Document:

Unassociated Document

INSITE VISION INCORPORATED
1994 EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated through June 3, 2002)

  

I.         PURPOSE

The InSite Vision Incorporated 1994 Employee Stock Purchase Plan (the “Plan”) is intended to provide eligible employees of the Company and one or more of its Corporate Affiliates with the opportunity to acquire a proprietary interest in the Company through participation in a plan designed to qualify as an employee stock purchase plan under Section 423 of the Code.

II.        DEFINITIONS

For purposes of administration of the Plan, the following terms shall have the meanings indicated:

Board means the Board of Directors of the Company.

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

Company means InSite Vision Incorporated, a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of InSite Vision Incorporated which shall by appropriate action adopt the Plan.

Compensation means the regular basic earnings paid to an Eligible Employee by one or more Participating Companies during such individual’s period of participation in the Plan, plus (i) any salary deferral contributions made by such individual to the Company’s 401(k) Plan during such period, (ii) any other pre-tax contributions which such individual makes during the period to any of the Company’s Code Section 125 cafeteria benefit programs and (iii) all overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments. There shall be excluded from such Compensation: all contributions (other than Code Section 125 or Section 401(k) contributions) made by the Company or its Corporate Affiliates for such individual’s benefit under any employee benefit or welfare plan now or hereafter established, moving or relocation allowances, car allowances, imputed income (including income attributable to cars or life insurance), taxable fringe benefits, and similar items.

Corporate Affiliate means any company which is either the parent corporation or a subsidiary corporation of the Company (as determined in accordance with Section 424 of the Code), including any parent or subsidiary corporation which becomes such after the Effective Date.

Effective Date means April 1, 1994, the start date of the first scheduled purchase period under the Plan. Any Corporate Affiliate which becomes a Participating Company in the Plan after such Effective Date shall designate a subsequent Effective Date with respect to its employee-Participants. 

Eligible Employee means any person who is regularly engaged, for a period of more than twenty (20) hours per week and more than five (5) months per calendar year, in the rendition of personal services to the Company or any other Participating Company for earnings considered wages under Section 3121(a) of the Code. 

Participant means any Eligible Employee of a Participating Company who is actively participating in the Plan. 

Participating Company means the Company and such Corporate Affiliate or Affiliates as may be authorized from time to time by the Board to extend the benefits of the Plan to their Eligible Employees. The Participating Companies in the Plan, as of the Effective Date, are listed in attached Schedule A.

Plan Administrator shall have the meaning given such term in Article III.

Stock means shares of the common stock of the Company.

III.       ADMINISTRATION

The Plan Administrator shall have sole and exclusive authority to administer the Plan and shall consist of a committee (the “Plan Administrator”) of two (2) or more non-employee Board members appointed from time to time by the Board. The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of Section 423 of the Code. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan.

IV.       PURCHASE PERIODS

A.          Stock shall be offered for purchase under the Plan through a series of successive or overlapping purchase periods until such time as (i) the maximum number of shares of Stock available for issuance under the Plan shall have been issued pursuant to purchase rights granted under the Plan or (ii) the Plan shall have been sooner terminated in accordance with subsection I of Article VII.

B.          The Plan shall be implemented in a series of successive or overlapping purchase periods, each to be of such duration (not to exceed twenty-four (24) months per purchase period) as determined by the Plan Administrator prior to the commencement date of the purchase period. Purchase periods will commence, at the Plan Administrator’s discretion, on the first business day of January and July each year. Accordingly, up to two (2) separate purchase periods may commence in each subsequent calendar year during which the Plan remains in existence.

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C.          The Participant shall be granted a separate purchase right for each purchase period in which he/she participates. The purchase right shall be granted on the first day of the purchase period and shall be automatically exercised in successive semiannual installments on the last business day of June and December on which such purchase right remains outstanding.

  D.          An
    Eligible Employee may participate in only one purchase period at a time. Accordingly,
    except as provided in subsection E below, an Eligible Employee who wishes
    to join a new purchase period must withdraw from the current purchase period
    in which he/she is participating and must also enroll in the new purchase
    period prior to the commencement date for that period.

  

  E.          If
    the fair market value per share of Stock on any purchase date is lower than
    the fair market value per share of Stock on the start date of that purchase
    period, then all Participants in such purchase period shall be automatically
    withdrawn from such purchase period immediately after the exercise of their
    purchase right on such purchase date and automatically re-enrolled in the
    immediately following purchase period as of the first day thereof.

  

  F.          No
    purchase rights granted under the Plan shall be exercised, and no shares of
    Stock shall be issued hereunder, until such time as (i) the Plan shall have
    been approved by the Company’s stockholders and (ii) the Company shall
    have complied with all applicable requirements of the Securities Act of 1933
    (as amended), all applicable listing requirements of any securities exchange
    on which the Stock is listed and all other applicable requirements established
    by law or regulation.

  

  G.          The
    acquisition of Stock through participation in the Plan for any purchase period
    shall neither limit nor require the acquisition of Stock by the Participant
    in any subsequent purchase period.

  

  V.        ELIGIBILITY
    AND PARTICIPATION

  

A.          Each Eligible Employee of a Participating Company may begin participation in the Plan on the start date of any purchase period beginning on or after his/her completion of six (6) months of continuous service with the Company or any Corporate Affiliate.

B.          In order to participate in the Plan, an Eligible Employee must complete the enrollment forms prescribed by the Plan Administrator (including a purchase agreement and a payroll deduction authorization) and file such forms with the Plan Administrator (or its designate) during the specified enrollment period for the purchase period.

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  C.          The
    payroll deduction authorized by a Participant for purposes of acquiring Stock
    under the Plan may be any one percent (1%) multiple (not to exceed ten percent
    (10%) of the Compensation paid to him/her during the purchase period. The
    deduction rate so authorized shall continue in effect for the entire purchase
    period and for each successive purchase period, except to the extent such
    rate is changed in accordance with the following guidelines:

  

  —          The
    Participant may, at any time during the purchase period, reduce his/her rate
    of payroll deduction. Such reduction shall become effective as soon as possible
    after filing of the requisite reduction form with the Plan Administrator (or
    its designate), but the Participant may not effect more than two (2) such
    reductions per purchase period. 

  

  —          The
    Participant may increase or decrease the rate of his/her payroll deduction
    by filing, at least ten (10) business days prior to the commencement
    of any new purchase period in which he/she enrolls, the appropriate form with
    the Plan Administrator (or its designate). The new rate (which may not exceed
    the ten percent (10%) maximum) shall then become effective as of the start
    date of the new purchase period. 

  

Payroll deductions will automatically cease upon the termination of the Participant’s purchase right in accordance with the applicable provisions of Article VII below.

