Document:

Stater Bros.Holding Inc., Exhibit 10.33

 

Exhibit 10.33

STATER BROS. MARKETS

STATER BROS. HOLDINGS INC.

FOURTH AMENDMENT

TO CREDIT AGREEMENT

     This FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Fourth Amendment”) is
dated as of February 4, 2003 entered into by and among STATER BROS. MARKETS, a
California corporation (“Borrower”), STATER BROS. HOLDINGS, INC., a Delaware
corporation (“Holdings”), the financial institutions listed on the signature
pages hereof (“Lenders”) and BANK OF AMERICA, N.A., as administrative agent for
Lenders (“Administrative Agent”), and Issuing Lender, and, for purposes of
Section 3 hereof, the Credit Support Party (as defined in Section 3 hereof)
listed on the signature pages hereof, and is made with reference to that
certain Credit Agreement dated as of August 6, 1999, as amended by the First
Amendment dated as of September 15, 2000, the Second Amendment dated as of
December 13, 2001 and the Third Amendment dated as of January 18, 2002 (as
amended, modified or supplemented from time to time, the “Credit Agreement”),
by and among Borrower, Holdings, Lenders, Administrative Agent, and Issuing
Lender. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement.

RECITALS

     WHEREAS, Borrower, Holdings, Lenders and Issuing Lender desire to amend
the Credit Agreement as set forth below;

     NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

	 	Section 1. 	 	AMENDMENTS TO THE CREDIT AGREEMENT
	 
	 	1.1	 	Amendments to Section 1: Definitions and Accounting Terms.

     A.     Subsection 1.01 of the Credit Agreement is hereby amended by deleting
the definitions of “Applicable Amount,” “Commitments,” “Letter of Credit
Commitment,” “Letter of Credit Expiration Date,” “Maturity Date,” and “Minimum
Amount” therefrom in their entirety and substituting the following therefor:

     “Applicable Amount” means a per annum rate equal to:

     (a)  with respect to Base Rate Loans, 1.00 percent;

     (b)  with respect to Offshore Rate Loans, 1.75 percent;

     (c)  with respect to the Commitment fee, 0.25 percent; and

     (d)  with respect to standby Letters of Credit, 1.25 percent.

     “Commitments” means, as to each Lender, the Revolving Loan Commitment of
such Lender, and the “combined Commitments” means such commitments collectively
of all Lenders in the aggregate.

 

 

     “Letter of Credit Sublimit” means an amount equal to the lesser of (a) the
Revolving Loan Commitment and (b) $50,000,000. The Letter of Credit Sublimit
is part of, and not in addition to, the Revolving Loan Commitment.

     “Letter of Credit Expiration Date” means the Maturity Date.

     “Maturity Date” means March 31, 2005, as it may be earlier terminated in
accordance with the terms hereof.

     “Minimum Amount” means, with respect to each of the following actions, the
minimum amount and any multiples in excess thereof set forth opposite such
action:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Multiples in
	Type of Action	 	Minimum Amount	 	excess thereof
	
	 	
	 	

	Borrowing of, prepayment of,
or Conversion into, Base Rate Loans
	 	$	100,000	 	 	$	500,000	 
	Borrowing of, prepayment of,
Continuation of, or Conversion
into, Offshore Rate Loans
	 	$	5,000,000	 	 	$	1,000,000	 
	Reduction in Commitments
and Letter of Credit Sublimit
	 	$	1,000,000	 	 	$	500,000	 
	Assignments
	 	$	1,000,000	 	 	 	N.A.”	 

     B.     Subsection 1.01 of the Credit Agreement is hereby further amended by
deleting the definitions of “Revolving Loan Commitment L/C Sublimit” and
“Letter of Credit Commitment Termination Date.”

	 	1.2	 	Amendments to Section 2: The Commitments and Extensions of Credit.

     A.     Subsection 2.04(a) of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and substituting the following
therefor:

	 	2.04	 	“Letters of Credit.

		
	 	     (a) The Letter of Credit Sublimit. Subject to the terms and
conditions hereof, at any time and from time to time from the Closing
Date through the Letter of Credit Expiration Date, Issuing Lender shall
take such Letter of Credit Actions as Borrower may request; provided,
however, that the Issuing Lender shall not be obligated to take any
Letter of Credit Action with respect to any Letter of Credit, and no
Lender shall be obligated to participate in any Letter of Credit if as of
the date of such Letter of Credit Action, the aggregate outstanding
Letter of Credit Usage would exceed the Letter of Credit Sublimit or the
aggregate outstanding principal amount of all Loans plus the Letter of
Credit Usage would exceed the combined Commitments. Each Letter of
Credit Action shall be in a form acceptable to Issuing Lender and shall
not violate any policies 

2

 

		
	 	of Issuing Lender. Standby Letters of Credit
shall be issued only for the purpose of (i) securing workers’
compensation and other insurance coverages for Borrower and its
Subsidiaries in an amount not at any time to exceed the minimum amount
required by Holdings’, Borrower’s, or any of Borrower’s Subsidiaries’
insurance carriers or applicable regulatory agencies and (ii) supporting
obligations of Borrower and its Subsidiaries incurred in the construction of stores and related
shopping centers and (iii) securing payment of monetary losses suffered
by Texas Eastern in the event Texas Eastern is required to make payments
under the Texas Eastern Guaranty with respect to the Jaclane Leases and
the Carlane Leases to the extent (and only to the extent) that such
issuance is required by Texas Eastern; provided that such standby Letters
of Credit shall not be issued prior to (a) the date on which all of the
amounts held in escrow under that certain escrow agreement dated
September 19, 1985 with First Interstate Bank of California as escrow
agent (now Wells Fargo Bank) (which amount was approximately $12,911,000
as of June 25, 2000) shall have been released from escrow and returned to
Borrower, (b) the date on which all of the guaranties of Texas Eastern
guarantying the obligations of Borrower and its Subsidiaries under leases
pursuant to which Borrower or one of its Subsidiaries is the lessee
(other than the Jaclane Leases and the Carlane Leases) shall have been
released, (c) or concurrently with the occurrence of the Closing (as
defined in the Redemption Agreement dated as of November 27, 2000 between
Borrower and Texas Eastern), and (d) the date on which Borrower shall
have delivered a certificate certifying that the conditions set forth in
clauses (a), (b) and (c) have been satisfied. Commercial Letters of
Credit shall only be issued for the purpose of supporting the purchase of
inventory by Borrower and its Subsidiaries. The obligation of the
Issuing Lender to take any Letter of Credit Action and the obligation of
the Lenders to participate in the Letter of Credit subject to such Letter
of Credit Action shall be subject to the following limitations:

		
	 	     (i) The Letter of Credit Usage in respect of standby Letters
of Credit issued to support obligations of Borrower and its
Subsidiaries incurred in the construction of stores and related
shopping centers shall not exceed $2,000,000.

		
	 	     (ii) The Letter of Credit Usage in respect of all Letters of
Credit other than Permitted Workers Compensation Letters of Credit
and Permitted Guaranty Lease Repayment Letters of Credit shall not
exceed $5,000,000.

		
	 	     (iii) The Outstanding Obligations on the last day of each
fiscal month shall not exceed an amount equal to 45% of the
aggregate book value of the inventory of Borrower and its
Subsidiaries on such day, measured on a consolidated basis, using
the first-in, first out method, in accordance with GAAP.

		
	 	     (iv) No standby Letter of Credit shall expire more than 12
months after the issuance thereof. No commercial Letter of Credit
shall expire more than 180 days after the issuance thereof. No
Letter of Credit shall expire after the Letter of Credit Expiration
Date. If any Letter of Credit Usage remains outstanding after the
Letter of Credit Expiration Date, Borrower shall, not later than
the Letter of Credit Expiration Date, deposit cash in an amount
equal to such Letter of Credit Usage in a Letter of Credit Cash
Collateral Account.”

3

 

		
	 	     (v) The Letter of Credit Usage in respect of all Permitted
Guaranty Lease Repayment Letters of Credit shall not exceed
$7,500,000.”

     B.     Section 2.04(j) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and substituting the following therefor:

		
	 	“(j) Standby Letter of Credit Fee. On each Quarterly Payment Date
and on the Letter of Credit Expiration Date, Borrower shall pay to
Administrative Agent in arrears, for the account of each Lender in
accordance with its Pro Rata Share, a Letter of Credit fee equal to
the Applicable Amount for Letters of Credit times the actual daily
maximum amount available to be drawn under each standby Letter of
Credit since the later of the Closing Date and the previous
Quarterly Payment Date.”

