirement or Total Disability, the
Participant or Participant's Personal Representative, as the case may be, shall
have, subject to earlier termination pursuant to or as contemplated by Section
2.3, 12 months (or, in the case of Incentive Stock Options where the Participant
terminates as a result of Retirement, three months) or such shorter period as is
provided in the Award Agreements from the date of termination of services or
employment to exercise any Option to the extent it shall have become exercisable
by the date of termination of services or employment and any Option not
exercisable on that date shall terminate.

                  (c)      If the Participant's service to or employment by the
Company terminates as a result of death while the Participant is rendering
services to the Company or is employed by the Company or during the 12 month
period (or, in the case of Incentive Stock Options where the Participant has
terminated as a result of Retirement, three month period) referred to in
subsection (b) above, the Participant's Option shall be exercisable by the
Participant's Beneficiary, subject to earlier termination pursuant to or as
contemplated by Section 2.3, during the 12 month period or such shorter period
as is provided in the Award Agreements following the Participant's death, as to
all or any part of the shares of Common Stock covered thereby to the extent
exercisable on the date of death (or earlier termination).

                  (d)      Each Stock Appreciation Right granted concurrently
with an Option shall have the same termination provisions and exercisability
periods as the Option to which it relates. The termination provisions and
exercisability periods of any Stock Appreciation Right granted independently of
an Option shall be established in accordance with Section 3.2(d). The
exercisability period of a Stock Appreciation Right shall not exceed that
provided in Section 2.3 or in the related Award Agreement and the Stock
Appreciation Right shall expire at the end of such exercisability period.

                  (e)      In the event of termination of services to or
employment with the Company for any reason, (i) shares of Common Stock subject
to the Participant's Restricted Stock Award shall be forfeited in accordance
with the provisions of the related

                                       15

<PAGE>

Award Agreement to the extent such shares have not become vested on that date;
and (ii) shares of Common Stock subject to the Participant's Performance Share
Award or Performance-Based Award shall be forfeited in accordance with the
provisions of the related Award Agreement to the extent such shares have not
been issued or become issuable on that date.

                  (f)      In the event of termination of services to or
employment with the Company for any reason, other than discharge for cause, the
Committee may, in its discretion, increase the portion of the Participant's
Award available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, upon such terms as the Committee shall
determine.

                  (g)      If an entity ceases to be a Subsidiary, such action
shall be deemed for purposes of this Section 6.3 to be a termination of services
or employment of each consultant or employee of that entity who does not
continue as a consultant or as an employee of another entity within the Company.

                  (h)      Upon forfeiture of a Restricted Stock Award pursuant
to this Section 6.3, the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, shall transfer to the Corporation the
portion of the Restricted Stock Award not vested at the date of termination of
services or employment, without payment of any consideration by the Corporation
for such transfer unless the Participant paid a purchase price in which case
repayment, if any, of that price shall be governed by the Award Agreement.
Notwithstanding any such transfer to the Corporation, or failure, refusal or
neglect to transfer, by the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, such nonvested portion of any Restricted
Stock Award shall be deemed transferred automatically to the Corporation on the
date of termination of services or employment. The Participant's original
acceptance of the Restricted Stock Award shall constitute his or her appointment
of the Corporation and each of its authorized representatives as
attorney(s)-in-fact to effect such transfer and to execute such documents as the
Corporation or such representatives deem necessary or advisable in connection
with such transfer.

         6.4      Acceleration of Awards.

         Unless prior to an Event the Board determines that, upon its
occurrence, there shall be no acceleration of Awards or determines those Awards
which shall be accelerated and the extent to which they shall be accelerated,
upon the occurrence of an Event (i) each Option and each related Stock
Appreciation Right shall become immediately exercisable to the full extent
theretofore not exercisable, (ii) Restricted Stock shall immediately vest free
of restrictions and (iii) the number of shares covered by each Performance Share
Award or Performance-Based Award shall be issued to the Participant; subject,
however, to compliance with applicable regulatory requirements, including
without limitation and Section 422 of the Code. For purposes of this section
only, the Board shall mean the Board as constituted immediately prior to the
Event.

