Document:

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                                                                    Exhibit 10.2

                          NOTIFY TECHNOLOGY CORPORATION

                                 1997 STOCK PLAN

                    (as amended effective February 27, 2002)

     1.   Purposes of the Plan. The purposes of this Stock Plan are:
          --------------------

          o    to attract and retain the best available personnel for positions
               of substantial responsibility,

          o    to provide additional incentive to Employees, Directors and
               Consultants, and

          o    to promote the success of the Company's business.

     Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.

     2.   Definitions. As used herein, the following definitions shall apply:
          -----------

          (a) "Administrator" means the Board or any of its Committees as shall
               -------------
be administering the Plan, in accordance with Section 4 of the Plan.

          (b) "Applicable Laws" means the requirements relating to the
               ---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.

          (c) "Board" means the Board of Directors of the Company.
               -----

          (d) "Code" means the Internal Revenue Code of 1986, as amended.
               ----

          (e) "Committee" means a committee of Directors appointed by the Board
               ---------
in accordance with Section 4 of the Plan.

          (f) "Common Stock" means the common stock of the Company.
               ------------

          (g) "Company" means Notify Technology Corporation, a California
               -------
corporation.

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          (h) "Consultant" means any person, including an advisor, engaged by
               ----------
the Company or a Parent or Subsidiary to render services to such entity.

          (i) "Director" means a member of the Board.
               ---------

          (j) "Disability" means total and permanent disability as defined in
               ----------
Section 22(e)(3) of the Code.

          (k) "Employee" means any person, including Officers and Directors,
               --------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

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

          (m) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:

               (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

               (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

          (n) "Incentive Stock Option" means an Option intended to qualify as
               ----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

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          (o) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

          (p) "Notice of Grant" means a written or electronic notice evidencing
               ---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.

          (q) "Officer" means a person who is an officer of the Company within
               -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          (r) "Option" means a stock option granted pursuant to the Plan.
              -------

          (s) "Option Agreement" means an agreement between the Company and an
               ----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

          (t) "Option Exchange Program" means a program whereby outstanding
               -----------------------
Options are surrendered in exchange for Options with a lower exercise price.

          (u) "Optioned Stock" means the Common Stock subject to an Option or
               --------------
Stock Purchase Right.

          (v) "Optionee" means the holder of an outstanding Option or Stock
               --------
Purchase Right granted under the Plan.

          (w) "Parent" means a "parent corporation," whether now or hereafter
               ------
existing, as defined in Section 424(e) of the Code.

          (x) "Plan" means this Notify Technology Corporation 1997 Stock Plan.
               ----

          (y) "Restricted Stock" means shares of Common Stock acquired pursuant
               ----------------
to a grant of Stock Purchase Rights under Section 11 of the Plan.

          (z) "Restricted Stock Purchase Agreement" means a written agreement
               -----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

          (aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
                ----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

          (bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
                -------------

          (cc) "Service Provider" means an Employee, Director or Consultant.
                ----------------

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          (dd) "Share" means a share of the Common Stock, as adjusted in
                -----
accordance with Section 13 of the Plan.

          (ee) "Stock Purchase Right" means the right to purchase Common Stock
                --------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

          (ff) "Subsidiary" means a "subsidiary corporation", whether now or
                ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan. Subject to the provisions of Section 13 of
          -------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,150,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

If an Option or Stock Purchase Right expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
             --------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.

     4.   Administration of the Plan.
          --------------------------

          (a) Procedure.

               (i)   Multiple Administrative Bodies. The Plan may be
                     ------------------------------
administered by different Committees with respect to different groups of Service
Providers.

               (ii)  Section 162(m). To the extent that the Administrator
                     --------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

               (iii) Rule 16b-3. To the extent desirable to qualify
                     ----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

               (iv)  Other Administration. Other than as provided above, the
                     --------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.

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          (b) Powers of the Administrator. Subject to the provisions of the
              ---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

               (i)    to determine the Fair Market Value;

               (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;

               (iii)  to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;

               (iv)   to approve forms of agreement for use under the Plan;

               (v)    to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right of the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

               (vi)   to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;

               (vii)  to institute an Option Exchange Program;

               (viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

               (ix)   to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

               (x)    to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;

               (xi)   to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that

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the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;

               (xii)  to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;

               (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c) Effect of Administrator's Decision. The Administrator's decisions,
              ----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.

     5.   Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
          -----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

     6.   Limitations.
          -----------

          (a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

          (b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.

          (c) The following limitations shall apply to grants of Options:

               (i)    No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 600,000 Shares.

               (ii)   In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 50,000 Shares
which shall not count against the limit set forth in subsection (i) above.

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               (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.

               (iv)  If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

     7.   Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
          ------------
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.

     8.   Term of Option. The term of each Option shall be stated in the Option
          --------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

     9.   Option Exercise Price and Consideration.
          ---------------------------------------

          (a) Exercise Price. The per share exercise price for the Shares to be
              --------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

               (i)   In the case of an Incentive Stock Option

                     (A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                     (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

               (ii)  In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

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               (iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.

          (b) Waiting Period and Exercise Dates. At the time an Option is
              ---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.

          (c) Form of Consideration. The Administrator shall determine the
              ---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

               (i)    cash;

               (ii)   check;

               (iii)  promissory note;

               (iv)   other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

               (v)    consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

               (vi)   a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

               (vii)  any combination of the foregoing methods of payment; or

               (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

     10.  Exercise of Option.

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
              -----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.

<PAGE>

     An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.

     Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

     (b) Termination of Relationship as a Service Provider. If an Optionee
         -------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

     (c) Disability of Optionee. If an Optionee ceases to be a Service Provider
         ----------------------
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

     (d) Death of Optionee. If an Optionee dies while a Service Provider, the
         -----------------
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event

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later than the expiration of the term of such Option as set forth in the Notice
of Grant), by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death. In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if none,
by the person(s) entitled to exercise the Option under the Optionee's will or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

     (e) Buyout Provisions. The Administrator may at any time offer to buy out
         -----------------
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

     11. Stock Purchase Rights.
         ---------------------

          (a) Rights to Purchase. Stock Purchase Rights may be issued either
              ------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.

          (b) Repurchase Option. Unless the Administrator determines otherwise,
              -----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.

          (c) Other Provisions. The Restricted Stock Purchase Agreement shall
              ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

          (d) Rights as a Shareholder. Once the Stock Purchase Right is
              -----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

<PAGE>

     12.  Non-Transferability of Options and Stock Purchase Rights. Unless
          --------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.

     13.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or
          ------------------------------------------------------------------
Asset Sale.
----------

          (a) Changes in Capitalization. Subject to any required action by the
              -------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

          (b) Dissolution or Liquidation. In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with
              --------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right shall be assumed
or an equivalent option or right substituted by the

<PAGE>

successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

     14.  Date of Grant. The date of grant of an Option or Stock Purchase
          -------------
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.

     15.  Amendment and Termination of the Plan.
          -------------------------------------

          (a) Amendment and Termination. The Board may at any time amend,
              -------------------------
alter, suspend or terminate the Plan.

          (b) Shareholder Approval. The Company shall obtain shareholder
              --------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration,
              ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

<PAGE>

     16.  Conditions Upon Issuance of Shares.
          ----------------------------------

          (a) Legal Compliance. Shares shall not be issued pursuant to the
              ----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

          (b) Investment Representations. As a condition to the exercise of an
              --------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

     17.  Inability to Obtain Authority. The inability of the Company to obtain
          -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

     18.  Reservation of Shares. The Company, during the term of this Plan, will
          ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     19.  Shareholder Approval. The Plan shall be subject to approval by the
          --------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.Prepared by R.R. Donnelley Financial -- Amended and Restated 1996 Incentive Stock Plan

  
 EXHIBIT 10.1 
  
 E*TRADE GROUP, INC. 
 1996 STOCK INCENTIVE PLAN 
  
 AS AMENDED AND RESTATED THROUGH APRIL 4, 2002 
  
 ARTICLE ONE

  
 GENERAL PROVISIONS 
  
 All share numbers in this document reflect the 2-for-1 stock splits effected 
 on January 29, 1999 and May 21, 1999. 

 

	 	I.
	 
	PURPOSE OF THE PLAN 
 

  
 This
1996 Stock Incentive Plan is intended to promote the interests of E*TRADE Group, Inc., a Delaware corporation, by providing eligible persons 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. 
  
 Capitalized terms shall have the meanings
assigned to such terms in the attached Appendix. 
  

	 	II.
	 
	STRUCTURE OF THE PLAN 
 

  
 A.        The Plan shall be divided into five separate equity programs: 
  
 —        the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, 

 
 —        the Salary Investment Option Grant Program under which eligible associates may elect
to have a portion of their base salary invested each year in special option grants, 
  
 —        the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase
of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), 
  
 —        the Automatic Option Grant Program under which eligible non-associate Board members shall automatically receive option grants at periodic intervals to purchase shares of Common Stock,
and 
 

  
 —        the Director Fee Option Grant Program
under which non-associate Board members may elect to have all or any portion of their annual retainer fee otherwise payable in cash applied to a special option grant. 
  
 B.        The provisions of Articles One and Seven shall apply to all equity programs under the Plan and shall govern the interests of all persons
under the Plan. 
  

	 	III.
	 
	ADMINISTRATION OF THE PLAN 
 

  
 A.        The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. Administration of
the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board’s discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may
retain the power to administer those programs with respect to all such persons. The members of the Secondary Committee may be Board members who are Associates eligible to receive discretionary option grants or direct stock issuances under the Plan
or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any Parent or Subsidiary). 
  
 B.        Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at
any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. 
  
 C.        Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan)
to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any option or stock issuance thereunder. 
  
 D.        The Primary Committee shall have the sole and exclusive authority to determine which Section 16 Insiders and other highly compensated Associates shall be eligible for
participation in the Salary Investment Option Grant Program for one or more calendar years. However, all option grants under the Salary Investment Option Grant Program shall be made in accordance with the express terms of that program, and the
Primary Committee shall not exercise any discretionary functions with respect to the option grants made under that program. 
  
 E.        Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable 
 

 2 

 for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. 
  
 F.        Administration of the Automatic Option Grant and Director Fee Option Grant Programs shall be
self-executing in accordance with the terms of those programs, and no Plan Administrator shall exercise any discretionary functions with respect to any option grants or stock issuances made under those programs. 
  

	 	IV.
	 
	ELIGIBILITY 
 

  
 A.        The persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 
  
 1.        Associates, 
  
 2.        non-associate members of the Board or the board of directors of any Parent or Subsidiary, and 
  
 3.        consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 
  

B.        Only Employees who are Section 16 Insiders or other highly compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program. 
  
 C.        Each Plan Administrator shall, within the
scope of its administrative jurisdiction under the Plan, have full authority to determine, (i) with respect to the option grants under the Discretionary Option Grant Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the
vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive stock
issuances, the time or times when such issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration for such shares. 
  