     C.     Subsection 2.05(c) of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and substituting the following
therefor:

		
	 	“(c) If for any reason the Letter of Credit Usage at any time
exceeds the Letter of Credit Sublimit as in effect or as reduced,
or gives effect to the limitations set forth in Section 2.04(a), or
because of any other limitation set forth in this Agreement or
otherwise, Borrower shall immediately deposit cash in a Letter of
Credit Cash Collateral Account in an aggregate amount equal to such
excess.”

     D.     Section 2.06 of the Credit Agreement is hereby amended by deleting such
section in its entirety and substituting the following therefor:

		
	 	“2.06 Reduction or Termination of Commitments. Upon Requisite
Notice to Administrative Agent not later than the Requisite Time
therefor, Borrower may at any time and from time to time, without
premium or penalty, permanently and irrevocably (a) reduce the
Revolving Loan Commitments or the Letter of Credit Sublimit in a
Minimum Amount therefor to an amount not less than the aggregate
outstanding principal amount of all Loans and the Letter of Credit
Usage, with respect to a reduction of Revolving Loan Commitments
and to an amount not less than the Letter of Credit Usage at such
time with respect to a reduction in the Letter of Credit Sublimit,
or (b) terminate the Revolving Loan Commitments. Any such
reduction or termination shall be accompanied by payment of all
accrued and unpaid commitment fees with respect to the portion of
the Revolving Loan Commitments being reduced or terminated.
Administrative Agent shall promptly notify Lenders of any such
request for reduction or termination of the Revolving Loan
Commitments and the Letter of Credit Sublimit. Each Lender’s
Revolving Loan Commitment and Letter of Credit Sublimit shall be
reduced by an amount equal to such Lender’s Pro Rata Share times
the amount of such reduction.”

     E.     Section 2.08(a) of the Credit Agreement is hereby amended by deleting
the first sentence in such subsection in its entirety and substituting the
following therefor:

		
	 	“Borrower shall pay to Administrative Agent for the account of each
Lender pro rata according to its Pro Rata Share, a Commitment fee
equal to the Applicable 

4

 

		
	 	Amount times the actual daily amount by
which the combined Revolving Loan Commitments exceed the sum of the
aggregate principal amount of outstanding Loans plus the Letter of
Credit Usage in respect of standby Letters of Credit.”

	 	1.4	 	Substitution of Schedule.

     Schedule 2.01 to the Credit Agreement is hereby amended by deleting it in
its entirety and substituting in place thereof Schedule 2.01 in the form of
Annex I to this Amendment.

	 	Section 2. 	 	REPRESENTATIONS AND WARRANTIES

     In order to induce Lenders and Issuing Lender to enter into this Fourth
Amendment and to amend the Credit Agreement in the manner provided herein, each
of Borrower and Holdings represents and warrants to each Lender and Issuing
Lender that the following statements are true, correct and complete:

     A.     Existence and Qualification; Power; Compliance with Laws. Each
Borrower Party is a corporation duly organized or formed, validly existing and
in good standing under the Laws of the state of its incorporation or
organization, has the power and authority and the legal right to own and
operate its properties, to lease the properties it operates and to conduct its
business, is duly qualified and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, and is in compliance with
all Laws except to the extent that noncompliance does not have a Material
Adverse Effect.

     B.     Power; Authorization; Enforceable Obligations. Each Borrower Party has
the power and authority and the legal right to make, deliver and perform this
Fourth Amendment and, in the case of Holdings and Borrower, to perform its
obligations under the Credit Agreement as amended by this Fourth Amendment (the
“Amended Agreement”), and has taken all necessary action to authorize the
execution, delivery and performance of this Fourth Amendment and to authorize
the performance under the Amended Agreement. No consent or authorization of,
filing with, or other act by or in respect of any Governmental Authority, is
required in connection with the execution, delivery, performance, validity or
enforceability of this Fourth Amendment or the Amended Agreement. This Fourth
Amendment has been duly executed and delivered by each Borrower Party, and this
Fourth Amendment and the Amended Agreement constitute a legal, valid and
binding obligation of each Borrower Party party thereto, enforceable against
each Borrower Party party thereto in accordance with their respective terms.

     C.     No Legal Bar. The execution, delivery, and performance by each
Borrower Party of this Fourth Amendment and the performance by each Borrower
Party party thereto of the Amended Agreement and compliance with the provisions
hereof and thereof have been duly authorized by all requisite action on the
part of such Borrower Party and do not and will not (a) violate or conflict
with, or result in a breach of, or require any consent under (i) any
Organization Documents of such Borrower Party or any of its Subsidiaries, (ii)
any applicable Laws, rules, or regulations or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator, or (iii) any Contractual
Obligation of such Borrower Party or any of its Subsidiaries or by which any of
them or any of their property is bound or subject, (b) constitute a

5

 

default
under any such agreement or instrument, (c) result in, or require, the creation
or imposition of any Lien on any of the properties of such Borrower Party or
any of its Subsidiaries, or (d) require any approval of stockholders or any
approval or consent of any Person of any Contractual Obligation of any Borrower
Party.

     D.     Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects
on and as of the date of this Fourth Amendment to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.

     E.     Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Fourth
Amendment that would constitute an Event of Default or a Default.

	 	Section 3. 	 	ACKNOWLEDGEMENT AND CONSENT

     Development is a party to the Development Guaranty, as amended, pursuant
to which Development has guaranteed the Obligations. Development is referred
to herein as the “Credit Support Party,” and the Development Guaranty is
referred to herein as the “Credit Support Document”.

     The Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Fourth Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Fourth Amendment. The Credit Support Party hereby confirms that the Credit
Support Document to which it is a party or otherwise bound will continue to
guaranty, to the fullest extent possible the payment and performance of all
Guarantied Obligations (as such term is defined in the Credit Support
Document), including without limitation the payment and performance of all such
Guarantied Obligations in respect of the Obligations of Borrower and Holdings
now or hereafter existing under or in respect of the Amended Agreement and the
Notes defined therein.

     The Credit Support Party acknowledges and agrees that the Credit Support
Document to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Fourth Amendment. The Credit Support Party represents
and warrants that all representations and warranties contained in the Amended
Agreement and the Credit Support Document to which it is a party or otherwise
bound are true, correct and complete in all material respects on and as of the
date of this Fourth Amendment to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.

     The Credit Support Party acknowledges and agrees that the Credit Support
Party is not required by the terms of the Credit Agreement or any other Loan
Document to consent to the amendments to the Credit Agreement effected pursuant
to this Fourth Amendment and nothing in the Credit Agreement, this Fourth
Amendment or any other Loan Document shall be

6

 

deemed to require the consent of
the Credit Support Party to any future amendments to the Credit Agreement.

	 	Section 4. 	 	MISCELLANEOUS

     A.     Reference to and Effect on the Credit Agreement and the Other Loan Documents.

		
	 	(i) On and after the date of this Fourth Amendment, each reference
in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”,
“herein” or words of like import referring to the Credit Agreement,
and each reference in the other Loan Documents to the “Credit
Agreement”, “thereunder”, “thereof” or words of like import
referring to the Credit Agreement shall mean and be a reference to
the Amended Agreement.
	 
	 	(ii) Except as specifically amended by this Fourth Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
	 
	 	(iii) The execution, delivery and performance of this Fourth
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a waiver of
any right, power or remedy of Administrative Agent, any Lender or
the Issuing Lender under, the Credit Agreement or any of the other
Loan Documents.

     B.     Fees and Expenses. Borrower acknowledges that all costs, fees and
expenses as described in subsection 11.03 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this Fourth Amendment and
the documents and transactions contemplated hereby shall be for the account of
Borrower.

     C.     Headings. Section and subsection headings in this Fourth Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Fourth Amendment for any other purpose or be given any substantive
effect.

     D.     Applicable Law. THIS FOURTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
(INCLUDING WITHOUT LIMITATION SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF
CALIFORNIA), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     E.     Counterparts; Effectiveness. This Fourth Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Fourth Amendment shall
become effective upon the execution of a counterpart hereof by Borrower,
Holdings, Requisite Lenders and the Credit Support Party, payment by Borrower
to Administrative Agent of a renewal fee in the amount of

7

 

$75,000, and receipt
by Borrower and Administrative Agent of written or telephonic notification of
such execution and authorization of delivery thereof.