VI.        STOCK SUBJECT TO PLAN

  A.          The
    Stock purchasable by Participants under the Plan shall, solely in the Board’s
    discretion, be made available from either authorized but unissued Stock or
    from reacquired Stock, including shares of Stock purchased on the open market.
    The total number of shares which may be issued under the Plan shall not exceed
    318,333 shares (subject to adjustment under subsection B below). Such share
    reserve includes (i) the 85,000-share increase authorized by the Board
    on March 13, 2000 and approved by the stockholders at the 2000 Annual Meeting,
    and (ii) the 100,000-share increase authorized by the Board on April 16,
    2002 and approved by the stockholders at the 2002 Annual Meeting.

  

  B.          The
    number of shares of Common Stock available for issuance under the Plan shall
    automatically increase on the first day of January each calendar year, beginning
    with the 2003 calendar year, by an amount equal to one-half percent (0.5%)
    of the total number of shares of the Corporation's Common Stock outstanding
    on December 31st of the immediately preceding calendar year; however, in no
    event will such annual increase amount exceed one hundred twenty-five thousand
    (125,000) shares. 

  

  C.          In the event any change is made to the Stock purchasable under the Plan by reason of any stock dividend, stock split, combination of shares, recapitalization or other change affecting the Company’s outstanding Common Stock as a class without the Company’s receipt of consideration, appropriate adjustments shall be made by the Plan Administrator to (i) the class and maximum number of securities issuable over the term of the Plan, (ii) the class and maximum number of securities purchasable per Participant on any one purchase date, and (iii) the class and number of securities and the price per share of the Stock in effect under each purchase right at the time outstanding under the Plan in order to prevent the dilution or enlargement of benefits thereunder.

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  VII.      PURCHASE
    RIGHTS

  

Each Eligible Employee who participates in the Plan for a particular purchase period shall have the right to purchase Stock upon the terms and conditions set forth below and shall execute a purchase agreement embodying such terms and conditions and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable.

  A.          Purchase Price. The purchase price per share shall be the lesser of (i) eighty-five percent (85%) of the fair market value per share of Stock on the start date of the purchase period or (ii) eighty-five percent (85%) of the fair market value per share of Stock on the date the purchase right is exercised. For purposes of determining such fair market value (and for all other valuation purposes under the Plan), the fair market value per share of Stock on any date shall be the closing selling price of such share on such date, as officially quoted on the principal exchange on which the Stock is at the time traded or, if not traded on any exchange, the closing selling price per share of the Stock on such date, as reported on the Nasdaq National Market and published in The Wall Street Journal. If there are no sales of Stock on such day, then the closing selling price for the Stock on the next preceding day for which such closing selling price is quoted shall be determinative of fair market value. 

  B.          Number of Purchasable Shares.
    The number of shares purchasable by a Participant upon the exercise of an
    outstanding purchase right shall be the number of whole shares obtained by
    dividing the amount collected from the Participant through payroll deductions
    during the semiannual period beginning with the start of the purchase period
    or the most recent purchase date in the same purchase period (whichever is
    applicable), together with any amount carried over from the preceding purchase
    date in the same purchase period pursuant to the provisions of subsection
    E of Article VII, by the purchase price in effect for that purchase date.
    However, the maximum number of shares purchasable by any Participant on any
    purchase date shall not exceed 6,666 shares (subject to adjustment under subsection
    B of Article VI). 

  

Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)), or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Corporate Affiliate.

  C.          Payment.
    Payment for Stock purchased under the Plan shall be effected by means of the
    Participant’s authorized payroll deductions. Such deductions shall begin
    with the first pay day on or after the start date of the purchase period and
    shall terminate on the last pay day within that purchase period. The amounts
    so collected shall be credited to the Participant’s individual account
    upon the Company’s books, but no interest shall be paid on the outstanding
    balance credited to such book account. The amounts collected from a Participant
    will not be held in any segregated account or trust fund and may be commingled
    with the general assets of the Company and used for general corporate purposes.

  

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  D.          Termination
    of Purchase Rights.
    The following provisions shall govern the termination of outstanding purchase
    rights:

  

  (i)          A
    Participant may, at any time prior to the last ten (10) business days
    preceding a purchase date, terminate his/her outstanding purchase right by
    filing the prescribed notification form with the Plan Administrator (or its
    designate). No further payroll deductions shall be collected from the Participant
    with respect to the terminated purchase right, and any payroll deductions
    previously collected from the Participant and not previously applied to the
    purchase of Stock during that purchase period shall, at the Participant’s
    election, be immediately refunded or held for the purchase of shares on the
    purchase date. The Participant shall have until ten (10) business days
    preceding the purchase date to make such election. If no such election is
    made, then such funds shall be refunded as soon as possible after the purchase
    date. 

  

  (ii)         The
    termination of such purchase right shall be irrevocable, and the Participant
    may not subsequently rejoin the purchase period for which the terminated purchase
    right was granted. In order to resume participation in any subsequent purchase
    period, such individual must re-enroll in the Plan (by making a timely filing
    of a new purchase agreement and payroll deduction authorization) on or before
    the start date of the new purchase period. 

  

  (iii)        If
    the Participant ceases to remain an Eligible Employee for any reason (including
    death, disability or change in status) while his/her purchase right remains
    outstanding, then such individual (or the personal representative of the estate
    of a deceased Participant) shall have the following election, exercisable
    at any time prior to the last ten (10) days preceding the purchase date
    for the semiannual period in which such cessation of Eligible Employee status
    occurs: 

  

  —          to withdraw all of the funds in the Participant’s payroll account at the time of his/her cessation of Eligible Employee status or 

  —          to have such funds held for the purchase of shares on the purchase date. 

If no such election is made, then such funds shall be refunded as soon as possible after the purchase date. In no event, however, may any payroll deductions be made on the Participant’s behalf following his/her cessation of Eligible Employee status.

  E.          Stock Purchase.
    Outstanding purchase rights shall be automatically exercised in a series of
    successive installments as provided in subsection C of Article IV. The exercise
    shall be effected by applying the amount credited to the Participant’s
    account on the last date of the alternate calendar quarter to the purchase
    of whole shares of Stock (subject to the limitations on the maximum number
    of purchasable shares set forth in subsection B of Article VII) at the
    purchase price in effect for such purchase date. Any amount remaining in the
    Participant’s account after such exercise shall be held for the purchase
    of Stock on the next semiannual purchase date within the purchase period;
    provided,
    however, that any amount not applied to the purchase of Stock at the end of
    a purchase period shall be refunded promptly after the close of the purchase
    period and any amount not applied to the purchase of stock by reason of the
    limitation of subsection B of Article VII on the maximum number
    of purchasable shares shall be refunded promptly after the semiannual purchase
    date.

