Document:

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                                                                    Exhibit 10.4

                              MCKESSON CORPORATION

                   1994 STOCK OPTION AND RESTRICTED STOCK PLAN

                       (As Amended Through July 31, 2001)

        1. Establishment, Purpose and Definitions.

           (a) There is hereby adopted the McKesson Corporation 1994 Stock
Option and Restricted Stock Plan (the "Plan"). The Plan is the successor to the
McKesson Corporation 1988 Restricted Stock Plan and the McKesson Corporation
1978 Stock Option Plan (collectively, the "Predecessor Plans") with respect to
those awards under the Predecessor Plans have been be equitably adjusted to
become awards under the Plan ("Adjusted Awards"), all in connection with the
restructuring of McKesson Corporation, a Delaware corporation ("Old McKesson"),
that resulted in the sale of Old McKesson's PCS business to Eli Lilly and
Company (the "Transaction"). In connection with the Transaction, SP Ventures,
Inc. was renamed McKesson Corporation, the name of which was subsequently
changed to McKesson HBOC, Inc. on January 12, 1999, and again changed to
McKesson Corporation effective July 30, 2001 (which entities are referred to
herein as the "Company", as the context so requires) and the Plan was renamed
the McKesson Corporation 1994 Stock Option and Restricted Stock Plan.

           (b) The purpose of this Plan is to provide a means whereby key
executives of the Company and its affiliates may be given an opportunity to
purchase shares of the common stock ($0.01 par value) of the Company (the
"Stock") pursuant to options which may or may not qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code, as amended (the
"Code"), and by providing participants with grants of restricted shares of Stock
("Restricted Stock") in accordance with the terms and conditions set forth
herein. Until July 30, 1997, the Plan also provided for grants of options to
members of the Board of Directors of the Corporation who were not employed as
regular salaried officers or employees of the Corporation or its affiliates
("Non-Employee Directors"). On that date, the stockholders approved the
Non-Employee Directors' Equity Compensation and Deferral Plan (the "1997 Plan"),
and all grants of options to Non-Employee Directors from that date forward are
made under the 1997 Plan. All options previously granted to Non-Employee
Directors under this Plan will continue to be governed by the terms and
conditions in effect at the time of the grant of such options.

        2. Stock Subject to the Plan.

           (a) The aggregate number of shares of Stock available for the grant
of awards hereunder is 41,219,828, which includes Adjusted Awards (all such
shares shall be subject to equitable adjustment as provided herein). The maximum
number of Future Award Shares that may be granted to any individual in the form
of options during any plan year shall not exceed 600,000; such maximum

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number shall be subject to equitable adjustment as provided herein. All awards
of Future Award Shares shall be contingent on the approval of the Plan by the
stockholders of the Company at its first annual meeting of stockholders next
following consummation of the Transaction.

           As the Committee (as hereinafter defined) may determine from time to
time, the Stock may consist either in whole or in part of shares of authorized
but unissued Stock, or shares of authorized and issued Stock reacquired by the
Company and held in its treasury. If an option covered by Future Award Shares is
surrendered for cash or for any other reason (except surrender for shares of
Stock) ceases to be exercisable in whole or in part, the shares which were
subject to such option but as to which the option had not been exercised shall
continue to be available for grants of stock options under the Plan. If any
shares of Stock underlying Restricted Stock grants which are covered by Future
Award Shares shall be reacquired by the Company pursuant to the termination
provisions described herein or in the instruments evidencing the making of such
Restricted Stock grants, such shares shall again be available for grant of
Restricted Stock awards under the Plan (to the extent permitted under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Prior to the granting of awards, the Company shall be under no obligation to
reserve or retain in its treasury any particular number of shares of Stock at
any time, and no particular shares of Stock, whether issued or held as treasury
Stock, shall be identified as being available for future awards under the Plan.

           (b) In the case of options which are intended to qualify as
"incentive stock options" under Section 422 of the Code, the aggregate fair
market value (determined as of the time the option is granted) of the Stock with
respect to which incentive stock options are exercisable for the first time by
any eligible key executive during any calendar year (under this Plan and any
other plans of the Company) shall not exceed $100,000.

           (c) In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, stock, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to preserve (but not increase) the rights of
participants under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares which may thereafter be issued in connection with
Future Award Shares (with respect to both Restricted Stock and option awards),
(ii) the number and kind of shares issued in respect of outstanding Adjusted
Awards, (iii) the number and kind of shares issued in respect of outstanding
awards of Future Award Shares, and (iv) the exercise price relating to any
options.

        3. Eligibility.

           Persons who shall be eligible to have granted to them awards provided
for by the Plan shall be such key executives of the Company and its affiliates
as the Committee, in its sole discretion, shall designate from time to time.