[Remainder of page intentionally left blank]

8

 

     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

	 	 	 
	 	 	
STATER BROS. MARKETS
	 
	 	 	 
	 
	 	 	
By:________________________________________
	 
	 	 	
Title:_______________________________________
	 
	 	 	 
	 
	 	 	
STATER BROS. HOLDINGS, INC.
	 
	 	 	 
	 
	 	 	
By:________________________________________
	 
	 	 	
Title:_______________________________________
	 
	 	 	 
	 
	 	 	
STATER BROS. DEVELOPMENT, INC. (for purposes of Section 3), as a Credit Support Party
	 
	 	 	 
	 
	 	 	
By:________________________________________
	 
	 	 	
Title:_______________________________________

S-1

 

	 	 	 
	 	 	
BANK OF AMERICA, N.A., as Administrative
Agent
	 	 	 
	 
	 	 	
By:________________________________________
	 
	 	 	
Title:_______________________________________
	 	 	 
	 
	 
	 	 	
BANK OF AMERICA, N.A., as Issuing Lender
and a Lender
	 
	 	 	 
	 	 	
By:________________________________________
	 
	 	 	
Title:_______________________________________

S-2

 

SCHEDULE 2.01

ANNEX I

	 	 	 	 	 	 	 	 	 	 
	 	 	 	Revolving Loan	 	 	 	 
	Lender	 	Commitment	 	Pro Rata Share
	
	 	
	 	

	BANK OF AMERICA, N.A
	 	 	 	 	 	 	 	 
	 	Total
	 	$	75,000,000.00	 	 	 	100.000000000	%

Schedule 2.01-1<PAGE>
                                                                 EXHIBIT 10.6(a)

                             SYNAPTICS INCORPORATED

                       -----------------------------------

                              AMENDED AND RESTATED
                        2001 INCENTIVE COMPENSATION PLAN
                     (AS AMENDED THROUGH DECEMBER 10, 2002)

<PAGE>

                             SYNAPTICS, INCORPORATED

                          -----------------------------

                              AMENDED AND RESTATED
                        2001 INCENTIVE COMPENSATION PLAN
                     (AS AMENDED THROUGH DECEMBER 10, 2002)

<TABLE>
<S>                                                                                                     <C>
1.       Purpose....................................................................................     1
2.       Definitions................................................................................     1
3.       Administration.............................................................................     5
         (a)      Authority of the Committee........................................................     5
         (b)      Manner of Exercise of Committee Authority.........................................     6
         (c)      Limitation of Liability...........................................................     6
4.       Stock Subject to Plan......................................................................     6
         (a)      Limitation on Overall Number of Shares Subject to Awards..........................     6
         (b)      Limitation on Number of Incentive Stock Option Shares.............................     7
         (c)      Application of Limitations........................................................     7
5.       Eligibility; Per-Person Award Limitations..................................................     7
6.       Specific Terms of Awards...................................................................     7
         (a)      General...........................................................................     7
         (b)      Options...........................................................................     8
         (c)      Stock Appreciation Rights.........................................................    10
         (d)      Restricted Stock..................................................................    11
         (e)      Deferred Stock....................................................................    12
         (f)      Bonus Stock and Awards in Lieu of Obligations.....................................    13
         (g)      Dividend Equivalents..............................................................    13
         (h)      Other Stock-Based Awards..........................................................    13
7.       Performance and Annual Incentive Awards....................................................    14
         (a)      Performance Conditions............................................................    14
         (b)      Performance Awards Granted to Designated Covered Employees........................    14
         (c)      Annual Incentive Awards Granted to Designated Covered Employees...................    15
         (d)      Written Determinations............................................................    16
         (e)      Status of Section 7(b) and Section 7(c) Awards Under Code
                  Section 162(m)....................................................................    17
8.       Certain Provisions Applicable to Awards or Sales...........................................    17
         (a)      Stand-Alone, Additional, Tandem, and Substitute Awards............................    17
         (b)      Term of Awards....................................................................    17
         (c)      Purchase Prices...................................................................    17
         (d)      Form and Timing of Payment Under Awards; Deferrals................................    18
         (e)      Exemptions from Section 16(b) Liability...........................................    18
9.       Change in Control..........................................................................    19
         (a)      Effect of "Change in Control."....................................................    19
         (b)      Definition of "Change in Control..................................................    19
         (c)      Definition of "Change in Control Price."..........................................    19
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                     <C>
10.      General Provisions.........................................................................    19
         (a)      Compliance With Legal and Other Requirements......................................    19
         (b)      Limits on Transferability; Beneficiaries..........................................    19
         (c)      Adjustments.......................................................................    20
         (d)      Taxes.............................................................................    22
         (e)      Changes to the Plan and Awards....................................................    22
         (f)      Reporting of Financial Information................................................    22
         (g)      Limitation on Rights Conferred Under Plan.........................................    22
         (h)      Unfunded Status of Awards; Creation of Trusts.....................................    23
         (i)      Nonexclusivity of the Plan........................................................    23
         (j)      Payments in the Event of Forfeitures; Fractional Shares...........................    23
         (k)      Governing Law.....................................................................    23
         (l)      Plan Effective Date and Stockholder Approval; Termination of Plan.................    23
</TABLE>

<PAGE>

                             SYNAPTICS, INCORPORATED

                              AMENDED AND RESTATED
                        2001 INCENTIVE COMPENSATION PLAN
                     (AS AMENDED THROUGH DECEMBER 10, 2002)

         1. Purpose. The purpose of this AMENDED AND RESTATED 2001 INCENTIVE
COMPENSATION PLAN (the "Plan") is to assist SYNAPTICS INCORPORATED, a California
corporation (the "Company") and its Related Entities in attracting, motivating,
retaining and rewarding high-quality executives and other Employees, officers,
Directors and independent Contractors by enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's shareholders, and
providing such persons with annual and long term performance incentives to
expend their maximum efforts in the creation of shareholder value. In the event
that the Company is or becomes a Publicly Held Corporation (as hereinafter
defined), the Plan is intended to qualify certain compensation awarded under the
Plan for tax deductibility under Section 162(m) of the Code (as hereafter
defined) to the extent deemed appropriate by the Committee (or any successor
committee) of the Board of Directors of the Company.

         2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

                  (a) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.

                  (b) "Award" means any Option, Stock Appreciation Right
(including Limited Stock Appreciation Right), Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other
Stock-Based Award, Performance Award or Annual Incentive Award, together with
any other right or interest, granted to a Participant under the Plan.

                  (c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

                  (d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d3 under the
Exchange Act and any successor to such Rule.

                  (e) "Board" means the Company's Board of Directors.

<PAGE>

                  (f) "Cause" shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as "cause" or "for cause") set forth in
any employment agreement between the Participant and the Company or a Related
Entity or, in the absence of any such agreement, such term shall mean (i) the
failure by the Participant to perform his or her duties as assigned by the
Company (or a Related Entity) in a reasonable manner, (ii) any violation or
breach by the Participant of his or her employment agreement with the Company
(or a Related Entity), if any, (iii) any violation or breach by the Participant
of his or her non-competition and/or non-disclosure agreement with the Company
(or a Related Entity), if any, (iv) any act by the Participant of dishonesty or
bad faith with respect to the Company (or a Related Entity), (v) chronic
addiction to alcohol, drugs or other similar substances affecting the
Participant's work performance, or (vi) the commission by the Participant of any
act, misdemeanor, or crime reflecting unfavorably upon the Participant or the
Company. The good faith determination by the Committee of whether the
Participant's Continuous Service was terminated by the Company for "Cause" shall
be final and binding for all purposes hereunder.

                  (g) "Change in Control" means a Change in Control as defined
with related terms in Section 9 of the Plan.

                  (h) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.

                  (i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.

                  (j) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist of at
least two directors, and, in the event the Company is or becomes a Publicly Held
Corporation (as hereinafter defined), each member of which shall be (i) a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act,
unless administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions under
the Plan, and (ii) an "outside director" within the meaning of Section 162(m) of
the Code, unless administration of the Plan by "outside directors" is not then
required in order to qualify for tax deductibility under Section 162(m) of the
Code.