 D.        The Plan Administrator shall have the absolute discretion either to grant options in accordance with
the Discretionary Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program. 
  
 E.        The individuals who shall be eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals serving as non-associate Board members on the
Underwriting Date who have not previously received a stock option grant from the Corporation, (ii) those individuals who first become non-associate Board members after the Underwriting Date, whether through appointment by the Board or election by
the Corporation’s stockholders, and (iii) those individuals who continue to serve as non-associate Board members 
 

 3 

 at one or more Annual Stockholders Meetings held after the Underwriting Date. A non-associate Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-associate Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to serve as a non-associate Board member. 
  
 F.        All non-associate Board members shall be eligible to participate in the Director Fee Option Grant Program. 
  

	 	V.
	 
	STOCK SUBJECT TO THE PLAN 
 

  
 A.        The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum
number of shares of Common Stock initially reserved for issuance over the term of the Plan shall not exceed 102,779,616 shares, except as adjusted from time to time as set forth in Section V(B) below. Such authorized share reserve is comprised of
(i) the shares subject to the outstanding options under the Predecessor Plan which have been incorporated into the Plan plus (ii) an additional increase of 16,000,000 shares authorized by the Board and subsequently approved by the stockholders prior
to the Section 12 Registration Date, plus (iii) an additional increase of 7,600,000 shares authorized by the Board on December 22, 1997, and approved by the stockholders at the 1998 Annual Meeting; plus (iv) an additional increase of 11,000,000
shares authorized by the Board on October 21, 1998, and approved by the stockholders at the 1999 Annual Meeting; plus (v) an additional increase of 11,900,000 shares authorized by the Board and approved by the stockholders on December 21, 1999; plus
(vi) an additional increase of 14,923,512 shares authorized by the Board on October 25, 2000 and approved by the stockholders at the 2000 Annual Meeting, plus (vii) an additional increase of 17,379,624 shares pursuant to the automatic increase
effected on January 2, 2002. 
  
 B.        The number of shares of Common Stock available
for issuance under the Plan shall automatically increase, on the first trading day of January of each calendar year in the four (4) calendar-year period beginning with the 2002 calendar year and continuing through the share increase effected for
calendar year 2005, by an amount equal to five percent (5%) of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year. 
  
 C.        No one person participating in the Plan may receive options, separately exercisable stock appreciation
rights and direct stock issuances for more than 6,000,000 shares of Common Stock in the aggregate per calendar year.             
  
 D.        Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent those options expire or terminate for any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the Corporation, at the
original issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of 
 

 4 

 Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock
issuances under the Plan. However, should the exercise price of an option under the 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 option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares
for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. 
  
 E.        If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under
the Plan, (ii) the number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under this Plan per calendar year, (iii) the number and/or class
of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-associate Board members, (iv) the number and/or class of securities and the exercise price per share in effect under each
outstanding option under the Plan and (v) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 
 

 5 

  
 ARTICLE TWO 
  
 DISCRETIONARY OPTION GRANT PROGRAM 
  

	 	I.
	 
	OPTION TERMS 
 

  
 Each option
shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in
addition, be subject to the provisions of the Plan applicable to such options. 
  
 A.        Exercise Price. 
  
 1.        The exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date. 
  
 2.        The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Seven and the documents evidencing the option, be payable in one or more of the forms specified below: 
  
 (i)         cash or check made payable to the Corporation, 
  
 (ii)        shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings
for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or 
  
 (iii)       to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete the sale. 
  
 Except to the extent such sale and
remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
 

 6 

 B.        Exercise and Term of Options.    Each option
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 documents evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date. 
  
 C.        Effect of Termination
of Service. 
  
 1.        The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death: 
  
 (i)        Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. 
  
 (ii)        Any option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by
the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. 
  
 (iii)       Should the Optionee’s Service be terminated for Misconduct, then all outstanding
options held by the Optionee shall terminate immediately and cease to be outstanding. 
  
 (iv)       During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of
the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option
has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 

 
 2.       The Plan Administrator shall have complete discretion, exercisable either at the time an option
is granted or at any time while the option remains outstanding, to: 
  
 (i)        extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the limited exercise period otherwise in effect for that
option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or 
 

 7 

  
 (ii)        permit the option to be
exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to
one or more additional installments in which the Optionee would have vested had the Optionee continued in Service. 
  
 D.        Stockholder Rights.    The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record of the purchased shares. 
  
 E.        Repurchase Rights.    The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. 

 
 F.        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, a
Non-Statutory Option 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. 
  

	 	II.
	 
	INCENTIVE OPTIONS 
 

  
 The terms
specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Seven shall be applicable to Incentive Options. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall not be subject to the terms of this Section II. 
  
 A.        Eligibility.    Incentive Options may only be granted to Associates. 
  
 B.        Dollar Limitation.    The aggregate Fair Market Value of the shares of Common Stock (determined as of
the respective date or dates of grant) for which one or more options granted to any Associate under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options
during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Associate holds two (2) or more such options which become exercisable for the 
 

 8 

 first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the
order in which such options are granted. 
  
 C.        10%
Stockholder.    If any Associate to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. 
  

	 	III.
	 
	CORPORATE TRANSACTION/CHANGE IN CONTROL 
 

  
 A.        In the event of any Corporate Transaction, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option
shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or (iii) the acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive. 
  