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        4. Administration of the Plan.

           (a) The Plan shall be administered by a committee (the "Committee")
consisting of not less than two directors of the Company to be appointed by the
Board, each of whom is an "outside director" within the meaning of Section
162(m) of the Code and a "non-employee director" within the meaning of Rule
16b-3 under the Exchange Act.

           (b) The Committee may from time to time determine which key
executives of the Company and its affiliates shall be granted awards under the
Plan, the terms thereof, and the number of shares covered by an option or the
number of shares of Restricted Stock to be granted.

           (c) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and the instruments evidencing
awards granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. All decisions,
determinations, and interpretations of the Committee shall be final and binding
on all participants and other interested parties.

        5. Stock Options and Stock Appreciation Rights.

           (a) The Option Price.

           The exercise price of each option shall not be less than the fair
market value of the Stock covered by such option on the date the option is
granted, except that the option price associated with Adjusted Awards shall be
such price as results from the equitable adjustment of such awards. Such fair
market value shall, if the Stock is not listed or admitted to trading on a stock
exchange, be the mean between the lowest reported bid price and highest reported
asked price of the Stock on the date the option is granted in the
over-the-counter market, as reported by any publication of general circulation
selected by the Company which regularly reports the market price of the Stock in
such market, or, if the Stock is then listed or admitted to trading on any stock
exchange, the composite closing price on such day as reported in the Wall Street
Journal; provided, however, that if the Committee determines that as a result of
the Transaction fair market value may be more accurately determined based on the
average closing price of the Stock over a three-consecutive-day period
immediately prior to the grant, then such average will constitute fair market
value. Such price shall be subject to adjustment as provided in paragraph 2(c)
hereof.

           (b) Terms and Conditions of Options.

               (i) Each option granted pursuant to the Plan shall be evidenced
by a written grant agreement (the "Agreement") executed by the Company and the
person to whom such option is granted which shall provide such terms and
conditions as the Committee may determine, in its sole discretion.

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               (ii) Unless otherwise provided in the Agreement, the term of each
option shall be for no more than ten years and three months; provided however
that the term of each option intended to qualify as an "incentive stock option"
shall be for no more than ten years.

               (iii) The Agreement may contain such other terms, provisions, and
conditions as may be determined by the Committee (not inconsistent with this
Plan) including, without limitation, provisions relating to stock appreciation
rights ("SARs") with respect to options granted hereunder. Unless otherwise
provided in the Agreement, the Committee may, in its sole discretion, extend the
post-termination exercise period with respect to an option (but not beyond the
original term of such option). If an option, or any part thereof, is intended to
qualify as an "incentive stock option", the Agreement shall contain those terms
and conditions necessary to so qualify said option or such part thereof.

               (iv) The Committee shall have the authority to accelerate the
exercisability of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate.

               (v) Adjusted Awards shall remain subject to the same terms and
conditions to which they were subject prior to any equitable adjustment made in
respect of the Transaction.

           (c) Stock Appreciation Rights.

           The Committee may, under such terms and conditions as it deems
appropriate, authorize the surrender by an optionee of all or part of an
unexercised option and authorize a payment in consideration thereof of an amount
equal to the difference obtained by subtracting the option price of the shares
then subject to exercise under such option from the fair market value of the
Stock represented by such shares on the date of surrender, provided that the
Committee determines that such settlement is consistent with the purpose of the
Plan. Such payment may be made in shares of Stock valued at their fair market
value on the date of surrender of such option or in cash, or partly in shares
and partly in cash. Acceptance of such surrender and the manner of payment shall
be in the discretion of the Committee. If an option is surrendered for cash, the
shares covered by the surrendered option will thereafter be available for grant
under the Plan to the extent permitted under Rule 16b-3 of the Exchange Act.

           (d) Use of Proceeds.

           Proceeds realized from the sale of Stock pursuant to options granted
under the Plan shall constitute general funds of the Company.

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        6. Restricted Stock Awards.

           (a) Terms and Conditions.

           Each Restricted Stock grant made pursuant to the Plan shall be
evidenced by an Agreement executed by the Company and the person to whom such
Restricted Stock is granted (the "Grantee"). Each Restricted Stock grant made
under the Plan shall, unless otherwise provided in the Agreement, contain the
following terms, conditions and restrictions and such additional terms,
conditions and restrictions as may be determined by the Committee. Adjusted
Awards shall maintain the same terms and conditions to which they were subject
prior to any equitable adjustment made in respect of the Transaction.

           (b) Restrictions.