                  (k) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

                  (l) "Continuous Service" means uninterrupted provision of
services to the Company in any capacity of Employee, Director, or Consultant.
Continuous Service shall not be considered to be interrupted in the case of (i)
any approved leave of absence, (ii) transfers among the Company, any Related
Entities, or any successor entities, in any capacity of Employee Director, or
Consultant, or (iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of Employee,
Director, or Consultant (except as otherwise provided in the Option Agreement).
An approved leave of absence shall include sick leave, military leave, or any
other authorized personal leave.

                                       2
<PAGE>

                  (m) [Reserved]

                  (n) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 7(e) of the Plan.

                  (o) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.

                  (p) "Director" means a member of the Board or the board of
directors of any Related Entity.

                  (q) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.

                  (r) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.

                  (s) "Effective Date" means the effective date of the Plan,
which shall be March 7, 2001.

                  (t) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
Employees of the Company or of any Related Entity, and independent contractors
with the Company or any Related Entity. The foregoing notwithstanding, only
employees of the Company, the Parent, or any Subsidiary shall be Eligible
Persons for purposes of receiving any Incentive Stock Options. An Employee on
leave of absence may be considered as still in the employ of the Company or a
Related Entity for purposes of eligibility for participation in the Plan.

                  (u) "Employee" means any person, including an officer or
Director, who is an employee of the Company or any Related Entity. The Payment
of a director's fee by the Company or a Related Entity shall not be sufficient
to constitute "employment" by the Company.

                  (v) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.

                  (w) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.

                  (x) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date after which the Company is a Publicly Held Corporation shall be
the closing sale price per share reported on a consolidated basis for stock
listed on the principal stock exchange or market on which Stock is traded on the
date as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported.

                                       3
<PAGE>

                  (y) "Good Reason" shall, with respect to any Participant, have
the equivalent meaning (or the same meaning as "good reason" or "for good
reason") set forth in any employment agreement between the Participant and the
Company or a Related Entity or, in the absence of any such agreement, such term
shall mean (i) the assignment to the Participant of any duties inconsistent in
any respect with the Participant's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as assigned
by the Company (or a Related Entity), or any other action by the Company (or a
Related Entity) which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company (or a Related Entity) promptly after receipt of notice
thereof given by the Participant; (ii) any failure by the Company (or a Related
Entity) to comply with its obligations to the Participant as agreed upon, other
than an isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company (or a Related Entity) promptly after
receipt of notice thereof given by the Participant; (iii) the Company's (or
Related Entity's) requiring the Participant to be based at any office or
location outside of fifty miles from the location of employment as of the date
of Award, except for travel reasonably required in the performance of the
Participant's responsibilities; (iv) any purported termination by the Company
(or a Related Entity) of the Participant's Continuous Service otherwise than for
Cause as defined in Section 2(f), or by reason of the Participant's Disability
as defined in Section 2(o), prior to the Expiration Date. For purposes of this
Section 2(v), any good faith determination of "Good Reason" made by the Company
shall be conclusive.

                  (z) "Incentive Stock Option" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.

                  (aa) [Reserved]

                  (bb) "Limited Stock Appreciation Right" means a right granted
to a Participant under Section 6(c) hereof.

                  (cc) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.

                  (dd) "Optionee" means a person to whom an Option or Incentive
Stock Option is granted under this Plan or any person who succeeds to the rights
of such person under this Plan.

                  (ee) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.

                  (ff) "Parent" means any corporation (other than the Company),
whether now or hereafter existing, in an unbroken chain of corporations ending
with the Company, if each of the corporations in the chain (other than the
Company) owns stock possessing 50 percent or more of the combined voting power
of all classes of stock in one of the other corporations in the chain.

                                       4
<PAGE>

                  (gg) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.

                  (hh) "Performance Award" means a right, granted to an Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.

                  (ii) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.

                  (jj) "Publicly Held Corporation" shall mean a publicly held
corporation as that term is used under Section 162(m)(2) of the Code.

                  (kk) "Related Entity" means any Parent, Subsidiary and any
business, corporation, partnership, limited liability company or other entity in
which the Company, a Parent or a Subsidiary holds a substantial ownership
interest, directly or indirectly.

                  (ll) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.

                  (mm) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and
Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

                  (nn) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.

                  (oo) "Stock Appreciation Right" means a right granted to a
Participant under Section 6(c) hereof.

                  (pp) "Subsidiary" means any corporation (other than the
Company), whether now or hereafter existing, in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

         3.       Administration.

                  (a) Authority of the Committee. The Plan shall be administered
by the Committee; provided, however, that except as otherwise expressly provided
in this Plan or, during the period that the Company is a Publicly Held
Corporation, in order to comply with Code Section 162(m) or Rule 16b-3 under the
Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the

                                       5
<PAGE>

administration of the Plan, construe and interpret the Plan and Award agreements
and correct defects, supply omissions or reconcile inconsistencies therein, and
to make all other decisions and determinations as the Committee or the Board may
deem necessary or advisable for the administration of the Plan. In exercising
any discretion granted to the Committee or the Board under the Plan or pursuant
to any Award, the Committee or the Board shall not be required to follow past
practices, act in a manner consistent with past practices, or treat any Eligible
Person in a manner consistent with the treatment of other Eligible Persons.

                  (b) Manner of Exercise of Committee Authority. In the event
that the Company is or becomes a Publicly Held Corporation, the Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its Related Entities, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and shareholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any Related Entity, or committees
thereof, the authority, subject to such terms as the Committee or the Board
shall determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 7(d). The Committee or the Board may appoint
agents to assist it in administering the Plan.

                  (c) Limitation of Liability. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any Executive Officer,
other officer or Employee, the Company's independent auditors, Consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee acting at the direction or
on behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.

         4.       Stock Subject to Plan.

                  (a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 1,000,000, plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of

                                       6
<PAGE>

shares of Stock that are surrendered in payment of any Awards or any tax
withholding with regard thereto. In the event an Initial Public Offering ("IPO")
of the shares of the Company's Stock occurs, the overall number of shares of the
Company's Stock subject to Awards shall be further increased by 6% of the total
number of shares of the Company's Stock outstanding immediately following the
IPO, plus, on the first day of each subsequent calendar quarter, an additional
1.5% of the total number of shares of the Company's Stock outstanding on that
day, provided, however, that at no time shall the number of shares of the
Company's Stock subject to Awards exceed 30% of the then outstanding shares of
the Company's Stock (counting convertible preferred and convertible senior
common shares as if converted), unless a greater percentage is approved by a
vote of at least two-thirds of the securities entitled to vote, or a
determination is made by counsel for the Company that such restriction is not
required by applicable federal or state securities laws under the circumstances.
Any shares of Stock delivered under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares.

                  (b) Limitation on Number of Incentive Stock Option Shares.
Subject to adjustment as provided in Section 10(c) hereof, the number of shares
of Stock which may be issued pursuant to Incentive Stock Options shall be the
lesser of (i) the number of Shares that may be subject to Awards under Section
4(a), or (ii) 15,000,000.

                  (c) Application of Limitations. The limitation contained in
this Section 4 shall apply not only to Awards that are settleable by the
delivery of shares of Stock but also to Awards relating to shares of Stock but
settleable only in cash (such as cash-only Stock Appreciation Rights). The
Committee or the Board may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments if the number of shares of
Stock actually delivered differs from the number of shares previously counted in
connection with an Award.

         5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 1,000,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 7(b) and 7(c). In addition, the maximum amount that may be earned as
an Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $2,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $5,000,000.

         6.       Specific Terms of Awards.

                  (a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee or the Board may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of Continuous Service by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The Committee or the
Board shall retain full power and discretion to accelerate, waive or modify, at
any time, any term or condition of an Award that is not

                                       7
<PAGE>

mandatory under the Plan. Except in cases in which the Committee or the Board is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must be paid to satisfy the requirements of
California law, no consideration other than services may be required for the
grant (but not the exercise) of any Award.

                  (b) Options. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:

                           (i) Stock Option Agreement. Each grant of an Option
                  under the Plan shall be evidenced by a Stock Option Agreement.
                  Such Stock Option Agreement shall be subject to all applicable
                  terms and conditions of the Plan and may be subject to any
                  other terms and conditions which are not inconsistent with the
                  Plan and which the Committee or the Board deems appropriate
                  for inclusion in a Stock Option Agreement. The provisions of
                  the various Stock Option Agreements entered into under the
                  Plan need not be identical.