  

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  F.          Proration
    of Purchase Rights. Should
    the total number of shares of Stock which are to be purchased pursuant to
    outstanding purchase rights on any particular date exceed the number of shares
    then available for issuance under the Plan, the Plan Administrator shall make
    a pro-rata allocation of the available shares on a uniform and nondiscriminatory
    basis, and any amounts credited to the accounts of Participants shall, to
    the extent not applied to the purchase of Stock, be refunded to the Participants.

  

  G.          Rights
    as Stockholder.
    A Participant shall have no stockholder rights with respect to the shares
    of Stock covered by his/her outstanding purchase right until the shares are
    actually purchased on the Participant’s behalf in accordance with subsection
    E of Article VII. No adjustments shall be made for dividends, distributions
    or other rights for which the record date is prior to the date of such purchase.

  

A Participant shall be issued, as soon as practicable after the date of each purchase, a stock certificate for the number of shares purchased on the Participant’s behalf. Such certificate may, upon the Participant’s request, be issued in the names of the Participant and his/her spouse as community property or as joint tenants with right of survivorship. Alternatively, the stock certificate may be delivered to a designated stock brokerage account maintained for the Participant and held in “street name” in order to facilitate the subsequent sale of the purchased shares.

  H.          Assignability.
    No purchase right
    granted under the Plan shall be assignable or transferable by the Participant
    other than by will or by the laws of descent and distribution following the
    Participant’s death, and during the Participant’s lifetime the purchase
    right shall be exercisable only by the Participant.

  

  I.          Change
    in Ownership.
    Should any of the
    following transactions (a “Corporate Transaction”) occur during
    the purchase period: 

  

  (i)          a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from those who held those securities immediately prior to such transaction, or 

  

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  (ii)          the
    sale, transfer or other disposition of all or substantially all of the Corporation’s
    assets in complete liquidation or dissolution of the Corporation,

  

  then
    all outstanding purchase rights under the Plan shall automatically be exercised
    immediately prior to the consummation of such Corporate Transaction by applying
    the payroll deductions previously collected from each Participant and not
    previously applied to the purchase of Stock during the purchase period in
    which such Corporate Transaction occurs to the purchase of whole shares of
    Stock at eighty-five percent (85%) of the lower
    of (i) the fair market value per share of Stock on the start date of the purchase
    period in which the Participant is enrolled at the time of the Corporate Transaction
    or (ii) the fair market value per share of Stock immediately prior to the
    consummation of such Corporate Transaction. However, the applicable share
    limitations of Articles VII and VIII shall continue to apply to any such purchase.
    

  

  VIII.     ACCRUAL
    LIMITATIONS

  

  A.          No
    Participant shall be entitled to accrue rights to acquire Stock pursuant to
    any purchase right outstanding under this Plan if and to the extent such accrual,
    when aggregated with (i) rights to purchase Stock accrued under other purchase
    rights granted to the Participant under this Plan and (ii) similar rights
    accrued by the Participant under other employee stock purchase plans (within
    the meaning of Code Section 423) of the Company or its Corporate Affiliates,
    would otherwise permit such Participant to purchase more than $25,000 in value
    of stock of the Company or any Corporate Affiliate (determined on the basis
    of the fair market value of such stock on the date or dates such rights are
    granted to the Participant) for each calendar year such rights are at any
    time outstanding.

  

  B.          For
    purposes of applying the accrual limitations of subsection A of this
    Article VIII, the right to acquire Stock pursuant to each purchase right granted
    under the Plan shall accrue as follows:

  

  (i)          The right to acquire Stock under each such purchase right shall accrue in a series of successive semiannual installments as and when the purchase right first becomes exercisable for each installment as provided in subsection C of Article IV.

  (ii)          No
    right to acquire Stock under any outstanding purchase right shall accrue to
    the extent the Participant has already accrued in the same calendar year the
    right to acquire $25,000 in value of Stock (determined on the basis of the
    fair market value on the date or dates of grant) pursuant to one or more other
    purchase rights granted to the Participant during such calendar year.

  

  (iii)          If
    by reason of the limitations of subsection A of this Article VIII, the Participant’s
    outstanding purchase right does not accrue for a particular purchase date
    of any purchase period, then the payroll deductions which the Participant
    made during that semiannual period with respect to such purchase right shall
    be promptly refunded.

  

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  C.          In
    the event there is any conflict between the provisions of this Article VIII
    and one or more provisions of the Plan or any instrument issued thereunder,
    the provisions of this Article VIII shall be controlling.

  

  IX.       AMENDMENT
    AND TERMINATION

  

The Board may from time to time alter, amend, suspend or discontinue the Plan; provided, however, that no such action shall adversely affect purchase rights at the time outstanding under the Plan. In addition, no such action of the Board may, without the approval of the Company’s stockholders, (i) increase the number of shares issuable under the Plan, except to the extent authorized pursuant to subsection B of Article VI in connection with certain changes in the Company’s capital structure, (ii) alter the purchase price formula so as to reduce the purchase price specified in the Plan or (iii) modify the requirements for eligibility to participate in the Plan.

  X.        GENERAL
    PROVISIONS

  

  A.          The Plan was initially adopted by the Board on July 28, 1993 and approved by the stockholders in August 1993. The Board amended and restated the Plan as of January 1, 1994, prior to its implementation, to provide the Plan Administrator with the discretionary power to have overlapping purchase periods of any duration up to twenty-four (24) months. Such restatement was approved by the stockholders on May 31, 1994. The Board amended the Plan on March 1, 1995 to increase the number of issuable shares by an additional 100,000 shares, and such share increase was approved by the stockholders at the 1995 Annual Meeting held on May 30, 1995. On March 13, 2000, the Board authorized an 85,000-share increase to the number of shares issuable under the Plan, and such share increase received stockholder approval at the 2000 Annual Meeting held on June 12, 2000. On April 16, 2002, the Board authorized a series of amendments to the Plan which included: (i) a 100,000-share increase to the number of shares issuable under the Plan, (ii) an extension to the term of the Plan by an additional five (5) years, and (iii) authorized implementation of a one-half percent (0.5%) annual increase feature to the Plan’s share reserve, provided such annual increase not exceed one hundred twenty-five thousand (125,000) shares. Such amendments were approved by the stockholders at the 2002 Annual Meeting held on June 3, 2002.

  B.          The
    Plan shall terminate upon the earlier
    of (i) December 31, 2008 or (ii) the date on which all shares available for
    issuance under the Plan shall have been sold pursuant to purchase rights exercised
    under the Plan.

  

  C.          All
    costs and expenses incurred in the administration of the Plan shall be paid
    by the Company.

  

  D.          Neither
    the action of the Company in establishing the Plan, nor any action taken under
    the Plan by the Board or the Plan Administrator, nor any provision of the
    Plan itself shall be construed so as to grant any person the right to remain
    in the employ of the Company or any of its Corporate Affiliates for any period
    of specific duration, and such person’s employment may be terminated
    at any time, with or without cause.