           Until the restrictions imposed on any Restricted Stock grant shall
lapse, shares of Stock granted to a participant pursuant to a Restricted Stock
grant:

               (i) Shall not be sold, assigned, transferred, pledged,
hypothecated, or otherwise disposed of, and

               (ii) Shall, if the Grantee's continuous employment with the
Company shall terminate for any reason, unless otherwise provided in the
Agreement, be returned to the Company forthwith, and all the rights of the
Grantee to such shares shall immediately terminate; provided that if the
Committee, in its sole discretion, shall within ninety (90) days of such
termination of employment, notify the participant in writing of its decision not
to terminate the Grantee's rights in such shares, then the Grantee shall
continue to be the owner of such shares subject to such continuing restrictions
as the Committee may prescribe in such notice. If the Grantee's interests in the
shares granted pursuant to a Restricted Stock grant shall be terminated, such
Grantee shall forthwith deliver or cause to be delivered to the Secretary of the
Company the certificate(s), if any, previously delivered to the Grantee for such
shares, accompanied by such endorsement(s) and/or instrument(s) of transfer as
may be required by the Secretary of the Company.

           (c) Lapse of Restrictions.

           Except as otherwise provided in the Plan or the Agreement, the
restrictions imposed on any Restricted Stock grant shall commence with the date
of the grant and continue during a period set by the Committee. Notwithstanding
the foregoing, the Committee may accelerate the lapsing of restrictions on a
Restricted Stock grant under such terms and conditions as it may deem
appropriate.

           (d) Restrictive Legend; Certificates May be Held in Custody.

           Each certificate evidencing shares granted pursuant to a Restricted
Stock grant may bear an appropriate legend referring to the terms, conditions
and restrictions described in the

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Plan and in the instrument evidencing the Restricted Stock grant. Any attempt to
dispose of such shares in contravention of such terms, conditions and
restrictions shall be invalid. The Committee may enact rules which provide that
the certificates evidencing such shares may be held in custody by a bank or
other institution, or that the Company may itself hold such shares in custody,
until restriction thereon shall have lapsed.

           (e) Restrictions upon Making of Restricted Stock Grants.

           The registration or qualification under any federal or state law of
any shares to be granted pursuant to Restricted Stock grants or the resale or
other disposition of any such shares by or on behalf of the Grantees receiving
such shares may be necessary or desirable as a condition of or in connection
with such Restricted Stock grants, and, in any such event, if the Committee in
its sole discretion so determines, delivery of the certificates for such shares
shall not be made until such registration or qualification shall have been
completed.

           (f) Special Provisions Regarding Awards.

           Notwithstanding anything to the contrary contained herein, unless
otherwise provided in the Agreement governing a Restricted Stock grant,
Restricted Stock awards granted pursuant to this Section 6 to Executive Officers
(as such term is defined in Rule 3b-7 promulgated under the Exchange Act) shall
be based on the attainment by the Company (or a subsidiary or division of the
Company if applicable) of performance goals pre-established by the Committee,
during a performance period pre-established by the Committee, based on one or
more of the following criteria: (i) the attainment of a specified percentage
return on total capital employed by the Company (or a subsidiary or division of
the Company); (ii) the attainment of a specified percentage return on total
stockholder equity of the Company; (iii) the attainment of a specified
percentage increase in earnings per share of Stock from continuing operations;
(iv) the attainment of a specified percentage increase in net income of the
Company; (v) the attainment of a specified percentage increase in profit before
taxation of the Company (or a subsidiary or division of the Company); and (vi)
the attainment of a specified percentage increase in revenues of the Company (or
a subsidiary or division of the Company). In addition, such performance goals
may be based upon the attainment of specified levels of Company performance
under one or more of the measures described above relative to the performance of
other corporations.

           Each such performance criteria shall be evaluated in accordance with
generally accepted accounting principles. Such shares of Restricted Stock shall
be released from restrictions only after the attainment of such performance
measures have been certified by the Committee.

        7. Change in Control.

           Upon a Change in Control (as hereinafter defined), then
notwithstanding anything herein to the contrary, all options granted under the
Plan that are outstanding at the time of such Change in Control shall become
immediately exercisable in full and all restrictions with respect to shares of
Restricted Stock shall lapse and such shares shall become fully vested and
exercisable.

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           A "Change in Control" of the Company shall be deemed to have occurred
if any of the events set forth in any one of the following paragraphs shall
occur:

               (i) Any "person" (as such term is used in sections 13(d) and
14(d) of the Exchange Act), excluding the Company or any of its affiliates, a
trustee or any fiduciary holding securities under an employee benefit plan of
the Company or any of its affiliates, an underwriter temporarily holding
securities pursuant to an offering of such securities or a company owned,
directly or indirectly, by stockholders of the Company in substantially the same
proportions as their ownership of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities; or

               (ii) During any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in clause (i),
(iii) or (iv) of this paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or

               (iii) The shareholders of the Company approve a merger or
consolidation of the Company with any other company, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or

               (iv) The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.