                           (ii) Number of Shares. Each Stock Option Agreement
                  shall specify the number of shares of Stock that are subject
                  to the Option and shall provide for the adjustment of such
                  number in accordance with Section 10(c) hereof. The Stock
                  Option Agreement shall also specify whether the Stock Option
                  is an Incentive Stock Option or a Non-Qualified Stock Option.

                           (iii) Exercise Price.

                                    (A) In General. Each Stock Option Agreement
                  shall state the price at which shares of Stock subject to the
                  Option may be purchased (the "Exercise Price"), which shall
                  be, with respect to Incentive Stock Options, not less than
                  100% of the Fair Market Value of the Stock on the date of
                  grant. In the case of Non-Qualified Stock Options, the
                  Exercise Price shall be determined in the sole discretion of
                  the Committee or the Board; provided, however, that the
                  Exercise Price shall be no less than 85% of the Fair Market
                  Value of the shares of Stock on the date of grant of the
                  Non-Qualified Stock Option.

                                    (B) Ten Percent Shareholder. If an
                  individual owns or is deemed to own (by reason of the
                  attribution rules applicable under Section 424(d) of the Code)
                  more than 10% of the combined voting power of all classes of
                  stock of the Company or any Related Entity, any Option granted
                  to such individual must comply with the following: (1) the
                  Exercise Price of a Non-Qualified Stock Option must be at
                  least 110% of the Fair Market Value of a share of Stock on the
                  date of grant, or (2) in the case of an Incentive Stock
                  Option, the Exercise Price must be at least 110% of the Fair
                  Market Value of a share of Stock on the date of grant and such
                  Incentive Stock Option by its terms is not exercisable after
                  the expiration of five years from the date of grant.

                                    (C) Non-Applicability. The Exercise Price
                  restriction applicable to Non-Qualified Stock Options required
                  by Sections 6(b)(iii)(A) and 6(b)(iii)(B) shall be inoperative
                  if (1) the offer and sale of the shares of Stock to

                                       8
<PAGE>

                  be issued upon payment of the Exercise Price have been
                  registered under a then currently effective registration
                  statement under applicable federal or state securities laws,
                  or (2) a determination is made by counsel for the Company that
                  such Exercise Price restrictions are not required in the
                  circumstances under applicable federal or state securities
                  laws.

                           (iv) Time and Method of Exercise. The Committee or
                  the Board shall determine the time or times at which or the
                  circumstances under which an Option may be exercised in whole
                  or in part (including based on achievement of performance
                  goals and/or future service requirements), provided that in
                  the case of an Optionee who is not an officer, Director, or
                  Consultant of the Company or a Related Entity, his or her
                  Options shall become exercisable at least as rapidly as 20%
                  per year, over a 5 year period commencing on the date of the
                  grant, unless a determination is made by counsel for the
                  Company that such vesting requirements are not required in the
                  circumstances under applicable federal or state securities
                  laws. The Board or the Committee may also determine the time
                  or times at which Options shall cease to be or become
                  exercisable following termination of Continuous Service or
                  upon other conditions; provided, however, if the Optionee's
                  Continuous Service is terminated for any reason other than
                  Cause, that portion of the Option that is exercisable as of
                  the date of termination shall remain exercisable for at least
                  6 months from the date of termination if by reason of death or
                  Disability, and for at least 30 days from the date of
                  termination if by reason other than the Optionee's death or
                  Disability. The Board or the Committee may determine the
                  methods by which such exercise price may be paid or deemed to
                  be paid (including in the discretion of the Committee or the
                  Board a cashless exercise procedure), the form of such
                  payment, including, without limitation, cash, Stock, other
                  Awards or awards granted under other plans of the Company or a
                  Related Entity, or other property (including notes or other
                  contractual obligations of Participants to make payment on a
                  deferred basis), and the methods by or forms in which Stock
                  will be delivered or deemed to be delivered to Participants.

                           (v) Incentive Stock Options. The terms of any
                  Incentive Stock Option granted under the Plan shall comply in
                  all respects with the provisions of Section 422 of the Code.
                  Anything in the Plan to the contrary notwithstanding, no term
                  of the Plan relating to Incentive Stock Options (including any
                  Stock Appreciation Rights in tandem therewith) shall be
                  interpreted, amended or altered, nor shall any discretion or
                  authority granted under the Plan be exercised, so as to
                  disqualify either the Plan or any Incentive Stock Option under
                  Section 422 of the Code, unless the Participant has first
                  requested the change that will result in such
                  disqualification. Thus, if and to the extent required to
                  comply with Section 422 of the Code, Options granted as
                  Incentive Stock Options shall be subject to the following
                  special terms and conditions:

                                    (A) the Option shall not be exercisable more
                  than ten years after the date such Incentive Stock Option is
                  granted; provided, however, that if a Participant owns or is
                  deemed to own (by reason of the attribution rules of Section

                                       9
<PAGE>

                  424(d) of the Code) more than 10% of the combined voting power
                  of all classes of stock of the Company or any Parent
                  Corporation and the Incentive Stock Option is granted to such
                  Participant, the term of the Incentive Stock Option shall be
                  (to the extent required by the Code at the time of the grant)
                  for no more than five years from the date of grant; and

                                    (B) The aggregate Fair Market Value
                  (determined as of the date the Incentive Stock Option is
                  granted) of the shares of stock with respect to which
                  Incentive Stock Options granted under the Plan and all other
                  option plans of the Company or its Parent Corporation during
                  any calendar year exercisable for the first time by the
                  Participant during any calendar year shall not (to the extent
                  required by the Code at the time of the grant) exceed
                  $100,000.

                           (vi) Repurchase Rights. The Committee and the Board
                  shall have the discretion to grant Options which are
                  exercisable for unvested shares of Common Stock. Should the
                  Optionee's Continuous Service cease while holding such
                  unvested shares, the Company 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 Committee or the
                  Board and set forth in the document evidencing such repurchase
                  right.

                  (c) Stock Appreciation Rights. The Committee and the Board
each is authorized to grant Stock Appreciation Rights to Participants on the
following terms and conditions:

                           (i) Right to Payment. A Stock Appreciation Right
                  shall confer on the Participant to whom it is granted a right
                  to receive, upon exercise thereof, the excess of (A) the Fair
                  Market Value of one share of stock on the date of exercise
                  (or, in the case of a "Limited Stock Appreciation Right" that
                  may be exercised only in the event of a Change in Control, the
                  Fair Market Value determined by reference to the Change in
                  Control Price, as defined under Section 9(c) hereof), over (B)
                  the grant price of the Stock Appreciation Right as determined
                  by the Committee or the Board. The grant price of a Stock
                  Appreciation Right shall not be less than the Fair Market
                  Value of a share of Stock on the date of grant except as
                  provided under Section 8(a) hereof.

                           (ii) Other Terms. The Committee or the Board shall
                  determine at the date of grant or thereafter, the time or
                  times at which and the circumstances under which a Stock
                  Appreciation Right may be exercised in whole or in part
                  (including based on achievement of performance goals and/or
                  future service requirements), the time or times at which Stock
                  Appreciation Rights shall cease to be or become exercisable
                  following termination of Continuous Service or upon other
                  conditions, the method of exercise, method of settlement, form
                  of consideration payable in settlement, method by or forms in
                  which Stock will be delivered or deemed to be delivered to
                  Participants, whether or not a Stock Appreciation Right shall
                  be in

                                       10
<PAGE>

                  tandem or in combination with any other Award, and any other
                  terms and conditions of any Stock Appreciation Right. Limited
                  Stock Appreciation Rights that may only be exercised in
                  connection with a Change in Control or other event as
                  specified by the Committee or the Board, may be granted on
                  such terms, not inconsistent with this Section 6(c), as the
                  Committee or the Board may determine. Stock Appreciation
                  Rights and Limited Stock Appreciation Rights may be either
                  freestanding or in tandem with other Awards.