  

  E.          The
    provisions of the Plan shall be governed by the laws of the State of California
    without resort to that State’s conflict of laws rules.

  

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Schedule A

Companies Participating in
Employee Stock Purchase Plan

InSite Vision IncorporatedUnassociated Document

INSITE VISION INCORPORATED

1994 STOCK OPTION PLAN

(Amended and Restated as of June 3, 2002)

ARTICLE ONE

GENERAL PROVISIONS

I.          PURPOSES OF THE PLAN

A.          The 1994 Stock Option Plan (the "Plan") was adopted as the 1993 Stock Plan as of July 28, 1993 to be effective October 25, 1993 (the "Effective Date") to promote the interests of InSite Vision Incorporated, a Delaware corporation (the "Corporation"), by providing eligible individuals with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation (or its parent or subsidiary corporations). This amendment and restatement of the Plan is effective as of June 3, 2002.

  B.          This
    Plan serves as the successor to the Corporation's 1989 Stock Plan (the 1989
    Plan"), and no further option grants shall be made under the 1989 Plan from
    and after the Effective Date. All options outstanding under the 1989 Plan
    on such Effective Date have been incorporated into this Plan and are treated
    as outstanding options under this Plan. However, each outstanding option so
    incorporated continues to be governed solely by the express terms and conditions
    of the instrument evidencing such grant, and no provision of this Plan shall
    be deemed to affect or otherwise modify the rights or obligations of the holders
    of such incorporated options with respect to their acquisition of shares of
    the Corporation's common stock thereunder or their exercise of any outstanding
    stock appreciation rights thereunder.

  

C.          For purposes of the Plan, the following provisions shall be applicable in determining the parent and subsidiary corporations of the Corporation:

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

    

  

  
  

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

II.          STRUCTURE OF THE PLAN

A.          The Plan shall be divided into two separate components: the Discretionary Option Grant Program specified in Article Two and the Automatic Option Grant Program specified in Article Three. Under the Discretionary Option Grant Program, eligible individuals may be granted options to purchase shares of the Corporation's common stock. Under the Automatic Option Grant Program, each eligible member of the Corporation's Board of Directors (the "Board") will automatically receive an option grant to purchase shares of the Corporation's common stock.

  B.          The
    provisions of Articles One and Four of the Plan shall apply to the Discretionary
    Option Grant Program and the Automatic Option Grant Program and shall accordingly
    govern the interests of all individuals in the Plan.

  

  III.          ADMINISTRATION
    OF THE PLAN

  

A.          Article Two of the Plan shall be administered by a committee ("Committee") of two (2) or more non-employee Board members appointed by the Board. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time.

  B.          The
    Committee which shall act as Plan Administrator (the "Plan Administrator")
    shall have full power and authority (subject to the express provisions of
    the Plan) to establish such rules and regulations as it may deem appropriate
    for the proper administration of the Discretionary Option Grant Program and
    to make such determinations and interpretations concerning such program and
    any outstanding option under Article Two as it may deem necessary or advisable.
    Decisions of the Plan Administrator shall be final and binding on all parties
    with an interest in any outstanding option under the Plan.

  

  C.          Administration
    of the Automatic Option Grant Program shall be self-executing in accordance
    with the express terms and conditions of Article Three.

  

  IV.          ELIGIBILITY
    FOR OPTION GRANTS

  

A.          The persons eligible to participate under Article Two of the Plan shall be limited to the following:

2

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

(ii)   non-employee members of the Board or the non-employee members of the board of directors of any parent or subsidiary corporation;

(iii)   those consultants or independent contractors who provide valuable services to the Corporation (or any parent or subsidiary corporation).

  B.          Non-employee
    members of the Board shall also be eligible to receive automatic option grants
    pursuant to the provisions of Article Three, and such individuals shall, for
    purposes of Articles Three and Four, be referred to as "Eligible Directors".

  

  C.          The
    Plan Administrator shall have full authority to determine which eligible individuals
    are to receive discretionary option grants under Article Two, the number of
    shares to be covered by each such grant, whether the granted option is to
    be an incentive stock option ("Incentive Option") which satisfies the requirements
    of Section 422 of the Internal Revenue Code or a non-statutory option not
    intended to meet such requirements, the time or times at which each such option
    is to become exercisable, and the maximum term for which the option is to
    remain outstanding.

  

  V.          STOCK
    SUBJECT TO THE PLAN

  

A.          Shares of the Corporation's common stock, par value $0.01 per share ("Common Stock") shall be available for issuance under the Plan and shall be drawn from either the Corporation's authorized but unissued shares of Common Stock or from reacquired shares of Common Stock, including shares repurchased by the Corporation on the open market. The aggregate number of shares available for issuance under the Plan from and after the Effective Date shall not exceed 4,492,828 shares of Common Stock, subject to adjustment from time to time in accordance with the provisions of this Section V. Such share reserve includes (i) the initial number of shares reserved for issuance under the Plan on the Effective Date, including the shares reserved for issuance under outstanding options granted under the 1989 Plan and incorporated into this Plan, (ii) the 500,000-share increase authorized by the Board on March 29, 1994 and approved by the stockholders on May 31, 1994, (iii) an additional 500,000-share increase authorized by the Board on March 17, 1997 and approved by the stockholders on June 2, 1997, (iv) the 265,521 share increase effected on January 2, 1998 pursuant to the automatic annual share increase provisions of the Plan, (v) the 336,979 share increase effected on January 2, 1999 pursuant to the automatic annual share increase provisions of the Plan, and (vi) the 405,916 share increase effected on January 3, 2000 pursuant to the automatic annual share increase provisions of the Plan, (vii) the 497,014 share increase effected on January 2, 2001, pursuant to the automatic annual share increase provisions of the Plan, and (viii) the 498,545 share increase effected on January 2, 2002, pursuant to the automatic annual share increase provisions of the Plan. To the extent one or more outstanding options under the 1989 Plan which have been incorporated into this Plan are subsequently exercised, the number of shares issued with respect to each such option shall reduce, on a share-for-share basis, the number of shares available for issuance under this Plan.

  3

  B.          The
    number of shares of Common Stock available for issuance under the Plan shall
    automatically increase on the first day of January each calendar year, beginning
    with the 1998 calendar year, by an amount equal to two percent (2%) of the
    total number of shares of the Corporation's Common Stock outstanding on December
    31st of the immediately preceding calendar year. All options granted on the
    basis of each such annual share increase shall be non-statutory options under
    the federal tax laws.

  

  C.          The
    maximum number of shares of Common Stock for which any one participant in
    the Plan may be granted stock options and separately exercisable stock appreciation
    rights over the term of the Plan shall be limited to 1,250,000 shares, subject
    to adjustment from time to time in accordance with the provisions of this
    Section V. For purposes of the foregoing limitation, stock options and stock
    appreciation rights granted prior to January 1, 1994 shall not be taken into
    account.