           Notwithstanding the foregoing, no Change in Control shall be deemed
to have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the holders of the Stock immediately
prior to such transaction or series of transactions continue to have the same
proportionate ownership in an entity which owns all or substantially all of the
assets of the Company immediately prior to such transaction or series of
transactions.

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        8. Amendment and Termination of the Plan.

           The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that an amendment which requires
stockholder approval in order for the Plan to continue to comply with Section
162(m) of the Code or any other law, regulation or stock exchange requirement
shall not be effective unless approved by the requisite vote of stockholders. No
suspension, termination, modification or amendment of the Plan may adversely
affect any award previously granted without the written consent of the Grantee.

        9. Assignability.

           Each option award granted pursuant to this Plan shall, during the
participant's lifetime, be exercisable only by him. No award nor any right
thereunder shall be transferable by the participant by operation of law or
otherwise other than by will, the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined in the Code or the Employee
Retirement Income Security Act of 1974, as amended.

       10. Payment Upon Exercise.

           Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in cash; provided that the Committee, in its sole
discretion, may permit an option holder to pay the option price, in whole or in
part, by tendering to the Company shares of Stock owned by the option holder,
and having a fair market value equal to the option price. The fair market value
of such Stock shall be determined by the Committee as it deems appropriate, or
as may be required in order to comply with any applicable law or regulation.

       11. Effective Date and Duration of the Plan.

           The Plan became effective upon its adoption by the Board and the
approval thereof by Old McKesson as the sole stockholder of the Company;
provided, however, that the effectiveness of the Plan was contingent upon the
occurrence of the Transaction and all awards of Future Award Shares were
contingent on the approval of the Plan by the stockholders of the Company at its
first annual meeting of stockholders, which approval was obtained. Unless sooner
terminated, the Plan shall remain in effect until terminated by action of the
Board, provided, however, that the duration of the Plan shall in no event exceed
ten years from the date of the adoption of the Plan by the Board. Termination of
the Plan shall not affect any awards previously granted pursuant thereto, which
shall remain in effect until their restrictions shall have lapsed (with respect
to Restricted Stock grants) or until exercised (with respect to option grants)
all in accordance with their terms.

       12. Agreement by Participant Regarding Withholding Taxes.

           If the Committee shall so require, as a condition of exercise of an
option or SAR or upon the lapsing of restrictions imposed on Restricted Stock
(each a "Tax Event"), each

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participant shall agree that no later than the date of the Tax Event, the
participant will pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the Tax Event. Alternatively, the Committee
may provide, in its sole discretion, that a participant may elect, to the extent
permitted or required by law, to have the Company deduct federal, state and
local taxes of any kind required by law to be withheld upon the Tax Event from
any payment of any kind due to the participant, including withholding of Shares.

        13. Rights as a Shareholder.

            A participant granted an award hereunder or a transferee of an award
shall have no rights as a stockholder with respect to any shares covered by the
award until the date of the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distribution of other rights
for which the record date is prior to the date such stock certificate is issued,
except as otherwise provided in the Plan.

        14. No Rights to Employment.

            Nothing in the Plan or in any award granted or Agreement entered
into pursuant hereto shall confer upon any participant the right to continue in
the employ of, or in an independent contractor relationship with, the Company or
any subsidiary or to be entitled to any remuneration or benefits not set forth
in the Plan or such Agreement or to interfere with or limit in any way the right
of the Company or any such subsidiary to terminate such participant's
employment. Awards granted under the Plan shall not be affected by any change in
duties or position of a participant as long as such participant continues to be
employed by, or, for awards granted prior to July 25, 2001, in a consultant
relationship with, the Company or any subsidiary.

        15. Interpretation.

            The Plan is designed and intended to comply with Rule 16b-3
promulgated under the Exchange Act and Section 162(m) of the Code and all
provisions hereof shall be construed in a manner to so comply.

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                                                                    Exhibit 10.5

                              MCKESSON CORPORATION

                1997 NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION
                                AND DEFERRAL PLAN

                       (As Amended Through July 31, 2001)

        1. Purpose of the Plan. The purpose of the McKesson Corporation 1997
Non-Employee Directors' Equity Compensation and Deferral Plan (the "Plan") is to
attract and retain qualified individuals not employed by McKesson Corporation
(the "Company") or its subsidiaries to serve on the Board of Directors of the
Company and to further align the interests of such non-employee directors with
those of the stockholders of the Company.