                  (d) Restricted Stock. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:

                           (i) Grant and Restrictions. Restricted Stock shall be
                  subject to such restrictions on transferability, risk of
                  forfeiture and other restrictions, if any, as the Committee or
                  the Board may impose, or as otherwise provided in this Plan.
                  The restrictions may lapse separately or in combination at
                  such times, under such circumstances (including based on
                  achievement of performance goals and/or future service
                  requirements), in such installments or otherwise, as the
                  Committee or the Board may determine at the date of grant or
                  thereafter. Except to the extent restricted under the terms of
                  the Plan and any Award agreement relating to the Restricted
                  Stock, a Participant granted Restricted Stock shall have all
                  of the rights of a shareholder, including the right to vote
                  the Restricted Stock and the right to receive dividends
                  thereon (subject to any mandatory reinvestment or other
                  requirement imposed by the Committee or the Board). During the
                  restricted period applicable to the Restricted Stock, subject
                  to Section 10(b) below, the Restricted Stock may not be sold,
                  transferred, pledged, hypothecated, margined or otherwise
                  encumbered by the Participant.

                           (ii) Forfeiture. Except as otherwise determined by
                  the Committee or the Board at the time of the Award, upon
                  termination of a Participant's Continuous Service during the
                  applicable restriction period, the Participant's Restricted
                  Stock that is at that time subject to restrictions shall be
                  forfeited and reacquired by the Company; provided that the
                  Committee or the Board may provide, by rule or regulation or
                  in any Award agreement, or may determine in any individual
                  case, that restrictions or forfeiture conditions relating to
                  Restricted Stock shall be waived in whole or in part in the
                  event of terminations resulting from specified causes, and the
                  Committee or the Board may in other cases waive in whole or in
                  part the forfeiture of Restricted Stock.

                           (iii) Certificates for Stock. Restricted Stock
                  granted under the Plan may be evidenced in such manner as the
                  Committee or the Board shall determine. If certificates
                  representing Restricted Stock are registered in the name of
                  the Participant, the Committee or the Board may require that
                  such certificates bear an appropriate legend referring to the
                  terms, conditions and restrictions applicable to such
                  Restricted Stock, that the Company retain physical possession
                  of the certificates, and that the Participant deliver a stock
                  power to the Company, endorsed in blank, relating to the
                  Restricted Stock.

                                       11
<PAGE>

                           (iv) Dividends and Splits. As a condition to the
                  grant of an Award of Restricted Stock, the Committee or the
                  Board may require that any cash dividends paid on a share of
                  Restricted Stock be automatically reinvested in additional
                  shares of Restricted Stock or applied to the purchase of
                  additional Awards under the Plan. Unless otherwise determined
                  by the Committee or the Board, Stock distributed in connection
                  with a Stock split or Stock dividend, and other property
                  distributed as a dividend, shall be subject to restrictions
                  and a risk of forfeiture to the same extent as the Restricted
                  Stock with respect to which such Stock or other property has
                  been distributed.

                  (e) Deferred Stock. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:

                           (i) Award and Restrictions. Satisfaction of an Award
                  of Deferred Stock shall occur upon expiration of the deferral
                  period specified for such Deferred Stock by the Committee or
                  the Board (or, if permitted by the Committee or the Board, as
                  elected by the Participant). In addition, Deferred Stock shall
                  be subject to such restrictions (which may include a risk of
                  forfeiture) as the Committee or the Board may impose, if any,
                  which restrictions may lapse at the expiration of the deferral
                  period or at earlier specified times (including based on
                  achievement of performance goals and/or future service
                  requirements), separately or in combination, in installments
                  or otherwise, as the Committee or the Board may determine.
                  Deferred Stock may be satisfied by delivery of Stock, cash
                  equal to the Fair Market Value of the specified number of
                  shares of Stock covered by the Deferred Stock, or a
                  combination thereof, as determined by the Committee or the
                  Board at the date of grant or thereafter. Prior to
                  satisfaction of an Award of Deferred Stock, an Award of
                  Deferred Stock carries no voting or dividend or other rights
                  associated with share ownership.

                           (ii) Forfeiture. Except as otherwise determined by
                  the Committee or the Board, upon termination of a
                  Participant's Continuous Service during the applicable
                  deferral period thereof to which forfeiture conditions apply
                  (as provided in the Award agreement evidencing the Deferred
                  Stock), the Participant's Deferred Stock that is at that time
                  subject to deferral (other than a deferral at the election of
                  the Participant) shall be forfeited; provided that the
                  Committee or the Board may provide, by rule or regulation or
                  in any Award agreement, or may determine in any individual
                  case, that restrictions or forfeiture conditions relating to
                  Deferred Stock shall be waived in whole or in part in the
                  event of terminations resulting from specified causes, and the
                  Committee or the Board may in other cases waive in whole or in
                  part the forfeiture of Deferred Stock.

                           (iii) Dividend Equivalents. Unless otherwise
                  determined by the Committee or the Board at date of grant, any
                  Dividend Equivalents that are granted with respect to any
                  Award of Deferred Stock shall be either (A) paid with respect
                  to such Deferred Stock at the dividend payment date in cash or
                  in shares

                                       12
<PAGE>

                  of unrestricted Stock having a Fair Market Value equal to the
                  amount of such dividends, or (B) deferred with respect to such
                  Deferred Stock and the amount or value thereof automatically
                  deemed reinvested in additional Deferred Stock, other Awards
                  or other investment vehicles, as the Committee or the Board
                  shall determine or permit the Participant to elect.

                  (f) Bonus Stock and Awards in Lieu of Obligations. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.

                  (g) Dividend Equivalents. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.

                  (h) Other Stock-Based Awards. The Committee and the Board each
is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified Related Entities or business units. The
Committee or the Board shall determine the terms and conditions of such Awards.
Stock delivered pursuant to an Award in the nature of a purchase right granted
under this Section 6(h) shall be purchased for such consideration (including
without limitation loans from the Company or a Related Entity), paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. The Committee and the Board shall have the discretion to grant such
other Awards which are exercisable for unvested shares of Common Stock. Should
the Optionee's Continuous Service cease while holding such unvested shares, the
Company 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 Committee or the Board and set forth in the document evidencing such
repurchase right. Cash awards, as an element of or supplement to any other Award
under the Plan, may also be granted pursuant to this Section 6(h).

                                       13
<PAGE>

         7.       Performance and Annual Incentive Awards.

                  (a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 7(b) and 7(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). At such times as the Company is a Publicly Held Corporation, if
and to the extent required under Code Section 162(m), any power or authority
relating to a Performance Award or Annual Incentive Award intended to qualify
under Code Section 162(m), shall be exercised by the Committee and not the
Board.

                  (b) Performance Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
pre-established performance goals and other terms set forth in this Section
7(b).

                           (i) Performance Goals Generally. The performance
                  goals for such Performance Awards shall consist of one or more
                  business criteria and a targeted level or levels of
                  performance with respect to each of such criteria, as
                  specified by the Committee consistent with this Section 7(b).
                  Performance goals shall be objective and shall otherwise meet
                  the requirements of Code Section 162(m) and regulations
                  thereunder including the requirement that the level or levels
                  of performance targeted by the Committee result in the
                  achievement of performance goals being "substantially
                  uncertain." The Committee may determine that such Performance
                  Awards shall be granted, exercised and/or settled upon
                  achievement of any one performance goal or that two or more of
                  the performance goals must be achieved as a condition to
                  grant, exercise and/or settlement of such Performance Awards.
                  Performance goals may differ for Performance Awards granted to
                  any one Participant or to different Participants.

                           (ii) Business Criteria. One or more of the following
                  business criteria for the Company, on a consolidated basis,
                  and/or specified Related Entities or business units of the
                  Company (except with respect to the total shareholder return
                  and earnings per share criteria), shall be used exclusively by
                  the Committee in establishing performance goals for such
                  Performance Awards: (1) total shareholder return; (2) such
                  total shareholder return as compared to total return (on a
                  comparable basis) of a publicly available index such as, but
                  not limited to, the Standard & Poor's 500 Stock Index or the
                  S&P Specialty Retailer Index; (3) net income; (4) pretax
                  earnings; (5) earnings before interest expense, taxes,
                  depreciation and amortization; (6) pretax operating earnings
                  after interest expense and before bonuses, service fees, and
                  extraordinary or special items; (7) operating margin; (8)
                  earnings per share; (9) return on equity; (10) return on
                  capital; (11)

                                       14
<PAGE>

                  return on investment; (12) operating earnings; (13) working
                  capital or inventory; and (14) ratio of debt to shareholders'
                  equity. One or more of the foregoing business criteria shall
                  also be exclusively used in establishing performance goals for
                  Annual Incentive Awards granted to a Covered Employee under
                  Section 7(c) hereof that are intended to qualify as
                  "performanced-based compensation under Code Section 162(m).