 B.        All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. 
  
 C.        Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or parent thereof). 
  
 D.        Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities
available for issuance over the remaining term of the Plan and (iii) the maximum number and/or class of securities for which any one person may be granted 
 

 9 

 stock options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year. 
  
 E.        The Plan Administrator shall have full power and authority to grant options under the Discretionary
Option Grant Program which will automatically accelerate in the event the Optionee’s Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those options are assumed or replaced and do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the expiration of the
option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights
with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate, and the shares subject to those terminated repurchase rights shall accordingly vest in full. 
  
 F.        The Plan Administrator shall have full power and authority to grant options under the Discretionary
Option Grant Program which will automatically accelerate in the event the Optionee’s Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control. Each option so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those terminated repurchase rights shall accordingly vest in full. 
  
 G.        The portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the
applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. 

 
 H.        The outstanding options 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. 
  

	 	IV.
	 
	[Intentionally Deleted] 
 

  
  

	 	V.
	 
	STOCK APPRECIATION RIGHTS 
 

  
 A.        The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights. 
 

 10 

  
 B.        The following terms shall govern the grant
and exercise of tandem stock appreciation rights: 
  
 (i)        One or
more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion
thereof) over (b) the aggregate exercise price payable for such shares. 
  
 (ii)       No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be
made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 
  
 (iii)      If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall
retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (a) five (5) business days after the receipt of the
rejection notice or (b) the last day on which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more than ten (10) years after the option grant
date. 
  
 C.        The following terms shall govern the grant and exercise of limited
stock appreciation rights: 
  
 (i)        One or more Section 16
Insiders may be granted limited stock appreciation rights with respect to their outstanding options. 
  
 (ii)       Upon the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have the unconditional right (exercisable for a thirty
(30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation, to the extent the option is at the time exercisable for vested shares of Common Stock. In return for the surrendered option, the Optionee shall
receive a cash distribution from the Corporation in an amount equal to the excess of (A) the Take-Over Price of the shares of Common Stock which are at the time vested under each surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the option surrender date. 
 

 11 

  
 (iii)        The Plan Administrator
shall, at the time the limited stock appreciation right is granted, pre-approve the subsequent exercise of that right in accordance with the terms and conditions of this Section V.C. Accordingly, no additional approval of the Plan Administrator or
the Board shall be required at the time of the actual option surrender and cash distribution. 
  
 (iv)        The balance of the option (if any) shall continue in full force and effect in accordance with the documents evidencing such option. 
 

 12 

  
 ARTICLE THREE 
  
 SALARY INVESTMENT OPTION GRANT PROGRAM 
  

	 	I.
	 
	OPTION GRANTS 
 

  
 The Primary
Committee shall have the sole and exclusive authority to determine the calendar year or years (if any) for which the Salary Investment Option Grant Program is to be in effect and to select the Section 16 Insiders and other highly compensated
Associates eligible to participate in the Salary Investment Option Grant Program for those calendar year or years. Each selected individual who elects to participate in the Salary Investment Option Grant Program must, prior to the start of each
calendar year of participation, file with the Plan Administrator (or its designate) an irrevocable authorization directing the Corporation to reduce his or her base salary for that calendar year by an amount not less than Ten Thousand Dollars
($10,000.00) nor more than Two Hundred Thousand Dollars ($200,000.00). The Primary Committee shall have complete discretion to determine whether to approve the filed authorization in whole or in part. To the extent the Primary Committee approves the
authorization, the individual who filed that authorization shall automatically be granted an option under the Salary Investment Grant Program on the first trading day in January of the calendar year for which the salary reduction is to be in effect.

  

	 	II.
	 
	OPTION TERMS 
 

  
 Each option
shall be a Non-Statutory Option evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. 
  
 A.        Exercise Price. 
  
 1.        The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date. 
  
 2.        The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise Date. 
  
 B.        Number of Option Shares.    The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down
to the nearest whole number): 
  
 X = A ÷ (B x 66-2/3%), where 
  
 X is the number of option shares, 
 

 13 

  
 A is the dollar amount of the approved reduction in the Optionee’s base salary for the
calendar year, and 
  
 B is the Fair Market Value per share of Common Stock on the option grant date. 
  
 C.        Exercise and Term of Options.    The option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the Optionee’s completion of each calendar month of Service in the calendar year for which the salary reduction is in effect. Each option shall have a maximum term of ten
(10) years measured from the option grant date. 
  
 D.        Effect of Termination
of Service.    Should the Optionee cease Service for any reason while holding one or more options under this Article Three, then each such option shall remain exercisable, for any or all of the shares for which the option
is exercisable at the time of such cessation of Service, until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Service. Should
the Optionee die while holding one or more options under this Article Three, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee’s cessation of Service (less any
shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws
of descent and distribution. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the
Optionee’s cessation of Service. However, the option shall, immediately upon the Optionee’s cessation of Service for any reason, terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the
option is not otherwise at that time exercisable. 
  

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

  
 A.        In the event of any Corporate Transaction while the Optionee remains in Service, each outstanding option held by such Optionee under this Salary Investment Option
Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such outstanding option shall be assumed by the successor corporation (or parent thereof) in the Corporate Transaction and shall
remain exercisable for the fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service.

  
 B.        In the event of a Change in Control while the Optionee remains in Service,
each outstanding option held by such Optionee under this Salary Investment Option Grant Program shall automatically accelerate so that each such option shall immediately become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to 
 

 14 

 such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the earlier
of (i) the expiration of the ten (10)-year option term, (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service or (iii) the surrender of the option in connection with a Hostile Take-Over.