        2. Definitions.

        (a) "Annual Meeting" shall mean the annual meeting of the stockholders
of the Company.

        (b) "Annual Retainer" shall mean any retainer fee paid to a non-employee
director for service on the Board during a Director Year.

        (c) "Board" shall mean the Board of Directors of the Company.

        (d) "Change in Control" of the Company shall mean the occurrence of any
of the following events:

            (i) Any "person" (as such term is used in sections 13(d) and 14(d)
        of the Exchange Act), excluding the Company or any of its affiliates, a
        trustee or any fiduciary holding securities under an employee benefit
        plan of the Company or any of its affiliates, an underwriter temporarily
        holding securities pursuant to an offering of such securities or a
        corporation owned, directly or indirectly, by stockholders of the
        Company in substantially the same proportions as their ownership of the
        Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
        under the Exchange Act), directly or indirectly, of securities of the
        Company representing 30% or more of the combined voting power of the
        Company's then outstanding securities; or

            (ii) During any period of not more than two consecutive years,
        individuals who at the beginning of such period constitute the Board and
        any new director (other than a director designated by a Person who has
        entered into an agreement with the Company to effect a transaction
        described in clause (i), (iii) or (iv) of this paragraph) whose election
        by the Board or nomination for election by the Company's stockholders
        was approved by a vote of at least two-thirds of the directors then
        still in office who either

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        were directors at the beginning of the period or whose election or
        nomination for election was previously so approved, cease for any reason
        to constitute a majority thereof; or

            (iii) The stockholders of the Company approve a merger or
        consolidation of the Company with any other corporation, other than (A)
        a merger or consolidation which would result in the voting securities of
        the Company outstanding immediately prior thereto continuing to
        represent (either by remaining outstanding or by being converted into
        voting securities of the surviving entity), in combination with the
        ownership of any trustee or other fiduciary holding securities under an
        employee benefit plan of the Company, at least 50% of the combined
        voting power of the voting securities of the Company or such surviving
        entity outstanding immediately after such merger or consolidation, or
        (B) a merger or consolidation effected to implement a recapitalization
        of the Company (or similar transaction) in which no person acquires more
        than 50% of the combined voting power of the Company's then outstanding
        securities; or

            (iv) The stockholders of the Company approve a plan of complete
        liquidation of the Company or an agreement for the sale or disposition
        by the Company of all or substantially all of the Company's assets.

        Notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the holders of the Common Stock
immediately prior to such transaction or series of transactions continue to have
the same proportionate ownership in an entity which owns all or substantially
all of the assets of the Company immediately prior to such transaction or series
of transactions.

        (e) Effective July 26, 2000 "Committee" shall mean the Committee on
Directors and Corporate Governance of the Board of Directors.

        (f) "Committee Chairman Retainer" shall mean any fee paid to a
non-employee director for service as the chairman of any committee of the Board.

        (g) "Common Stock" shall mean shares of Common Stock, par value $0.01
per share, of the Company.

        (h) "DCAP II" shall mean the McKesson Corporation Deferred Compensation
Administration Plan II, as amended from time to time.

        (i)    "Director Year" shall mean a calendar year.

        (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

        (k) "Fair Market Value" of a share of Common Stock as of a particular
date shall mean, if the Common Stock is not listed or admitted to trading on a
stock exchange, the average between the lowest reported bid price and highest
reported asked price of the Common Stock on

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such date in the over-the-counter market, or, if the Common Stock is then listed
or admitted to trading on any stock exchange, the composite closing price on
such date as reported in The Wall Street Journal.

        (l) "Fees" shall mean the sum, for any Director Year, of the Annual
Retainer, Meeting Fees and Committee Chairman Retainer.

        (m) "Meeting Fees" shall mean any fees paid to a non-employee director
for attending a meeting of the Board or a committee of the Board, including any
fees paid to a non-employee director for extraordinary or special Board and/or
committee meetings.

        (n) "Participant" shall mean a non-employee director of the Company
participating in the Plan.

        (o) "Restricted Stock Unit" shall mean a right to receive, in accordance
with the conditions set forth herein, a share of the Common Stock or,
alternatively, a cash payment equal to the Fair Market Value of a share of
Common Stock.

        (p) "Retainer Option" shall mean a stock option granted pursuant to the
Plan in lieu of all or a portion of a Participant's Annual Retainer, as provided
in Sections 6(c) and 6(d)(iv).

        3. Effective Date, Duration of Plan. This Plan shall become effective as
of January 1, 1997, subject to the approval of the Plan by the stockholders of
the Company; provided, that if the Plan is so approved, any election made
hereunder prior to such approval shall be deemed effective as of the date such
election was made. The Plan will terminate on December 31, 2006 or such earlier
date as determined by the Board; provided that no such termination shall affect
rights earned or accrued under the Plan prior to the date of termination.