  

  D.          Should
    one or more outstanding options under this Plan (including any outstanding
    options under the 1989 Plan incorporated into this Plan) expire or terminate
    for any reason prior to exercise in full (including any option cancelled in
    accordance with the cancellation-regrant provisions of Section IV of Article
    Two of the Plan), the shares subject to the portion of the option not so exercised
    shall be available for subsequent option grant under the Plan. Shares subject
    to any option or portion thereof surrendered or cancelled in accordance with
    Section V of Article Two and Section III of Article Three of the Plan shall
    not be available for subsequent
    option grant under the Plan. Should the exercise price of an outstanding option
    under the Plan (including any option incorporated from the 1989 Plan) be paid
    with shares of Common Stock or should shares of Common Stock otherwise issuable
    under the Plan be withheld by the Corporation in satisfaction of the withholding
    taxes incurred in connection with the exercise of an outstanding option under
    the Plan, then the number of shares available for issuance under the Plan
    shall be reduced by the gross number of shares for which the option is exercised,
    and not by the net number of shares of Common Stock issued to the option holder.

  

  E.          In
    the event any change is made to the Common Stock issuable under the Plan by
    reason of any stock split, stock dividend, recapitalization, combination of
    shares, exchange of shares or other change affecting the outstanding Common
    Stock as a class without receipt of consideration, then appropriate adjustments
    shall be made to (i) the maximum number and/or class of securities issuable
    under the Plan, (ii) the maximum number and/or class of securities issuable
    for which any one individual may be granted stock options and separately exercisable
    stock appreciation rights under the Plan after December 31, 1993, (iii) the
    number and/or class of securities for which stock options are to be granted
    to newly-elected or continuing non-employee Board members under the Automatic
    Option Grant Program and (iv) the number and/or class of securities and price
    per share in effect under each outstanding option under the
    Plan (including each outstanding option incorporated into this Plan from
    the 1989 Plan). The purpose of such adjustments to the outstanding options
    shall be to preclude the enlargement or dilution of rights and benefits under
    those options. The adjustments determined by the Plan Administrator shall
    be final, binding and conclusive.

  

  4

  ARTICLE
    TWO

DISCRETIONARY OPTION GRANT PROGRAM

  I.          TERMS
    AND CONDITIONS OF OPTIONS

  

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

  

A.          Option Price.

  1.          The
    option price per share shall be fixed by the Plan Administrator, but in no
    event shall the option price per share be less than the fair market value
    per share of Common Stock on the date of the option grant.

  

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

  

         —      cash or check made payable to the Corporation's order;

         —      shares of Common Stock held by the optionee for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at fair market value on the Exercise Date (as such term is defined below); or

         —      through a broker-dealer sale and remittance procedure pursuant to which the optionee shall provide irrevocable instructions (I) to a designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased shares plus all applicable federal and state income and employment taxes required to be withheld by the Corporation in connection with such purchase and (II) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction.

  5

For purposes of this Section I.A.2, the Exercise Date shall be the date on which written notice of the option exercise is delivered to the Corporation. Except to the extent the sale and remittance procedure is used in connection with the exercise of the option, payment of the option price for the purchased shares must accompany such notice.

  3.          The
    fair market value per share of Common Stock on any relevant date under the
    Plan shall be determined in accordance with the following provisions:

  

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

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

  B.          Term
    and Exercise of Options. Each option
    granted under this Article Two shall be exercisable at such time or times,
    during such period, and for such number of shares as shall be determined by
    the Plan Administrator and set forth in the instrument evidencing the option
    grant. No such option, however, shall have a maximum term in excess of ten
    (10) years from the grant date.

  

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

  

  6 

  
  

  

  

  D.          Termination
    of Service.

  

  1.          Except to the extent otherwise provided pursuant to Section VII of this Article Two, the following provisions shall govern the exercise period applicable to any options held by the optionee at the time of cessation of Service or death.

         —      Should the optionee cease to remain in Service for any reason other than death or permanent disability, then the period for which each outstanding option held by such optionee is to remain exercisable shall be limited to the three (3)-month period following the date of such cessation of Service.

         —      In the event such Service terminates by reason of permanent disability (as defined in Section 22(e)(3) of the Internal Revenue Code), then the period for which each outstanding option held by the optionee is to remain exercisable shall be limited to the twelve (12)-month period following the date of such cessation of Service.

         —      Should the optionee die while in Service or during the three (3)-month period following his or her cessation of Service, then the period for which each of his or her outstanding options is to remain exercisable shall be limited to the twelve (12)-month period following the date of the optionee's cessation of Service. During such limited period, the option may be exercised by the personal representative of the optionee's estate or by the person or persons to whom the option is transferred pursuant to the optionee's will or in accordance with the laws of descent and distribution.

         —      Under no circumstances, however, shall any option be exercisable after the specified expiration date of the option term.

         —      Each such option shall, during such limited exercise period, be exercisable for any or all of the shares for which the option is exercisable on the date of the optionee's cessation of Service. Upon the expiration of such limited exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be exercisable.

7

  2.          The
    Plan Administrator shall have complete discretion, exercisable either at the
    time the option is granted or at any time while the option remains outstanding,
    to permit one or more options held by the optionee under this Article Two
    to be exercised, during the limited period of exercisability provided under
    Section I.D. 1 above, not only with respect to the number of shares for which
    each such option is exercisable at the time of the optionee's cessation of
    Service but also with respect to one or more subsequent installments of purchasable
    shares for which the option would otherwise have become exercisable had such
    cessation of Service not occurred. The Plan Administrator shall also have
    full power and authority to extend the period of time for which any option
    granted under this Article Two is
    to remain exercisable following the optionee's cessation of Service or
    death from the limited period in effect under Section I.D. 1 of this Article
    Two to such greater period of time as the Plan Administrator shall deem appropriate;
    provided, however, that in no event shall such option be exercisable
    after the specified expiration date of the option term.

  

  3.          For
    purposes of the foregoing provisions of this Section I.D (and for all other
    purposes under the Plan):

  

         —      The optionee shall be deemed to remain in the Service of the Corporation for so long as such individual renders services on a periodic basis to the Corporation (or any parent or subsidiary corporation) in the capacity of an Employee, a non-employee member of the Board or an independent consultant or advisor.

         —      The optionee shall be considered to be an Employee for so long as such individual remains in the employ of the Corporation or one or more of its parent or subsidiary corporations, subject to the control and direction of the employer entity as to the work to be performed and the manner and method of performance.