  
 C.        Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each outstanding option granted him or her under the Salary Investment Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. The Primary Committee shall, at the time the option with such limited stock appreciation right is granted under the
Salary Investment Option Grant Program, pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, no further approval of the Primary Committee or the Board shall be required at the time of the
actual option surrender and cash distribution. 
  
 D.        The grant of options under the
Salary Investment Option Grant Program 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. 
  

	 	IV.
	 
	REMAINING TERMS 
 

  
 The
remaining terms of each option granted under the Salary Investment Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 
 

 15 

  
 ARTICLE FOUR 
  
 STOCK ISSUANCE PROGRAM 
  

	 	I.
	 
	STOCK ISSUANCE TERMS 
 

  
 Shares
of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms
specified below. 
  
 A.        Purchase Price. 
  
 1.        The purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the issuance date. 
  
 2.        Subject to the provisions of Section I of Article Seven, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance: 
  
 (i)         cash or check made payable to the Corporation, or 
  
 (ii)        past services rendered to the Corporation (or any Parent or Subsidiary). 
  
 B.        Vesting Provisions. 
  
 1.        Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more
installments over the Participant’s period of Service or upon attainment of specified performance objectives. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program,
namely: 
  
 (i)          the Service period to be completed by
the Participant or the performance objectives to be attained, 
  
 (ii)         the number of installments in which the shares are to vest, 
  
 (iii)        the interval or intervals (if any) which are to lapse between installments, and 
  
 (iv)        the effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon
the vesting 
 

 16 

 schedule, shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement. 
  
 2.        Any new, substituted or additional securities or other property (including money paid other than as a
regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of
Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 
  
 3.        The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the
Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 
  
 4.        Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall
have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money
indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to the
surrendered shares. 
  
 5.        The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the
Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives. 
  

	 	II.
	 
	CORPORATE TRANSACTION/CHANGE IN CONTROL 
 

  
 A.        All of the Corporation’s outstanding repurchase/cancellation rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent (i) those repurchase/cancellation rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) 
 

 17 

 such accelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement. 
  
 B.        The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time
while the Corporation’s repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date
of any Corporate Transaction in which those repurchase/cancellation rights are assigned to the successor corporation (or parent thereof). 
  
 C.        The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation’s
repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately
vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control.

  

	 	III
	 
	SHARE ESCROW/LEGENDS 
 

  
 Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares. 
 

 18 

 ARTICLE FIVE 
  
 AUTOMATIC OPTION GRANT PROGRAM 
  

	 	I.
	 
	OPTION TERMS 
 

  
 A.        Grant Dates.    Option grants shall be made on the dates specified below: 
  
 1.        Each individual serving as a non-associate Board member on the Underwriting Date shall automatically be granted at that time a
Non-Statutory Option to purchase 80,000 shares of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary and has not previously received a stock option grant from the Corporation.

  
 2.        Each individual who is first elected or appointed as a non-associate Board
member at any time after the Underwriting Date until April 19, 2000 shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase 80,000 shares of Common Stock, provided that individual has
not previously been in the employ of the Corporation or any Parent or Subsidiary. 
  
 3.        Each individual who is first elected or appointed as a non-associate Board member at any time after April 19, 2000 shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 50,000 shares of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary. 
  
 4.        On the date of each Annual Stockholders Meeting held after the Underwriting Date, each individual who is to continue to serve as an
Eligible Director, whether or not that individual is standing for re-election to the Board at that particular Annual Meeting, shall automatically be granted a Non-Statutory Option to purchase 20,000 shares of Common Stock, provided such individual
has served as a non-associate Board member for at least six (6) months. There shall be no limit on the number of such 20,000 share option grants any one Eligible Director may receive over his or her period of Board service, and non-associate Board
members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) or who have otherwise received a stock option grant from the Corporation prior to the Underwriting Date shall be eligible to receive one or more such
annual option grants over their period of continued Board service. 
  
 B.        Exercise Price. 
  
 1.        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 option grant date. 
  
 2.        The exercise price shall be payable in one or more of the alternative forms authorized under the
Discretionary Option Grant Program. Except to the extent 
 

 19 

  
 the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased
shares must be made on the Exercise Date. 
  
 C.        Option
Term.    Each option shall have a term of ten (10) years measured from the option grant date. 
  
 D.        Exercise and Vesting of Options.    Each option shall be immediately exercisable for any or all of the option shares. However, any shares purchased under
the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s cessation of Board service prior to vesting in those shares. Each initial 50,000-share or 80,000-share grant (as applicable,
in accordance with the provisions of Sections I.A.2 and I.A.3 of this Article Five) shall vest, and the Corporation’s repurchase right shall lapse, in a series of four (4) successive equal annual installments over the Optionee’s period of
continued service as a Board member, with the first such installment to vest upon the Optionee’s completion of one (1) year of Board service measured from the option grant date. Each annual 20,000-share grant shall vest, and the
Corporation’s repurchase right shall lapse, upon the Optionee’s completion of two (2) years of Board service measured from the option grant date. 
  
 E.        Termination of Board Service.    The following provisions shall govern the exercise of any options held by the Optionee at the time
the Optionee ceases to serve as a Board member: 
  
 (i)          The Optionee
(or, in the event of Optionee’s death, the personal representative of the Optionee’s estate or 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) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise each such option. 
  
 (ii)         During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for
which the option is exercisable at the time of the Optionee’s cessation of Board service. 
  
 (iii)        Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock. 
  