                           (iii) Performance Period; Timing For Establishing
                  Performance Goals. Achievement of performance goals in respect
                  of such Performance Awards shall be measured over a
                  performance period of up to ten years, as specified by the
                  Committee. Performance goals shall be established not later
                  than 90 days after the beginning of any performance period
                  applicable to such Performance Awards, or at such other date
                  as may be required or permitted for "performance-based
                  compensation" under Code Section 162(m).

                           (iv) Performance Award Pool. The Committee may
                  establish a Performance Award pool, which shall be an unfunded
                  pool, for purposes of measuring Company performance in
                  connection with Performance Awards. The amount of such
                  Performance Award pool shall be based upon the achievement of
                  a performance goal or goals based on one or more of the
                  business criteria set forth in Section 7(b)(ii) hereof during
                  the given performance period, as specified by the Committee in
                  accordance with Section 7(b)(iii) hereof. The Committee may
                  specify the amount of the Performance Award pool as a
                  percentage of any of such business criteria, a percentage
                  thereof in excess of a threshold amount, or as another amount
                  which need not bear a strictly mathematical relationship to
                  such business criteria.

                           (v) Settlement of Performance Awards; Other Terms.
                  Settlement of such Performance Awards shall be in cash, Stock,
                  other Awards or other property, in the discretion of the
                  Committee. The Committee may, in its discretion, reduce the
                  amount of a settlement otherwise to be made in connection with
                  such Performance Awards. The Committee shall specify the
                  circumstances in which such Performance Awards shall be paid
                  or forfeited in the event of termination of Continuous Service
                  by the Participant prior to the end of a performance period or
                  settlement of Performance Awards.

                  (c) Annual Incentive Awards Granted to Designated Covered
Employees. The Committee may, within its discretion, grant one or more Annual
Incentive Awards to any Eligible Person, subject to the terms and conditions set
forth in this Section 7(c).

                           (i) Annual Incentive Award Pool. The Committee may
                  establish an Annual Incentive Award pool, which shall be an
                  unfunded pool, for purposes of measuring Company performance
                  in connection with Annual Incentive Awards. In the case of
                  Annual Incentive Awards intended to qualify as
                  "performance-based compensation" for purposes of Code Section
                  162(m), the amount of such Annual Incentive Award pool shall
                  be based upon the achievement of a performance goal or goals
                  based on one or more of the business criteria set forth

                                       15
<PAGE>

                  in Section 7(b)(ii) hereof during the given performance
                  period, as specified by the Committee in accordance with
                  Section 7(b)(iii) hereof. The Committee may specify the amount
                  of the Annual Incentive Award pool as a percentage of any such
                  business criteria, a percentage thereof in excess of a
                  threshold amount, or as another amount which need not bear a
                  strictly mathematical relationship to such business criteria.

                           (ii) Potential Annual Incentive Awards. Not later
                  than the end of the 90th day of each fiscal year, or at such
                  other date as may be required or permitted in the case of
                  Awards intended to be "performance-based compensation" under
                  Code Section 162(m), the Committee shall determine the
                  Eligible Persons who will potentially receive Annual Incentive
                  Awards, and the amounts potentially payable thereunder, for
                  that fiscal year, either out of an Annual Incentive Award pool
                  established by such date under Section 7(c)(i) hereof or as
                  individual Annual Incentive Awards. In the case of individual
                  Annual Incentive Awards intended to qualify under Code Section
                  162(m), the amount potentially payable shall be based upon the
                  achievement of a performance goal or goals based on one or
                  more of the business criteria set forth in Section 7(b)(ii)
                  hereof in the given performance year, as specified by the
                  Committee; in other cases, such amount shall be based on such
                  criteria as shall be established by the Committee. In all
                  cases, the maximum Annual Incentive Award of any Participant
                  shall be subject to the limitation set forth in Section 5
                  hereof.

                           (iii) Payout of Annual Incentive Awards. After the
                  end of each fiscal year, the Committee shall determine the
                  amount, if any, of (A) the Annual Incentive Award pool, and
                  the maximum amount of potential Annual Incentive Award payable
                  to each Participant in the Annual Incentive Award pool, or (B)
                  the amount of potential Annual Incentive Award otherwise
                  payable to each Participant. The Committee may, in its
                  discretion, determine that the amount payable to any
                  Participant as an Annual Incentive Award shall be reduced from
                  the amount of his or her potential Annual Incentive Award,
                  including a determination to make no Award whatsoever. The
                  Committee shall specify the circumstances in which an Annual
                  Incentive Award shall be paid or forfeited in the event of
                  termination of Continuous Service by the Participant prior to
                  the end of a fiscal year or settlement of such Annual
                  Incentive Award.

                  (d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
7(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 7(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).

                                       16
<PAGE>

                  (e) Status of Section 7(b) and Section 7(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 7(b) and 7(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 7(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.

         8.       Certain Provisions Applicable to Awards or Sales.

                  (a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Related Entity, or any business entity to be acquired
by the Company or a Related Entity, or any other right of a Participant to
receive payment from the Company or any Related Entity. Such additional, tandem,
and substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the Committee or
the Board shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be granted
in lieu of cash compensation, including in lieu of cash amounts payable under
other plans of the Company or any Related Entity, in which the value of Stock
subject to the Award is equivalent in value to the cash compensation (for
example, Deferred Stock or Restricted Stock), or in which the exercise price,
grant price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Stock minus the
value of the cash compensation surrendered (for example, Options granted with an
exercise price "discounted" by the amount of the cash compensation surrendered).

                  (b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or Stock Appreciation Right exceed a period
of ten years (or such shorter term as may be required in respect of an Incentive
Stock Option under Section 422 of the Code).

                  (c) Purchase Prices.

                           (i) In General. In the case of an Award under this
                  Plan, other than an Option, which grants an Employee,
                  Director, or Consultant of the Company the right to purchase
                  Stock, the Board or the Committee shall have discretion to set

                                       17
<PAGE>

                  the purchase price, provided that in no event shall the
                  purchase price per share of Stock be less than 85% of the Fair
                  Market Value of such share on the date of the Award or the
                  date of the purchase, and in the case of an Award made to an
                  Employee who owns or is deemed to own (by reason of the
                  attribution rules applicable under Section 424(d) of the Code)
                  more than 10% of the combined voting power of all classes of
                  Stock of the Company, the Parent Corporation or a Subsidiary,
                  the purchase price of such Stock shall be no less than 100% of
                  the Fair Market Value of the Stock on the date of such award
                  or the date of the purchase.

                           (ii) Non-Applicability of Restrictions. The Purchase
                  Price restrictions contained in Section 8(c)(i) applicable to
                  Awards under this Plan, other than Options, which grant an
                  Employee, Director, or Consultant of the Company the right to
                  purchase Stock, shall be inoperative if (A) the offer and sale
                  of the shares of Stock to be issued upon payment of the
                  Exercise Price have been registered under a then currently
                  effective registration statement under applicable federal or
                  state securities laws, or (B) a determination is made by
                  counsel for the Company that such Exercise Price restrictions
                  are not required in the circumstances under applicable federal
                  or state securities laws.

                  (d) Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a Related Entity upon the exercise of an Option or
other Award or settlement of an Award may be made in such forms as the Committee
or the Board shall determine, including, without limitation, cash, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.

                  (e) Exemptions from Section 16(b) Liability. If and to the
extent that the Company is or becomes a Publicly Held Corporation, it is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure
that neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability under
Section 16(b) thereof (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the

                                       18
<PAGE>

Fair Market Value of Stock at the date of grant of the Award then required in
order to comply with Rule 16b-3.

                  9.       Change in Control.

                  (a) Effect of "Change in Control." The effect of a "Change in
Control," as defined in Section 9(b) below, shall be as provided, if at all, (1)
in an employment, compensation, or severance agreement, if any, between the
Company or any Related Entity and the Participant, relating to the Participant's
employment, compensation, or severance with or from the Company or such Related
Entity, or (2) in the agreement evidencing the Award.

                  (b) Definition of "Change in Control." A "Change in Control"
shall be defined as it is defined, if at all, (1) in an employment,
compensation, or severance agreement, if any, between the Company or any Related
Entity and the Participant, relating to the Participant's employment,
compensation, or severance with or from the Company or such Related Entity, or
(2) in the agreement evidencing the Award to such Participant.