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

  

II.          INCENTIVE OPTIONS

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

A.          Dollar Limitation. The aggregate fair market value (determined as of the respective date or dates of grant) of the Common Stock for which one or more options granted to any Employee under this Plan (or any other option plan of the Corporation or its parent or subsidiary corporations) may for the first time become exercisable as incentive stock options under the federal tax laws during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as incentive stock options under the federal tax laws shall be applied on the basis of the order in which such options are granted.

8

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

  

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

  III.          CORPORATE
    TRANSACTION/CHANGES IN CONTROL

  

A.          In the event of any Corporate Transaction or Change in Control (as defined below), each option which is at the time outstanding under this Article Two shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction or Change in Control, respectively, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares. However, an outstanding option under this Article Two shall not so accelerate upon a Corporate Transaction if and to the extent such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof. The determination of comparability shall be made by the Plan Administrator, and its determination shall be final and binding.

  B.          A
    "Corporate Transaction" shall mean any of the following stockholder-approved
    transactions:

  

(a)   a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or

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

C.          For all purposes under the Plan, a "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Corporation is then subject to such reporting requirement, other than a Corporate Transaction; provided that, without limitation, a Change in Control shall be deemed to have occurred if:

9

(i)   any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act, is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Corporation representing forty percent (40%) or more of the combined voting power of the Corporation's then outstanding securities entitled to vote in the election of directors of the Corporation, pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept; or

(ii)   a change in the composition of the Board occurs over any period of two (2) consecutive years or less such that a majority of the Board ceases for any reason to be comprised of individuals who either (A) have been Board members continuously since the beginning of that period or (B) have been elected or nominated for election as Board members during such period by a vote of at least three-fourths (3/4) of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.

  D.          Upon
    the consummation of the Corporate Transaction, all outstanding options under
    this Article Two shall terminate and cease to be outstanding, except to the
    extent assumed by the successor corporation or its parent company. Any options
    accelerated in connection with the Change in Control shall remain fully exercisable
    until the expiration or sooner termination of the option term.

  

  E.          Each
    outstanding option under this Article Two which is assumed in connection with
    the Corporate Transaction or is otherwise to continue in effect shall be appropriately
    adjusted, immediately after such Corporate Transaction, to apply and pertain
    to the number and class of securities which would have been issued to the
    option holder, in consummation of such Corporate Transaction, had such person
    exercised the option immediately prior to such Corporate Transaction. Appropriate
    adjustments shall also be made to the option price payable per share, provided
    the aggregate option price payable for such securities shall remain the same.
    In addition, the class and number of securities available for issuance under
    the Plan following the consummation of the Corporate Transaction shall be
    appropriately adjusted.

  

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

  

10

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

  IV.          CANCELLATION
    AND REGRANT OF OPTIONS

  

The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, the cancellation of any or all outstanding options under this Article Two and to grant in substitution new options under the Plan covering the same or different numbers of shares of Common Stock but having an option price per share not less than the fair market value of the Common Stock on the new grant date (or one hundred ten percent (110%) of such fair market value in the case of an Incentive Option granted to a 10% Stockholder).

  V.          STOCK
    APPRECIATION RIGHTS

  

A.          Each officer of the Corporation subject to the short-swing profit restrictions of the federal securities laws shall be granted limited stock appreciation rights in tandem with his or her outstanding options under this Article Two. Upon the occurrence of a Hostile Take-Over, each outstanding option with such a limited stock appreciation right shall automatically be cancelled, and the optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the cancelled option (whether or not the option is otherwise at the time exercisable for those shares) over (ii) the aggregate exercise price payable for such shares. The cash distribution payable upon such cancellation shall be made within five (5) days following the consummation of the Hostile Take-Over. The Plan Administrator shall pre-approve, at the time the limited stock appreciation right is granted, the subsequent exercise of that right in accordance with the terms of the grant and the provisions of this Section V.A. No additional approval of the Plan Administrator or the Board shall be required at the time of the actual option cancellation and cash distribution.

  B.          For
    purposes of Section V.A, the following definitions shall be in effect: 

  

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

11

The Take-Over Price per share shall be deemed to be equal to the greater of (a) the fair market value per share on the date of cancellation, as determined pursuant to the valuation provisions of Section I.A.3 of this Article Two, or (b) the highest reported price per share paid in effecting such Hostile Take-Over. However, if the cancelled option is an Incentive Option, the Take-Over Price shall not exceed the clause (a) price per share.

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

  VI.          LOANS
    OR INSTALLMENT PAYMENTS

  

The Plan Administrator may assist any optionee (including any officer) in the exercise of one or more outstanding options under this Article Two, including the satisfaction of any federal and state income and employment tax obligations arising therefrom, by (a) authorizing the extension of a loan to such optionee from the Corporation or (b) permitting the optionee to pay the option price for the purchased Common Stock in installments over a period of years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) will be established by the Plan Administrator in its sole discretion. Loans and installment payments may be granted with or without security or collateral (other than to optionees who are consultants or independent contractors, in which event the loan must be adequately secured by collateral other than the purchased shares), but the maximum credit available to the optionee shall not exceed the sum of (i) the aggregate option price (less par value) of the purchased shares plus (ii) any federal and state income and employment tax liability incurred by the optionee in connection with the exercise of the option.

  12

  ARTICLE
    THREE

AUTOMATIC OPTION GRANT PROGRAM

  I.          ELIGIBILITY

  

The individuals eligible to receive automatic option grants pursuant to the provisions of this Article Three shall be limited to (i) those individuals who are first elected or appointed as non-employee Board members on or after the Effective Date, whether through appointment by the Board or election by the Corporation's stockholders, provided they have not otherwise been in the prior employ of the Corporation (or any parent or subsidiary corporation) and (ii) those individuals who continue to serve as non-employee Board members on one or more automatic annual option grant dates below while this Automatic Grant Program remains in effect.

II.          TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

A.          Grant Dates. Option grants will be made under this Article Three on the dates specified below. The revised automatic grant program was approved by the stockholders at the 1998 Annual Meeting.

(i)   Each individual who first becomes a non-employee Board member at any time after October 25, 1993, whether through election at an Annual Stockholders Meeting or through appointment by the Board, and who has not previously been in the employ of the Corporation (or any parent or subsidiary corporation) shall automatically be granted upon the terms and conditions of this Article Three, at the time of such initial election or appointment, a non-statutory stock option to purchase 10,000 shares of Common Stock. A non-employee Board member who replaces a Board member shall not receive an initial 10,000-share grant if both the new and former Board member are affiliated with the same investment fund or similar entity.

(ii)   On December 15, 1997, each individual serving as a non-employee Board member shall automatically be granted a non-statutory stock option to purchase 10,000 shares of Common Stock.