(iv)        In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon
the 
 

 20 

  
 Optionee’s cessation of Board service for any reason other than death or Permanent
Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 
  

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

  
 A.        In the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest
in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any
portion of those shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each automatic option grant shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof). 
  
 B.        In connection with any Change in
Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock. Each such option shall remain exercisable for such
fully-vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over. 
  
 C.        Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each automatic option held by him
or her. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the
Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. Stockholder
approval of the Plan, as amended and restated on December 24, 1998, shall constitute pre-approval of the surrender of each automatic option in accordance with the terms and provisions of this Section II.C. No additional approval of any Plan
Administrator or the consent of the Board shall be required in connection with such option surrender and cash distribution. 
  
 D.        Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. 
 

 21 

  
 E.        The grant of options under the Automatic
Option Grant Program 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. 
  

	 	III.
	 
	REMAINING TERMS 
 

  
 The
remaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 
 

 22 

  
 ARTICLE SIX 
  
 DIRECTOR FEE OPTION GRANT PROGRAM 
  

	 	I.
	 
	OPTION GRANTS 
 

  
 Each
non-associate Board member may elect to apply all or any portion of the annual retainer fee otherwise payable in cash for his or her service on the Board to the acquisition of a special option grant under this Director Fee Option Grant Program. Such
election must be filed with the Corporation’s Chief Financial Officer prior to first day of the calendar year for which the annual retainer fee which is the subject of that election is otherwise payable. Each non-associate Board member who
files such a timely election shall automatically be granted an option under this Director Fee Option Grant Program on the first trading day in January in the calendar year for which the annual retainer fee which is the subject of that election would
otherwise be payable in cash. 
  

	 	II.
	 
	OPTION TERMS 
 

  
 Each option
shall be a Non-Statutory Option governed by the terms and conditions specified below. 
  
 A.        Exercise Price. 
  
 1.        The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date. 
  
 2.        The exercise price shall become immediately due upon exercise of the option and shall be payable in
one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date. 
  
 B.        Number of Option
Shares.    The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number): 
  

X = A ÷ (B x 66-2/3%), where 
  
 X is the number of option shares, 
  
 A is the portion of the annual retainer fee
subject to the non-associate Board member’s election, and 
  
 B is the Fair Market Value per share of Common
Stock on the option grant date. 
 

 23 

  
 C.        Exercise and Term of
Options.    The option shall become exercisable in a series of twelve (12) equal monthly installments upon the Optionee’s completion of each month of Board service over the twelve (12)-month period measured from the
grant date. Each option shall have a maximum term of ten (10) years measured from the option grant date. 
  
 D.        Termination of Board Service.    Should the Optionee cease Board service for any reason (other than death or Permanent Disability) while holding one or more
options under this Director Fee Option Grant Program, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Board service, until the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. However, each option held by the Optionee under this Director Fee Option Grant Program at
the time of his or her cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable. 
  
 E.        Death or Permanent Disability.    Should the Optionee’s service
as a Board member cease by reason of death or Permanent Disability, then each option held by such Optionee under this Director Fee Option Grant Program shall immediately become exercisable for all the shares of Common Stock at the time subject to
that option, and the option may be exercised for any or all of those shares as fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the
date of such cessation of Board service. 
  
 Should the Optionee die after cessation of Board service but while holding one or more
options under this Director Fee Option Grant Program, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee’s cessation of Board service (less any shares
subsequently purchased by Optionee prior to death), by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of
descent and distribution. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the
Optionee’s cessation of Board service. 
  

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

  
 A.        In the event of any Corporate Transaction while the Optionee remains a Board member, each outstanding option held by such Optionee under this Director Fee Option Grant
Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such outstanding option shall be assumed by the successor corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the earlier of (i) the expiration of the 
 

 24 

  
 ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the
Optionee’s cessation of Board service. 
  
 B.        In the event of a Change in
Control while the Optionee remains in Service, each outstanding option held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall immediately 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 any or all of those shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the earlier or (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service. 
  
 C.        Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation
each outstanding option granted him or her under the Director Fee Option Grant Program. 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 each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within
five (5) days following the surrender of the option to the Corporation. No approval or consent of the Board or any Plan Administrator shall be required in connection with such option surrender and cash distribution. 
  
 D.        The grant of options under the Director Fee Option Grant Program 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. 
  

	 	IV.
	 
	REMAINING TERMS 
 

  
 The
remaining terms of each option granted under this Director Fee Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 
 

 25 

  
 ARTICLE SEVEN 
  
 MISCELLANEOUS 
  

	 	I.
	 
	FINANCING 
 

  
 The Plan
Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest
bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the
maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred
by the Optionee or the Participant in connection with the option exercise or share purchase. 
  

	 	II.
	 
	TAX WITHHOLDING 
 

  
 A.        The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares 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, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan (other than the options granted or the
shares issued under the Automatic Option Grant or Director Fee Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such holders in connection with the exercise of their options
or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats: 
  
 Stock Withholding:    The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of
those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder. 
  
 Stock Delivery:    The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder.

 

 26 

  

	 	III.
	 
	EFFECTIVE DATE AND TERM OF THE PLAN 
 

  
 A.        The Plan was initially adopted by the Board on May 31, 1996, and was subsequently approved by the stockholders. The Discretionary Option Grant and the Stock Issuance Programs became
effective immediately upon the Plan Effective Date. 
  