        4. Participation. Subject to the prior approval of the Committee, each
member of the Board who is not an employee of the Company or any of its
subsidiaries shall be eligible to participate in the Plan.

        5. Common Stock Subject to the Plan.

        (a) Subject to Section 5(b) below, the maximum aggregate number of
shares authorized to be issued under the Plan shall be 1,286,000. All Restricted
Stock Units issued hereunder, whether or not distributed in the form of Common
Stock, shall count against such maximum. If any options granted hereunder cease
to be exercisable in whole or in part, any shares subject thereto but with
respect to which such option had not been exercised, shall not count against
such maximum. As the Committee shall determine from time to time, the Common
Stock may consist of either shares of authorized but unissued Common Stock, or
shares of authorized and issued Common Stock reacquired by the Company and held
in its treasury.

        (b) In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, stock or other property),
recapitalization, stock split,

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reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or share exchange or other similar corporate transaction
or event affects the Common Stock such that an adjustment is determined by the
Committee to be appropriate to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan, then the
Committee may, in its sole discretion and in such manner as it may deem
equitable, adjust any or all of (i) the number of shares of Common Stock subject
to the Plan, (ii) the number of shares of Common Stock subject to outstanding
awards under the Plan, and (iii) the grant or exercise price with respect to any
option.

        6. Restricted Stock Units; Deferrals.

        (a) Transition Grant. As soon as practicable following January 1, 1997,
each Participant shall receive an initial grant (the "Transition Grant") of a
number of Restricted Stock Units in consideration for the termination of such
Participant's accrued benefits and rights under the Company's Director's
Retirement Program (the "Prior Plan"); provided that the Transition Grant shall
be subject to the receipt by the Company of a written release from the
Participant, in the form approved by the Committee, consenting to such
termination. The number of Restricted Stock Units granted to a Participant in
respect of the Transition Grant shall equal the Accrued Benefit (as defined
below), divided by the Fair Market Value of a share of Common Stock as of
December 31, 1996. A Participant's Accrued Benefit shall equal his or her
accrued benefit under the Prior Plan, as of December 31, 1996.

        (b) Annual Grant. On the date of each Annual Meeting prior to the
termination or expiration of the Plan, beginning with the 1997 Annual Meeting,
each Participant shall receive a grant of 400 Restricted Stock Units. Effective
January 27, 1999, the annual grants of 400 Restricted Stock Units shall be
discontinued.

        (c) Mandatory Deferral. On each date that any portion of the Annual
Retainer would otherwise be payable to a Participant prior to the termination or
expiration of the Plan, each such Participant shall be required to defer the
receipt of an amount equal to 50% of such portion of Annual Retainer, which
amount shall be deferred in the form of Restricted Stock Units or Retainer
Options, as elected by the Participant prior to the end of the calendar year
preceding the year in which the Annual Retainer is payable. In the event that a
participant fails to make such an election with respect to any calendar year in
which he or she receives payment of an Annual Retainer, the Participant shall be
deemed to have elected to receive the Annual Retainer in the form of Restricted
Stock Units. The number of Restricted Stock Units granted to a Participant in
respect of such deferral shall equal the Annual Retainer so deferred, divided by
the Fair Market Value of a share of Common Stock as of the last trading day of
the calendar quarter immediately preceding the date such Annual Retainer would
otherwise be payable. To the extent applicable, Restricted Stock Units granted
pursuant to this paragraph shall be subject to the same terms and conditions
described in Section 6(d)(ii) below. The number of Retainer Option shares
granted to a Participant in respect of such deferral shall be determined using
the same conversion rate as employed in that year for the purpose of determining
the number of stock option shares to be granted to employees in lieu of awards
under the Company's Management Incentive Plan.

                                       4
<PAGE>

        (d) Optional Deferral. All Fees (other than the portion of Annual
Retainer subject to Mandatory Deferral described above) earned by a Participant
in each Director Year prior to the termination or expiration of the Plan shall
be subject to the following payment and deferral options. Each Participant may
elect by written notice to the Company, in accordance with the procedures
established by the Company, to participate in such payment and deferral options.

            (i) Cash Alternative. Unless a valid election is made in accordance
        with the procedures established by the Company, each Participant shall
        receive payment of all Fees (other than the portion of Annual Retainer
        subject to Mandatory Deferral described above) in the form of cash.