                                       16

<PAGE>

         6.5      Government Regulations.

         This Plan, the granting of Awards under this Plan and the issuance or
transfer of shares of Common Stock (and/or the payment of money) pursuant
thereto are subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency
(including without limitation "no action" positions of the Commission) which
may, in the opinion of counsel for the Corporation, be necessary or advisable in
connection therewith. Without limiting the generality of the foregoing, no
Awards may be granted under this Plan, and no shares shall be issued by the
Corporation, nor cash payments made by the Corporation, pursuant to or in
connection with any such Award, unless and until, in each such case, all legal
requirements applicable to the issuance or payment have, in the opinion of
counsel to the Corporation, been complied with. In connection with any stock
issuance or transfer, the person acquiring the shares shall, if requested by the
Corporation, give assurances satisfactory to counsel to the Corporation in
respect of such matters as the Corporation may deem desirable to assure
compliance with all applicable legal requirements.

         6.6      Tax Withholding.

                  (a)      Upon the disposition by a Participant or other person
of shares of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option prior to satisfaction of the holding period requirements of Section
422 of the Code, or upon the exercise of a Nonqualified Stock Option, the
exercise of a Stock Appreciation Right, the vesting of a Restricted Stock Award
or the payment of a Performance Share Award or Performance-Based Award, the
Company shall have the right to (i) require such Participant or such other
person to pay by cash or check payable to the Company, the amount of any taxes
which the Company may be required to withhold with respect to such transactions
or (ii) deduct from amounts paid in cash the amount of any taxes which the
Company may be required to withhold with respect to such cash amounts. The above
notwithstanding, in any case where a tax is required to be withheld in
connection with the issuance or transfer of shares of Common Stock under this
Plan, the Participant may elect, pursuant to such rules as the Committee may
establish, to have the Company reduce the number of such shares issued or
transferred by the appropriate number of shares to accomplish such withholding;
provided, the Committee may impose such conditions on the payment of any
withholding obligation as may be required to satisfy applicable regulatory
requirements.

                  (b)      The Committee may, in its discretion, permit a loan
from the Company to a Participant in the amount of any taxes which the Company
may be required to withhold with respect to shares of Common Stock received
pursuant to a transaction described in subsection (a) above. Such a loan will be
for a term, at a rate of interest and pursuant to such other terms and rules as
the Committee may establish.

         6.7      Amendment, Termination and Suspension.

                  (a)      The Board may, at any time, terminate or, from time
to time, amend, modify or suspend this Plan (or any part hereof). No Awards may
be granted during any suspension of this Plan or after termination of this Plan,
but the Committee

                                       17

<PAGE>

shall retain jurisdiction as to Awards then outstanding in accordance with the
terms of this Plan.

                  (b)      To the extent then required under Sections 162, 422
or 424 of the Code or any other applicable law, or deemed necessary or advisable
by the Board, any amendment to this Plan shall be subject to shareholder
approval.

                  (c)      Without limiting any other express authority of the
Committee under (but subject to) the express limits of this Plan, the Committee
by agreement or resolution may waive conditions of or limitations on Awards to
Participants that the Committee in the prior exercise of its discretion has
imposed, without the consent of a Participant, and may make other changes to the
terms and conditions of Awards that do not affect in any manner materially
adverse to the Participant, the Participant's rights and benefits under an
Award.

                  (d)      No amendment, suspension or termination of this Plan
or change of or affecting any outstanding Award shall, without written consent
of the Participant, affect in any manner materially adverse to the Participant
any rights or benefits of the Participant or obligations of the Company under
any Award granted under this Plan prior to the effective date of such change.
Changes contemplated by Section 6.2 shall not be deemed to constitute changes or
amendments for purposes of this Section 6.7.

         6.8      Privileges of Stock Ownership; Nondistributive Intent.

         A Participant shall not be entitled to the privilege of stock ownership
as to any shares of Common Stock not actually issued to him or her. Upon the
issuance and transfer of shares to the Participant, unless a registration
statement is in effect under the Securities Act and applicable state securities
law, relating to such issued and transferred Common Stock and there is available
for delivery a prospectus meeting the requirements of Section 10 of the
Securities Act, the Common Stock may be issued and transferred to the
Participant only if he or she represents and warrants in writing to the
Corporation that the shares are being acquired for investment and not with a
view to the resale or distribution thereof. No shares shall be issued and
transferred unless and until there shall have been full compliance with any then
applicable regulatory requirements (including those of exchanges upon which any
Common Stock of the Corporation may be listed).

         6.9      Effective Date of the Plan.

         This Plan shall be effective upon its approval by the Board (the
"Effective Date"), subject to approval by the shareholders of the Corporation
within twelve months from the date of such Board approval.