 B.        The Automatic Option
Grant Program became effective on the Underwriting Date. The Plan was subsequently amended by the Board on December 22, 1997 to (i) increase the maximum number of shares of Common Stock authorized for issuance under the Plan by 7,600,000 shares,
(ii) allow individuals who administer the Plan to be included in the group of non-associate Board members eligible to receive option grants and direct stock issuances under the Discretionary Option Grant and Stock Issuance Programs, (iii) remove
certain restrictions on the eligibility of non-associate Board members to serve as Plan Administrator, and (iv) effect a series of technical changes to the provisions of the Plan (including stockholder approval requirements, certain holding period
restrictions, and the frequency of which the Automatic Option Grant Program may be amended) in order to take advantage of the November 1996 amendments to Rule 16b-3 of the 1934 Act which exempts certain officer and director transactions under the
Plan from the short-swing liability provisions of the federal securities laws (“December 1997 Amendment”). The December 1997 Amendment was approved by the stockholders at the 1998 Annual Meeting. 
  
 C.        On October 21, 1998, the Board amended and restated the Plan to increase the maximum number of shares
of Common Stock authorized for issuance under the Plan by 11,000,000 shares, to 58,576,480 shares of Common Stock. On December 24, 1998 the Board again amended and restated the Plan to incorporate the Salary Investment Option Grant and Director Fee
Option Grant Programs. Both Amendments were approved by the stockholders at the 1999 Annual Meeting. The Salary Investment Option Grant Program and Director Fee Option Program shall not be implemented until such time as the Primary Committee may
deem appropriate. The option grants made prior to the October 1998 Amendment shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options or issuances and nothing in the October 1998
Amendment shall be deemed to modify or in any away affect those outstanding options or issuances. 
  
 D.        On December 21, 1999, the Board amended and restated the Plan to increase the maximum number of shares of Common Stock authorized for issuance under the Plan by 11,900,000 shares, to
70,476,480 shares of Common Stock. The Amendment was concurrently approved by the stockholders on December 21, 1999. The option grants made prior to the December 1999 Amendment shall remain outstanding in accordance with the terms and conditions of
the respective instruments evidencing those options or issuances and nothing in the December 1999 Amendment shall be deemed to modify or in any away affect those outstanding options or issuances. 
  

E.        On April 19, 2000, the Board amended and restated the Plan to reduce the number of shares granted upon the initial grant to new
non-associate Board members under Article Five of the Plan from 80,000 shares of Common Stock to 50,000 shares of Common Stock. 
 

 27 

  
 F.        On October 25, 2000, the Board amended and
restated the Plan to (i) increase the maximum number of shares of Common Stock authorized for issuance under the Plan by 14,923,512 shares, subject to stockholder approval at the 2000 Annual Meeting, (ii) to provide that the number of shares of
Common Stock available for issuance under the Plan shall automatically increase, on the first trading day of January of each calendar year in the four (4) calendar-year period beginning with the 2002 calendar year and continuing through the share
increase effected for calendar year 2005, by an amount equal to five percent (5%) of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, subject to stockholder
approval at the 2000 Annual Meeting, and (iii) to increase the maximum number of shares which any one person participating in the Plan may receive during any one calendar year in options, separately exercisable stock appreciation rights and direct
stock issuances to 6,000,000 shares, subject to stockholder approval at the 2000 Annual Meeting. Each Amendment was approved by the shareholders at the 2000 Annual Meeting on December 21, 2000. The option grants made prior to the October 2000
Amendment shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options or issuances and nothing in the October 2000 Amendment shall be deemed to modify or in any away affect those
outstanding options or issuances. 
  
 G.        On April 4, 2002, the Board amended and
restated the Plan to eliminate the authority of the Plan Administrator to cancel and regrant options under then Article Two, Section IV of the Plan. All cancelled and regranted options made prior to the April 2002 Amendment shall remain outstanding
in accordance with the terms and conditions of the respective instruments evidencing those options or issuances and nothing in the April 2002 Amendment shall be deemed to modify or in any away affect those outstanding options or issuances. Subject
to the foregoing limitations, the Plan Administrator may make option grants under the Plan at any time before the date fixed herein for the termination of the Plan. 
  
 H.        The Plan shall serve as the successor to the Predecessor Plan, and no further option grants or direct stock issuances shall be made
under the Predecessor Plan after the Section 12(g) Registration Date. All options outstanding under the Predecessor Plan on the Section 12(g) Registration Date shall be incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 
  
 I.        One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Corporate Transactions and Changes in Control, may,
in the Plan Administrator’s discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such provisions. 
  
 J.        The Plan shall terminate upon the earliest of (i) May 30, 2006, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Corporate 
 

 28 

 Transaction. Upon such plan termination, all outstanding option grants and unvested stock issuances shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or issuances. 
  

	 	IV.
	 
	AMENDMENT OF THE PLAN 
 

  
 A.        The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the
rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations. 
  
 B.        Options to
purchase shares of Common Stock may be granted under the Discretionary Option Grant and Salary Investment Option Grant Programs and shares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. 
  

	 	V.
	 
	USE OF PROCEEDS 
 

  
 Any cash
proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. 
  

	 	VI.
	 
	REGULATORY APPROVALS 
 

  
 A.        The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the
Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common 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 the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable 
 

 29 

 listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 

 

	 	VII.
	 
	NO EMPLOYMENT/SERVICE RIGHTS 
 

  
 Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause. 

 30 

  
 APPENDIX 
  
 The following definitions shall be in effect under the Plan: 
  
 A.        Associate shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both
the work to be performed and the manner and method of performance. 
  