                  (c) Definition of "Change in Control Price." The "Change in
Control Price" shall be defined as it is defined, if at all, (1) in an
employment, compensation, or severance agreement, if any, between the Company or
any Related Entity and the Participant, relating to the Participant's
employment, compensation, or severance with or from the Company or such Related
Entity, or (2) in the agreement evidencing the Award to such Participant."

         10.      General Provisions.

                  (a) Compliance With Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.

                  (b)      Limits on Transferability; Beneficiaries.

                           (i) General. Except as provided herein, a Participant
                  may not assign, sell, transfer, or otherwise encumber or
                  subject to any lien any Award or other

                                       19
<PAGE>

                  right or interest granted under this Plan, in whole or in
                  part, including any Award or right which constitutes a
                  derivative security as generally defined in Rule 16a1(c) under
                  the Exchange Act, other than by will or by operation of the
                  laws of descent and distribution, and such Awards or rights
                  that may be exercisable shall be exercised during the lifetime
                  of the Participant only by the Participant or his or her
                  guardian or legal representative.

                           (ii) Permitted Transfer of Option. The Committee or
                  Board, in its sole discretion, may permit the transfer of an
                  Option (but not an Incentive Stock Option, or any other right
                  to purchase Stock other than an Option) as follows: (A) by
                  gift to a member of the Participant's Immediate Family or (B)
                  by transfer by instrument to a trust providing that the Option
                  is to be passed to beneficiaries upon death of the Optionee.
                  For purposes of this Section 10(b)(ii), "Immediate Family"
                  shall mean the Optionee's spouse (including a former spouse
                  subject to terms of a domestic relations order); child,
                  stepchild, grandchild, child-in-law; parent, stepparent,
                  grandparent, parent-in-law; sibling and sibling-in-law, and
                  shall include adoptive relationships. If a determination is
                  made by counsel for the Company that the restrictions
                  contained in this Section 10(b)(ii) are not required by
                  applicable federal or state securities laws under the
                  circumstances, then the Committee or Board, in its sole
                  discretion, may permit the transfer of Awards (other than
                  Incentive Stock Options and Stock Appreciation Rights in
                  tandem therewith) to one or more Beneficiaries or other
                  transferees during the lifetime of the Participant, which may
                  be exercised by such transferees in accordance with the terms
                  of such Award, but only if and to the extent permitted by the
                  Committee or the Board pursuant to the express terms of an
                  Award agreement (subject to any terms and conditions which the
                  Committee or the Board may impose thereon, and further subject
                  to any prohibitions and restrictions on such transfers
                  pursuant to Rule 16b-3). A Beneficiary, transferee, or other
                  person claiming any rights under the Plan from or through any
                  Participant shall be subject to all terms and conditions of
                  the Plan and any Award agreement applicable to such
                  Participant, except as otherwise determined by the Committee
                  or the Board, and to any additional terms and conditions
                  deemed necessary or appropriate by the Committee or the Board.

                  (c)      Adjustments.

                           (i) Adjustments to Awards. In the event that any
                  dividend or other distribution (whether in the form of cash,
                  Stock, or other property), recapitalization, forward or
                  reverse split, reorganization, merger, consolidation,
                  spin-off, combination, repurchase, share exchange,
                  liquidation, dissolution or other similar corporate
                  transaction or event affects the Stock and/or such other
                  securities of the Company or any other issuer such that a
                  substitution, exchange, or adjustment is determined by the
                  Committee or the Board to be appropriate, then the Committee
                  or the Board shall, in such manner as it may deem equitable,
                  substitute, exchange, or adjust any or all of (A) the number
                  and kind of shares of Stock which may be delivered in
                  connection with Awards granted thereafter, (B) the number and
                  kind of shares of Stock by which annual per-person Award

                                       20
<PAGE>

                  limitations are measured under Section 5 hereof, (C) the
                  number and kind of shares of Stock subject to or deliverable
                  in respect of outstanding Awards, (E) the exercise price,
                  grant price or purchase price relating to any Award and/or
                  make provision for payment of cash or other property in
                  respect of any outstanding Award, and (F) any other aspect of
                  any Award that the Committee or the Board determines to be
                  appropriate.

                           (ii) Adjustments in Case of Certain Corporate
                  Transactions. In the event of a proposed sale of all or
                  substantially all of the Company's assets or any
                  reorganization, merger, consolidation, or other form of
                  corporate transaction in which the Company does not survive,
                  or in which the shares of Stock are exchanged for or converted
                  into securities issued by another entity, then the successor
                  or acquiring entity or an affiliate thereof may, with the
                  consent of the Committee or the Board, assume each outstanding
                  Option or substitute an equivalent option or right. If the
                  successor or acquiring entity or an affiliate thereof, does
                  not cause such an assumption or substitution, then each Option
                  shall terminate upon the consummation of sale, merger,
                  consolidation, or other corporate transaction. The Committee
                  or the Board shall give written notice of any proposed
                  transaction referred to in this Section 10(c)(ii) a reasonable
                  period of time prior to the closing date for such transaction
                  (which notice may be given either before or after the approval
                  of such transaction), in order that Optionees may have a
                  reasonable period of time prior to the closing date of such
                  transaction within which to exercise any Options that are then
                  exercisable (including any Options that may become exercisable
                  upon the closing date of such transaction). An Optionee may
                  condition his exercise of any Option upon the consummation of
                  the transaction.

                           (iii) Other Adjustments. In addition, the Committee
                  (and the Board if and only to the extent such authority is not
                  required to be exercised by the Committee to comply with Code
                  Section 162(m)) is authorized to make adjustments in the terms
                  and conditions of, and the criteria included in, Awards
                  (including Performance Awards and performance goals, and
                  Annual Incentive Awards and any Annual Incentive Award pool or
                  performance goals relating thereto) in recognition of unusual
                  or nonrecurring events (including, without limitation,
                  acquisitions and dispositions of businesses and assets)
                  affecting the Company, any Related Entity or any business
                  unit, or the financial statements of the Company or any
                  Related Entity, or in response to changes in applicable laws,
                  regulations, accounting principles, tax rates and regulations
                  or business conditions or in view of the Committee's
                  assessment of the business strategy of the Company, any
                  Related Entity or business unit thereof, performance of
                  comparable organizations, economic and business conditions,
                  personal performance of a Participant, and any other
                  circumstances deemed relevant; provided that no such
                  adjustment shall be authorized or made if and to the extent
                  that such authority or the making of such adjustment would
                  cause Options, Stock Appreciation Rights, Performance Awards
                  granted under Section 8(b) hereof or Annual Incentive Awards
                  granted under Section 8(c) hereof to Participants designated
                  by the Committee as Covered Employees and intended to qualify
                  as "performance-based

                                       21
<PAGE>

                  compensation" under Code Section 162(m) and the regulations
                  thereunder to otherwise fail to qualify as "performance-based
                  compensation" under Code Section 162(m) and regulations
                  thereunder.

                  (d) Taxes. The Company and any Related Entity are authorized
to withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

                  (e) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of shareholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's shareholders not later than the annual
meeting next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to shareholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.

                  (f) Reporting of Financial Information. The Company shall
provide to the recipient of any Award under this Plan, no less frequently than
annually, the financial statements of the Company, until such time as a
determination is made by counsel for the Company that such reports are not
required by applicable federal or state securities laws under the circumstances.

                  (g) Limitation on Rights Conferred Under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a

                                       22
<PAGE>

Related Entity; (ii) interfering in any way with the right of the Company or a
Related Entity to terminate any Eligible Person's or Participant's Continuous
Service at any time, (iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly with other
Participants and Employees, or (iv) conferring on a Participant any of the
rights of a shareholder of the Company unless and until the Participant is duly
issued or transferred shares of Stock in accordance with the terms of an Award.

                  (h) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.

                  (i) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).

                  (j) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

                  (k) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of California
without giving effect to principles of conflicts of laws, and applicable federal
law.

                  (l) Plan Effective Date and Shareholder Approval; Termination
of Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
shareholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable NASDAQ
requirements, and other laws, regulations, and obligations of the Company
applicable to the Plan. Awards may be granted subject to shareholder approval,
but may not be exercised or otherwise

                                       23
<PAGE>

settled in the event shareholder approval is not obtained. The Plan shall
terminate no later than 10 years from the date the Plan is adopted by the Board
or 10 years from the date the Plan is approved by the Shareholders, whichever is
earlier.

                                       24

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