(iii)   On the date of the first Board meeting in December each year, beginning December 1998, each individual continuing to serve as a non-employee Board member shall automatically be granted a non-statutory stock option to purchase 10,000 shares of Common Stock, provided such individual did not receive his or her initial option grant under this Article III within the preceding six (6) months. In the event there is no Board meeting in December of any year, then the automatic option grant for that year shall be made on December 15th: If December 15th in any year is not a day on which the New York Stock Exchange is open for business (a "Trading Day"), then the grant for that year shall be made on the immediately succeeding Trading Day.

  13

The 10,000-share limitation applicable to each initial automatic option grant and each annual automatic option grant per eligible non-employee Board member shall be subject to periodic adjustment pursuant to the applicable provisions of paragraph V.E of Article One.

Stockholder approval of the December 15, 1997 restatement of the Plan constitutes pre-approval of each option granted on or after that date pursuant to the provisions of this Article Three and the subsequent exercise of that option in accordance with the terms and conditions of this Article Three.

  B.          Exercise
    Price. The exercise price per share
    shall be equal to one hundred percent (100%) of 
     the Fair Market Value per share
    of Common Stock on the automatic grant date.

  

  C.          Payment.
    The option price shall become immediately due upon exercise of the option
    and shall be payable in one of the alternative forms specified in Section
    I.A.2 of Article Two.

  

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

  

  E.          Exercisability.
    Each automatic option grant under this Article Three shall become exercisable
    for the option shares one (1) year after the date of grant, provided the optionee
    remains a member of the Board through such date. Each such option shall remain
    exercisable until the expiration or sooner termination of the option term.

  

  F.          Limited
    Transferability. Each automatic
    grant under this Article Three may, in connection with the optionee's estate
    plan, be assigned in whole or in part during the optionee's lifetime to one
    or more members of the optionee's immediate family or to a trust established
    exclusively for one or more such family members. The assigned portion may
    only be exercised by the person or persons who acquire a proprietary interest
    in the option pursuant to the assignment. The terms applicable to the assigned
    portion shall be the same as those in effect for the option immediately prior
    to such assignment.

  

  G.          Effect
    of Termination of Board Membership.

  

  1.          Should the optionee cease to be a Board member for any reason (other than death or Permanent Disability (as defined in Code Section 22(e)(3)) while holding an automatic option grant under this Article Three, then he or she shall have a three (3)-month period following the date of such cessation of Board membership in which to exercise such option for any or all of the shares of Common Stock for which the option is exercisable at the time the optionee ceases service as a Board member.

  14

  2.          Should
    the optionee cease to be a Board member by reason of Permanent Disability
    while holding an automatic option grant under this Article Three, then he
    or she shall have a six (6)-month period following the date of such cessation
    of Board membership in which to exercise such option for any or all of the
    shares of Common Stock for which the option is exercisable at the time the
    optionee ceases service as a Board member.

  

  3.          Should
    the optionee die while serving as a Board member or during the three (3)-month
    period following his or her cessation of Board service, then the option may
    subsequently be exercised, for any or all of the shares of Common Stock for
    which the option is exercisable at the time of the optionee's cessation of
    Board membership, by the personal representative of his or her estate or by
    the person or persons to whom the option is transferred pursuant to the optionee's
    will or in accordance with the laws of descent and distribution. Any such
    exercise must, however, occur within six (6) months after the date of the
    optionee’s death.

  

  4.          In
    no event shall any automatic grant under this Article Three remain exercisable
    after the specified expiration date of the ten (10)-year option term. Upon
    the expiration of the applicable exercise period in accordance with subparagraphs
    1, 2 and 3 above or (if earlier) upon the expiration of the ten (10)-year
    option term, the automatic grant shall terminate and cease to be exercisable.

  

  H.          Stockholder
    Rights. The holder of an automatic
    option grant under this Article Three shall have no stockholder rights with
    respect to any shares covered by such option until such individual shall have
    exercised the option and paid the exercise price for the purchased shares.

  

  I.          Remaining
    Terms. The remaining terms and
    conditions of each automatic option grant shall be as set forth in the prototype
    Director Automatic Grant Agreement attached as Exhibit A to the Plan.

  

  III.          CORPORATE
    TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER

  

A.          Each automatic option grant outstanding at the time of a Corporate Transaction or a Change in Control shall automatically accelerate so that each such option shall, immediately prior to the specified effective date for such Corporate Transaction or Change in Control, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares at any time prior to the expiration or sooner termination of the option term. Upon the consummation of the Corporate Transaction, all automatic option grants under this Article Three shall terminate and cease to be outstanding.

  B.          Upon
    the occurrence of a Hostile Take-Over, each outstanding automatic option grant
    made pursuant to the provisions of this Article Three shall automatically
    be cancelled and the optionee shall in return be entitled to a cash distribution
    from the Corporation calculated in accordance with Section V.B of Article
    Two and payable at the time and in the manner set forth in Section V.B of
    Article Two. Stockholder approval of the December 15, 1997 restatement of
    the Plan constitutes pre-approval of each option subsequently granted under
    this Article Three with such a cancellation provision and the subsequent cancellation
    of that option in accordance with the terms of this Section III.B. No additional
    approval of the Board or any Plan Administrator shall be required at the time
    of the actual option cancellation and cash distribution.

  

  15

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

  

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

  

  16

  ARTICLE
    FOUR

MISCELLANEOUS

  I.          AMENDMENT
    OF THE PLAN

  

The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects whatsoever. However, no such amendment or modification shall, without the consent of the holders, adversely affect rights and obligations with respect to options at the time outstanding under the Plan. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations.

  II.          TAX
    WITHHOLDING

  

  A.          The
    Corporation's obligation to deliver shares or cash upon the exercise of stock
    options or stock appreciation rights granted under the Plan shall be subject
    to the satisfaction of all applicable federal, state and local income and
    employment tax withholding requirements.

  

  B.          The
    Plan Administrator may, in its discretion and upon such terms and conditions
    as it may deem appropriate (including the applicable safe-harbor provisions
    of Rule 16b-3 of the Exchange Act) provide any or all holders of outstanding
    option grants under Article Two with the election to have the Corporation
    withhold, from the shares of Common Stock otherwise issuable upon the exercise
    of such options, one or more of such shares with an aggregate fair market
    value equal to the designated percentage (any multiple of 5% specified by
    the optionee) of the federal and state income and employment withholding taxes
    ("Withholding Taxes") to which such holders may become subject in connection
    with the acquisition of such shares. In lieu of such direct withholding, one
    or more optionees may also be granted the right to deliver shares of Common
    Stock to the Corporation in satisfaction of such Withholding Taxes. The withheld
    or delivered shares shall be valued at the Fair Market Value on the applicable
    determination date for such Withholding Taxes.