         6.10     Term of the Plan.

         Unless previously terminated by the Board, this Plan shall terminate at
the close of business on the day before the tenth anniversary of the Effective
Date, and no Awards shall be granted under it thereafter, but such termination
shall not affect any Award theretofore granted. Unless otherwise expressly
provided in this Plan or in an applicable Award Agreement, any Award granted
prior to the Plan's termination date may extend

                                       18

<PAGE>

beyond such date, and all authority of the Committee with respect to Awards
hereunder, including the authority to amend an Award, shall continue during any
suspension of this Plan and in respect of Awards outstanding on the termination
date. No new Performance-Based Award may be granted under Section 5.2 of the
Plan after the first annual shareholders meeting of the Corporation to occur in
2008, but such termination shall not affect any Performance-Based Award
theretofore granted.

         6.11     Governing Law.

         This Plan and the documents evidencing Awards and all other related
documents shall be governed by, and construed in accordance with, the laws of
the State of California. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue to be fully effective.

         6.12     Plan Construction.

                  (a)      Rule 16b-3. It is the intent of the Corporation that
the Awards and transactions permitted by Awards generally satisfy and be
interpreted in a manner that, in the case of Participants who are or may be
subject to Section 16 of the Exchange Act, satisfies the applicable requirements
of Rule 16b-3 promulgated thereunder so that such persons (unless they otherwise
agree) will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Exchange Act in respect of those transactions and will
not be subjected to avoidable liability.

                  (b)      Section 162(m). It is the further intent of the
Corporation that (to the extent the Corporation or Awards under this Plan may be
or become subject to limitations on deductibility under Section 162(m) of the
Code), Options or SARs granted with an exercise or base price not less than Fair
Market Value on the date of grant and Performance-Based Awards under Section 5.2
of this Plan that are granted to or held by a person subject to Section 162(m)
of the Code will qualify as performance-based compensation or otherwise be
exempt from deductibility limitations under Section 162(m) of the Code, to the
extent that the Committee authorizing the Award (or the payment thereof, as the
case may be) satisfies any applicable administrative requirements thereof.

         6.13     Captions.

         Captions and headings are given to the sections and subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
this Plan or any provision thereof.

         6.14     Non-Exclusivity of Plan.

         Nothing in this Plan shall limit or be deemed to limit the authority of
the Board or the Committee to grant awards or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or
authority.

                                       19

<PAGE>

         6.15     No Corporate Action Restriction.

         The existence of the Plan, the Award Agreements and the Awards granted
hereunder shall not limit, affect or restrict in any way the right or power of
the Board or the shareholders of the Corporation to make or authorize: (a) any
adjustment, recapitalization, reorganization or other change in the
Corporation's or any Subsidiary's capital structure or its business, (b) any
merger, amalgamation, consolidation or change in the ownership of the
Corporation or any subsidiary, (c) any issue of bonds, debentures, capital,
preferred or prior preference stock ahead of or affecting the Corporation's or
any Subsidiary's capital stock or the rights thereof, (d) any dissolution or
liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of
all or any part of the Corporation or any Subsidiary's assets or business, or
(f) any other corporate act or proceeding by the Corporation or any Subsidiary.
No participant, beneficiary or any other person shall have any claim under any
Award or Award Agreement against any member of the Board or the Committee, or
the Corporation or any employees, officers or agents of the Corporation or any
Subsidiary, as a result of any such action.

         6.16     Other Company Benefit and Compensation Program.

         Payments and other benefits received by a Participant under an Award
made pursuant to this Plan shall not be deemed a part of a Participant's
compensation for purposes of the determination of benefits under any other
employee welfare or benefit plans or arrangements, if any, provided by the
Corporation or any Subsidiary, except where the Committee or the Board expressly
otherwise provides or authorizes in writing. Awards under this Plan may be made
in addition to, in combination with, as alternatives to or in payment of grants,
awards or commitments under any other plans or arrangements of the Corporation
or the Subsidiaries.

VII.     DEFINITIONS.

         7.1      Definitions.

                  (a)      "Award" means an Option, which may be designated as a
Nonqualified Stock Option or an Incentive Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, Performance Share Award or Performance-Based
Award, in each case granted under this Plan.

                  (b)      "Award Agreement" means a written agreement setting
forth the terms of an Award.

                  (c)      "Award Date" means the date upon which the Committee
took the action granting an Award or such later date as is prescribed by the
Committee or, in the case of Options granted under Section 2.6, the date
specified in such Section 2.6.