            (ii) Restricted Stock Unit Alternative. Subject to executing a valid
        election with the Company (the "RSU Election"), each Participant may
        elect to defer all or any portion of his or her Fees (other than the
        portion of Annual Retainer subject to Mandatory Deferral described
        above) in the form of Restricted Stock Units. The number of Restricted
        Stock Units granted shall equal the amount of Fees so deferred, divided
        by the Fair Market Value of the Common Stock as of the last trading day
        of the calendar quarter immediately preceding the date such Fees would
        otherwise be payable. The RSU Election (A) shall be in the form of a
        document executed by the Participant and filed with the Secretary of the
        Company, (B) shall be made before the first day of the calendar year in
        which the applicable Fees are earned and shall become irrevocable on the
        last day prior to the beginning of such calendar year, and (C) shall
        continue until the Participant ceases to serve as a director of the
        Company or until he or she terminates or modifies such election by
        written notice to the Company in accordance with the procedures
        established by the Company, any such termination or modification to be
        effective as of the end of the calendar year in which such notice is
        given with respect to Fees otherwise payable in subsequent calendar
        years. Any person who becomes a Participant during any Director Year may
        execute an RSU Election prior to commencing service on the Board with
        respect to Fees to be earned for the remainder of such year and for
        future Director Years in accordance with the procedures established by
        the Company.

            Each Restricted Stock Unit shall entitle the holder to, upon
        distribution thereof (A) receive a cash payment equal to the Fair Market
        Value of one share of Common Stock, or (B) have issued in his or her
        name one share of Common Stock. In either case, each such Restricted
        Stock Unit shall terminate upon distribution.

            The Company shall credit each Participant holding Restricted Stock
        Units with a number of additional Restricted Stock Units equal to any
        dividends and other distributions paid by the Company on an equivalent
        number of shares of Common Stock, as of the date such dividends or
        distributions are payable. Such additional Restricted Stock Units shall
        thereafter be treated as any other Restricted Stock Units issued under
        the Plan. Restricted Stock Units may not be sold, transferred, assigned,
        pledged or otherwise encumbered or disposed of until such time as share
        certificates for Common Stock are issued.

                                       5
<PAGE>

            Each Participant issued Restricted Stock Units shall execute a valid
        distribution election in accordance with the procedures established by
        the Committee (the "Distribution Election"). The Distribution Election
        shall indicate (A) whether distribution shall be made in the form of
        Common Stock or cash, (B) whether the distribution shall be made in a
        single allotment or in substantially equal annual installments over a
        period not to exceed ten (10) years and (C) with respect to Distribution
        Elections filed on or after October 28, 1998, the date on which the
        distribution shall commence in accordance with the next paragraph. The
        Distribution Election (D) shall be in the form of a document executed by
        the participant and filed with the Secretary of the Company, (E) shall
        be made no later than twelve (12) months prior to the distribution date
        and (F) shall become irrevocable twelve (12) months prior to the
        distribution date.

            With respect to a Distribution Election completed on or after
        October 28, 1998, the Participant shall elect whether distributions
        shall commence as soon as practicable after (i) the first business day
        of January of the calendar year following the Participant's cessation
        from service as a director of the Company; or (ii) the first business
        day of January of any calendar year, provided that such calendar year is
        not later than the calendar year following the calendar year in which
        the Participant attains age 72. All other distributions shall commence
        as soon as practicable after the first business day of the January
        following the Participant's cessation from service as a director of the
        Company. If no valid Distribution Election is made, the Restricted Stock
        Units shall be distributed in a lump sum as soon as practicable after
        the first business day of January of the calendar year following the
        Participant's cessation from service as a director of the Company, in
        the form of cash. Participants who receive Restricted Stock Units shall
        have no rights as stockholders with respect to such Restricted Stock
        Units until share certificates for Common Stock are issued.
        Notwithstanding any provision to the contrary, any fractional shares of
        Common Stock issuable hereunder shall be paid in cash.

            Upon the occurrence of a Change in Control, Common Stock to be
        issued in respect of all Restricted Stock Units shall be immediately
        distributed.

            (iii) DCAP II Alternative. Subject to executing an election in
        accordance with the procedures established by the Company and the terms
        of DCAP II, each Participant may elect to defer all or any portion of
        his or her Fees (other than the portion of Annual Retainer subject to
        Mandatory Deferral described above) under DCAP II.

            (iv) Retainer Option Alternative. Subject to executing an election
        in accordance with the procedures established by the Company, each
        Participant may elect to receive the portion of Annual Retainer not
        subject to Mandatory Deferral, as described in Section 6(c) above, in
        the form of Retainer Options. The number of Retainer Option shares
        granted to a Participant with respect to such deferral shall be
        determined in the manner described in Section 6(c) above.