  

  III.          EFFECTIVE
    DATE AND TERM OF PLAN

  

  A.          This
    Plan, as successor to the Corporation's 1989 Plan, became effective as of
    the October 25, 1993 Effective Date. The Plan was subsequently amended and
    restated by the Board on December 15, 1993 with the purpose of, among other
    provisions, deleting direct stock issuances and renaming the Plan to the 1994
    Stock Option Plan. On March 29, 1994 the Board amended and restated the Plan
    (the "1994 Restatement") to increase the number of shares of Common Stock
    issuable thereunder by 500,000 shares and to impose a limitation on the maximum
    number of shares of Common Stock for which any one participant in the Plan
    may be granted stock options and separately exercisable stock appreciation
    rights after December 31, 1993. The 1994 Restatement was approved by the Corporation's
    stockholders in May 1994. On March 17, 1997, the Board adopted amendments
    to the Plan (the "1997 Restatement") to effect the following changes: (i)
    increase the maximum number of shares of Common Stock available for issuance
    over the term of the Plan by an additional 500,000 shares; (ii) implement
    an automatic share increase feature pursuant to which the number of shares
    of Common Stock available for issuance under the Plan will automatically increase
    on the first day of January each year, beginning January 1, 1998, by two percent
    (2%) of the total number of shares of Common Stock outstanding on the last
    day of December in the immediately preceding year; (iii) increase the maximum
    number of shares available for issuance under the Automatic Option Grant Program
    in effect under the Plan by an additional 33,334 shares to 150,000 shares;
    (iv) impose a specific limitation of 850,000 shares on the maximum number
    of shares for which any one participant may be granted stock options and separately
    exercisable stock appreciation rights in the aggregate under the 1994 Plan;
    (v) render the non-employee Board members eligible to receive option grants
    under the Discretionary Option Grant Program; (vi) remove certain restrictions
    on the eligibility of non-employee Board members to serve as Plan Administrator;
    and (vii) effect a series of additional changes to the provisions of the Plan
    (including the stockholder approval requirements, the transferability of non-statutory
    stock options and the elimination of the six (6) month holding period requirement
    as a condition to the exercise of stock appreciation rights) in order to take
    advantage of the recent amendments to Rule 16b-3 of the Securities and Exchange
    Commission which exempts certain officer and director transactions under the
    1993 Plan from the short-swing liability provisions of the federal securities
    laws. The 1997 Restatement was approved by the Corporation's stockholders
    on June 2, 1997.

  

  17

  B.          On
    December 15, 1997, the Board adopted a series of amendments (the "1997 Amendment")
    to the Plan which effect the following changes to the Automatic Option Grant
    Program for non-employee Board members under Article Three of the Plan: (i)
    increase the number of shares of Common Stock for which options are to be
    granted annually (the "Annual Automatic Grant") to each non-employee Board
    member from five thousand (5,000) shares to ten thousand (10,000) shares;
    (ii) change the date on which such Annual Automatic Grants are to be made
    to the non-employee Board members from the date of the Annual Stockholders
    Meeting to the date of the first Board meeting in December each year (commencing
    December 1997); provided, however, that if there is no Board meeting in December
    of any year, the Annual Automatic Grants for that year shall be made on December
    15 or, if December 15th is not a Trading Day, the immediately succeeding Trading
    Day; (iii) authorize and effect an Annual Automatic Grant for each individual
    serving as a non-employee Board member on December 15, 1997, whether or not
    that individual received his or her initial automatic grant within the preceding
    six (6) months; (iv) provide that after December 15, 1997, each non-employee
    Board member shall be eligible to receive an Automatic Option Grant in December
    of any year only if that individual did not receive his or her initial automatic
    grant within the preceding six (6) months; and (v) eliminate the provisions
    of the Plan which impose a 150,000-share limitation on the maximum number
    of shares issuable under the Automatic Option Grant Program. The 1997 Amendment
    was approved by the stockholders at the 1998 Annual Meeting. All option grants
    made prior to the 1997 Amendment shall remain outstanding in accordance with
    the terms and conditions of the respective instruments evidencing those options,
    and nothing in the 1997 Amendment shall be deemed to modify or in any way
    affect those outstanding options.

  

  18

  C.          On
    April 16, 2002, the Board adopted an amendment to the Plan (the “2002
    Amendment”) which (i) extends the term of the Plan by five (5) years,
    thus extending the Plan termination date from July 27, 2003 to July 27,
    2008 and (ii) increases the per participant limit, as described in Article
    One, Section V, Paragraph C, from 850,000 shares to 1,250,000 shares. The
    2002 Amendment was approved by the stockholders at the 2002 Annual Meeting.

  

  D.          Each
    option issued and outstanding under the 1989 Plan immediately prior to the
    Effective Date shall be incorporated into this Plan and treated as an outstanding
    option under this Plan, but each such option shall continue to be governed
    solely by the terms and conditions of the instrument evidencing such grant,
    and nothing in this Plan shall be deemed to affect or otherwise modify the
    rights or obligations of the holders of such options with respect to their
    acquisition of shares of Common Stock thereunder or their exercise of outstanding
    stock appreciation rights thereunder.

  

  E.          The
    Plan shall terminate upon the earlier
    of (i) July 27, 2008 or (ii) the date on which all shares available for issuance
    under the Plan have been issued pursuant to the exercise of options granted
    under Article Two. If the date of termination is determined under clause (i)
    above, then no options outstanding on such date shall be affected by the termination
    of the Plan, and such securities shall thereafter continue to have force and
    effect in accordance with the provisions of the instruments evidencing such
    options.

  

  F.          Options
    may be granted under this Plan to purchase shares of Common Stock in excess
    of the number of shares then available for issuance under the Plan, provided
    each option granted is not to become exercisable, in whole or in part, at
    any time prior to stockholder approval of an amendment authorizing a sufficient
    increase in the number of shares issuable under the Plan.

  

  IV.          REGULATORY
    APPROVALS

  

  A.          The implementation of the Plan, the granting of any option hereunder, and the issuance of stock upon the exercise or surrender of any such option shall be subject to the procurement by the Corporation of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the stock issued pursuant to it.

  B.          No
    shares of Common Stock or other assets shall be issued or delivered under
    the Plan unless and until there shall have been compliance with all applicable
    requirements of federal and state securities laws, including the filing and
    effectiveness of a Form S-8 registration statement for the shares of Common
    Stock issuable under the Plan, and all applicable listing requirements of
    any securities exchange on which stock of the same class is then listed.

  

  V.          USE
    OF PROCEEDS

  

            Any cash proceeds received by the Corporation from the sale of shares pursuant to options granted under the Plan shall be used for general corporate purposes.

  

  19

  VI.          NO
    EMPLOYMENT/SERVICE RIGHTS

  

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

  VII.          MISCELLANEOUS
    PROVISIONS

  

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

  

  B.          The
    provisions of the Plan shall be governed by the laws of the state of California,
    as such laws are applied to contracts entered into and performed in such state.

  

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

  

  20

Exhibit A

Director Automatic Grant Agreement

  21

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