                  (d)      "Beneficiary" means the person, persons, trust or
trusts entitled by will or the laws of descent and distribution to receive the
benefits specified under this Plan in the event of a Participant's death, and
shall mean the Participant's executor or administrator if no other Beneficiary
is designated and able to act under the circumstances.

                                       20

<PAGE>

                  (e)      "Board" means the Board of Directors of the
Corporation.

                  (f)      "Cash-Based Award" means an Award pursuant to Section
5.2 that, if paid, must be paid in cash and is not denominated in nor have a
value derived from the value of, nor an exercise or conversion privilege at a
price related to, shares of Common Stock.

                  (g)      "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

                  (h)      "Commission" means the Securities and Exchange
Commission.

                  (i)      "Committee" means the Board or a committee appointed
by the Board to administer this Plan, which committee shall be comprised only of
one or more directors or such greater number of directors as may be required
under applicable law. In respect of any decision with respect to an Award
intended to satisfy the requirements of Section 162(m) of the Code, the
Committee shall be composed of no less than two members, each of whom shall be
an "outside director" within the meaning of Section 162(m) of the Code. In
respect of any decision with respect to an Award intended to be exempt pursuant
to Rule 16b-3 promulgated by the Commission under the Exchange Act, the
Committee shall be composed of no less than two members, each of whom shall be a
"Non-Employee Director" within the meaning of Rule 16b-3(d)(1) under the
Exchange Act.

                  (j)      "Common Stock" means the Common Stock of the
Corporation.

                  (k)      "Company" means the Corporation and its Subsidiaries,
collectively or individually, as the context may require.

                  (l)      "Corporation" means Pacific Sunwear of California,
Inc., a California corporation, and its successors.

                  (m)      "Eligible Employee" means an officer or key employee
of the Company and consultants to the Company whether or not such consultants
are employees.

                  (n)      "Event" means any of the following:

                      (i)     Approval by the shareholders of the Corporation of
                the dissolution or liquidation of the Corporation;

                      (ii)    Approval by the shareholders of the Corporation of
                an agreement to merge or consolidate, or otherwise reorganize,
                with or into one or more entities other than Subsidiaries, as a
                result of which less than 50% of the outstanding voting
                securities of the surviving or resulting entity are, or are to
                be, owned by former shareholders of the Corporation; or

                                       21

<PAGE>

                      (iii)   Approval by the shareholders of the Corporation of
                the sale of substantially all of the Corporation's business
                assets to a person or entity which is not a Subsidiary.

                  (o)      "Exchange Act" means the Securities Exchange Act of
1934, as amended.

                  (p)      "Fair Market Value" means (i) if the stock is listed
or admitted to trade on a national securities exchange, the closing price of the
stock on the Composite Tape, as published in the Western Edition of The Wall
Street Journal, of the principal national securities exchange on which the stock
is so listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished by
the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information; (iii) if the stock is not listed or admitted
to trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD; or (iv) if the stock is not listed or
admitted to trade on a national securities exchange, is not reported on the
National Market Reporting System and if bid and asked prices for the stock are
not furnished by the NASD or a similar organization, the values established by
the Committee for purposes of the Plan.

                  (q)      "Incentive Stock Option" means an option which is
designated as an incentive stock option within the meaning of Section 422 of the
Code, the award of which contains such provisions as are necessary to comply
with that section.

                  (r)      "Non-Employee Director" means a member of the Board
who is not an officer or employee of the Company.

                  (s)      "Non-Employee Director Participant" means a
Non-Employee Director who has been granted an Option under Section 2.6.

                  (t)      "Nonqualified Stock Option" means an option which is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof.

                  (u)      "Option" means an option to purchase Common Stock
under this Plan. An Option shall be designated by the Committee as a
Nonqualified Stock Option or an Incentive Stock Option.

                  (v)      "Participant" means an Eligible Employee who has been
granted an Award and a Non-Employee Director who has received an Option under
Section 2.6.

                  (w)      "Performance Goal" means any one or more of the
criteria set forth on Exhibit A hereto.

                                       22

<PAGE>

                  (x)      "Performance-Based Awards" shall mean an Award of a
right to receive shares of Common Stock or other compensation (including cash)
under Section 5.2, the issuance or payment of which is contingent upon, among
other conditions, the attainment of performance objectives specified by the
Committee.

                  (y)      "Performance Share Award" means an award of shares of
Common Stock under Section 5.1, the issuance of which is contingent upon
attainment of performance objectives specified by the Committee.

                  (z)      "Personal Representative" means the person or persons
who, upon the disability or incompetence of a Participant, shall have acquired
on behalf of the Participant by legal proceeding or otherwise the power to
exercise the rights and receive the benefits specified in this Plan.