 B.        Automatic Option Grant Program shall mean the automatic option grant program in effect under the Plan. 
  
 C.        Board shall mean the Corporation’s Board of Directors. 
  
 D.        Change in Control shall mean a change in ownership or control of the Corporation effected through either of the following
transactions: 
  
 (i)        the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders
which the Board does not recommend such stockholders to accept, or 
  
 (ii)        a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least
a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. 
  
 E.        Code shall mean the Internal Revenue Code of 1986, as amended. 
  
 F.        Common Stock shall mean the Corporation’s common stock. 
 

 A-1 

 G.        Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party: 
  
 (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 the persons holding those securities immediately prior to such transaction, or 
 (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. 
  
 H.        Corporation shall mean E*TRADE Group, Inc. and any corporate successor to all or
substantially all of the assets or voting stock of E*TRADE Group, Inc. which shall by appropriate action adopt the Plan. 
  
 I.        Discretionary Option Grant Program shall mean the discretionary option grant program in effect under the Plan. 
  
 J.        Director Fee Option Grant Program shall mean the special stock option grant in effect for non-associate Board members
under Article Six of the Plan. 
  
 K.        Eligible Director shall mean a
non-associate Board member eligible to participate in the Automatic Option Grant Program in accordance with the eligibility provisions of Article One. 
  
 L.        Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise. 
  
 M.        Fair Market Value per share of Common Stock on any relevant date shall be determined in
accordance with the following provisions: 
  
 (i)        If the Common
Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the average of the high and low selling prices per share of Common Stock on the date in question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor system. If there is no average of the high and low selling prices per share for the Common Stock on the date in question, then the Fair Market Value shall be the average of the high
and low selling prices per share on the last preceding date for which such quotation exists. 
  
 (ii)        If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the average of the high and low selling prices per 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 average of the high and low
selling 
 

 A-2 

 prices per share for the Common Stock on the date in question, then the Fair Market Value shall be the average of the high and low
selling prices per share on the last preceding date for which such quotation exists. 
  
 (iii)        For purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is to be sold in the
initial public offering pursuant to the Underwriting Agreement. 
  
 (iv)        For purposes of any option grants made prior to the Underwriting Date, the Fair Market Value shall be determined by the Plan Administrator, after taking into account such factors as it
deems appropriate. 
  
 N.        Hostile Take-Over shall mean a change
in ownership of the Corporation effected through the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board does not recommend such stockholders to accept. 
  
 O.        Incentive Option shall mean an option which satisfies the requirements of Code Section 422. 
  

P.        Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of:

  
 (i)        such individual’s involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or 
  
 (ii)        such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe benefits and participation in any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of
employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent. 
  
 Q.        Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or
Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of any 
 

 A-3 

 Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary). 
  

R.        1934 Act shall mean the Securities Exchange Act of 1934, as amended. 
  
 S.        Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422. 
  
 T.        Optionee shall mean
any person to whom an option is granted under the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option Grant or Director Fee Program. 
  
 U.        Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each
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. 
  
 V.        Participant shall mean any person who is issued
shares of Common Stock under the Stock Issuance Program. 
  
 W.        Permanent Disability or Permanently Disabled shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Option Grant and Director Fee Option Grant Programs,
Permanent Disability or Permanently Disabled shall mean the inability of the non-associate Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more. 
  
 X.        Plan shall mean the Corporation’s 1996 Stock Incentive Plan, as set forth in this document. 
  
 Y.        Plan Administrator shall mean the particular entity, whether the Primary Committee, the Board or the Secondary
Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction. 
  
 Z.        Plan Effective Date shall mean May 31, 1996, the date on which the Plan was adopted by the Board. 
  
 AA.     Predecessor Plan shall mean the Corporation’s pre-existing 1993 Stock Option Plan (which is the successor to the 1983 Employee
Incentive Stock Option Plan) in effect immediately prior to the Plan Effective Date hereunder. 
 

 A-4 

  
 BB.     Primary Committee shall mean the
committee of two (2) or more non-associate Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders and to administer the Salary Investment Option Grant Program
solely with respect to the selection of the eligible individuals who may participate in such program. 
  
 CC.     Salary Investment Option Grant Program shall mean the salary investment option grant program in effect under the Plan. 
  
 DD.     Secondary Committee shall mean a committee of one (1) or more Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders. 
  
 EE.     Section 12 Registration Date shall mean the date on which the Common Stock was first registered under Section 12(g) of the 1934 Act. 
  

FF.     Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of
Section 16 of the 1934 Act. 
  
 GG.     Service shall mean the performance of
services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Associate, a non-associate member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance. 
  
 HH.     Stock
Exchange shall mean either the American Stock Exchange or the New York Stock Exchange. 
  
 II.        Stock Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock
Issuance Program. 
  
 JJ.       Stock Issuance Program shall mean the stock
issuance program in effect under the Plan. 
  
 KK.     Subsidiary shall mean any
corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each 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. 
  
 LL.     Take-Over Price shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile
Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i)
price per share. 
 

 A-5 

  
 MM.     Taxes shall mean the Federal, state and
local income and employment tax liabilities incurred by the holder of Non-Statutory Options or unvested shares of Common Stock in connection with the exercise of those options or the vesting of those shares. 
  
 NN.       10% Stockholder shall mean the owner of stock (as determined under Code Section
424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). 
  
 OO.      Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters who managed the initial public offering of the
Common Stock. 
  
 PP.       Underwriting Date shall mean August 15, 1996,
which is the date on which the Underwriting Agreement was executed and priced in connection with an initial public offering of the Common Stock. 
 

 A-6

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