        7. Stock Options.

                                       6
<PAGE>

        (a) Discretionary Grants. The Committee may, in its sole discretion,
grant options to purchase Common Stock to Participants, pursuant to such terms
and conditions that it may deem advisable, so long as not inconsistent with
Section 7(d) below or any other terms of this Plan.

        (b) Formula Grants. Each Participant then serving as a non-employee
director of the Company shall automatically receive, on the date of each January
meeting of the Board, an option to purchase 10,000 shares of Common Stock
(subject to adjustment as provided in Section 5(b) above); provided, however,
that a Participant who is elected to the Board after the January meeting of the
Board shall be granted, as of the date of election, a prorated number of options
with respect to the initial year of participation in the Plan, based on the
number of full calendar quarters remaining in the calendar year in which the
Participant is elected to the Board. The options granted pursuant to this
Section 7(b) shall be immediately exercisable in full and have an option term of
ten years.

        (c) Retainer Option Grants. At the same time that the Company makes
stock option grants annually to eligible employees, each Participant who has
made an election to receive a Retainer Option pursuant to Section 6(c) or
6(d)(iv) with respect to all or any portion of the Annual Retainer to be paid in
such year shall be granted an option to purchase that number of shares of Common
Stock determined pursuant to Section 6(c) and/or Section 6(d)(iv), as
applicable. The terms of such Retainer Options shall be as prescribed by the
Committee, so long as such terms are not inconsistent with Section 7(d) below or
any other terms of this Plan.

        (d) Terms and Conditions of Options. Except as provided in Section 7(b)
above, the following terms and conditions shall apply to all options granted to
Participants under the Plan.

            (i) The exercise price of each option shall not be less than the
        Fair Market Value of the Common Stock covered by the option on the date
        the option is granted.

            (ii) Each option granted pursuant to the Plan shall be evidenced by
        a written grant agreement (the "Agreement") executed by the Company and
        the person to whom such option is granted which shall provide such terms
        and conditions as the Committee may determine, in its sole discretion,
        so long as not inconsistent with the terms of this Plan.

            (iii) The term of each option shall be for no more than ten years.

            (iv) The Agreement may contain such other terms, provisions, and
        conditions as may be determined by the Committee (not inconsistent with
        this Plan). Unless otherwise provided in the Agreement and excluding
        options granted under paragraph (b) above, the Committee may, in its
        sole discretion, extend the post-termination exercise period with
        respect to an option (but not beyond the original term of such option).

            (v) Payment of the purchase price upon exercise of any option shall
        be made in cash; provided that the Committee, in its sole discretion,
        may permit an option holder to pay the option price by such other method
        that it may deem appropriate, including,

                                       7
<PAGE>

        without limitation, by tendering to the Company shares of Common Stock
        owned by the option holder, and having a Fair Market Value equal to the
        option price. Such stock surrender method may permit an election by the
        option holder to have the unrealized gain with respect to the option
        denominated in stock units (based on the fair market value of a share of
        Common Stock on the date of exercise) and paid in shares of Common Stock
        at the time specified by the Participant at the time of making the stock
        surrender option gain deferral election. During the deferral period each
        such stock unit shall be credited with additional stock units equal to
        any dividends or other distributions paid by the Company on an
        equivalent number of shares of Common Stock, as of the date such
        dividends or distributions are payable. Stock units may not be sold,
        transferred, assigned, pledged or otherwise encumbered or disposed of
        until such time as share certificates for Common Stock are issued.

            (vi) All such options shall be designated as stock options which do
        not qualify under Section 422 of the Internal Revenue Code of 1986, as
        amended.

            (vii) Unless otherwise provided in an Agreement, options granted
        under the Plan will become immediately and fully vested and exercisable
        upon the occurrence of a Change in Control.

        8. Administration. The Plan shall be administered by the Committee. The
Committee shall have full power to interpret the Plan and formulate additional
details and regulations for carrying out the Plan. Any decision or
interpretation adopted by the Committee shall be final and conclusive.

        9. No Right to Serve. Nothing in the Plan shall confer upon any
Participant the right to remain in service as a member of the Board.

        10. Amendment and Termination. The Board at any time may amend or
terminate the Plan; provided that any such amendment or termination does not
adversely affect the rights of any Participant.

        11. Governing Law. The validity, construction and effect of the Plan and
any such actions taken under or relating to the Plan shall be determined in
accordance with the laws of the State of California.

        12. Notices. All notices under this Plan shall be sent in writing to the
Secretary of the Company. All correspondence to the Participants shall be sent
in writing to the Participant at the address which is their recorded address as
listed on the most recent election form or as specified in the Company's
records.

        13. Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. Nothing contained
hereunder shall give any Participant any rights that are greater than those of
an unsecured general creditor of the Company.

                                       8

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