                  (aa)     "Plan" means the Pacific Sunwear of California, Inc.
1999 Stock Award Plan, as it may be amended from time to time.

                  (bb)     "QDRO" shall mean an order requiring the transfer of
an Award or portion thereof pursuant to a state domestic relations law to the
spouse, former spouse, child or other dependent of a Participant. Such order
must be in a form substantially identical to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended.

                  (cc)     "Restricted Stock" means those shares of Common Stock
issued pursuant to a Restricted Stock Award which are subject to the
restrictions set forth in the related Award Agreement.

                  (dd)     "Restricted Stock Award" means an award of a fixed
number of shares of Common Stock to the Participant subject, however, to payment
of such consideration, if any, and such forfeiture provisions, as are set forth
in the Award Agreement.

                  (ee)     "Retirement" means retirement from employment by or
providing services to the Corporation or any Subsidiary after age 65 and, in the
case of employees, in accordance with the retirement policies of the Company
then in effect.

                  (ff)     "Securities Act" means the Securities Act of 1933, as
amended.

                  (gg)     "Stock Appreciation Right" means a right to receive a
number of shares of Common Stock or an amount of cash, or a combination of
shares and cash, determined as provided in Section 3.3(a).

                  (hh)     "Subsidiary" means any corporation or other entity a
majority or more of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Corporation.

                  (ii)     "Total Disability" means a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code and, in the case
of Awards other than Incentive Stock Options, such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.

                                       23

<PAGE>

                                    EXHIBIT A

                                PERFORMANCE GOALS

         The Performance Targets shall mean any one or a combination of the
following. Except as otherwise expressly provided below or the context otherwise
requires, financial and accounting terms herein are used as defined for purposes
of, and shall be determined and construed in accordance with, generally accepted
accounting principles, as from time to time in effect, as applied and reflected
in the consolidated financial statements of the Corporation, prepared in the
ordinary course of business.

         EBIT. "EBIT" means Net Income before interest expense and taxes.

         EBITDA. "EBITDA" means Net Income before interest expense, taxes,
depreciation and amortization.

         EPS. "EPS" means Net Income divided by the weighted average number of
common shares outstanding. Unless otherwise provided by the Committee in the
related Award Agreement, common shares outstanding shall be adjusted to include
the dilutive effect of stock options, restricted stock and other dilutive
financial instruments.

         EXPENSE REDUCTION. "Expense Reduction" means reduction in actual
expense or an improvement in the expense to Net Sales ratio compared to a target
or prior year actual expense to Sales ratio.

         DEBT TO EBITDA. "Debt to EBITDA" means the ratio of debt to EBITDA.

         INTEREST COVERAGE. "Interest Coverage" means the ratio of EBITDA to
interest expense.

         INVENTORY TURNS. "Inventory Turns" means the ratio of total cost of
goods sold on a historical basis to average net inventory.

         NET INCOME. "Net Income" means the difference between total Net Sales
and total costs and expenses, including income taxes.

         NET SALES. "Net Sales" means net sales.

         OPERATING CASH FLOW. "Operating Cash Flow" means the net cash provided
by operating activities less net cash used by operations and investing
activities as shown on the statement of cash flows.

         PRE-TAX MARGIN. "Pre-Tax Margin" means the ratio of earnings before
income taxes to Net Sales.

         RETURN ON ASSETS. "Return on Assets" means the ratio of Net Income to
total average assets including goodwill.

         RETURN ON CAPITAL. "Return on Capital" means the ratio of Net Income to
average total capital. Total capital includes working capital, and other long
term assets such as PP&E, goodwill and intangibles, and leased assets. Unless
otherwise provided by the

                                      A-1

<PAGE>

Committee in the related Award Agreement, cash, deferred tax assets and debt
shall not be included in capital for calculation purposes.

         RETURN ON EQUITY. "Return on Equity" means Net Income divided by
average total equity.

         STOCK PRICE APPRECIATION. "Stock Price Appreciation" means an increase,
or an average annualized increase, in the stock price or market value of the
Common Stock of the Corporation after the date of grant of an Award or above a
specified price.

         WORKING CAPITAL IMPROVEMENT. "Working Capital Improvement" means the
net change in current assets less current liabilities over the applicable period
or the reduction in the current ratio (current assets divided by current
liabilities), excluding changes in cash and cash equivalents, and current and
deferred income taxes.

                                      A-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]