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EXHIBIT 10.17    
  

 
  Executive Incentive Plan    
  

       

       

2002  

CONFIDENTIAL  

        The information contained herein is the sole and exclusive property of IHOP Corp. It is only for the use of participants in the 2002
Executive Incentive Plan and may not be copied, distributed or shared with anyone without prior written consent of an officer of IHOP Corp.

[IHOP LOGO]  

 Effective Date  

        The Executive Incentive Plan is effective January 1, 2002 and supersedes all previously implemented plans. 

Modification of the Plan  

        IHOP Corp. and its subsidiaries reserve the right to modify, terminate or make exceptions to the Executive Incentive Plan ("Plan") at any time without prior
notice. The Plan will be reviewed on an annual basis allowing for updates or revisions to be considered. The Plan and this Plan Document do not constitute or imply an employment contract, and
participants accrue no interest, right or any benefit in the Plan, except as specifically set forth in this document. 

Eligibility  

        The Plan includes the Chairman of the Board, President, Vice Presidents, and all director level reports to the Vice President, President, or CEO/Chairman,
including legal counsels of IHOP Corp. and its subsidiaries; except those otherwise covered by another plan. Participants must be actively employed with IHOP Corp. and its subsidiaries through the end
of the applicable year of the incentive plan. The Company's Plan Year is based on IHOP's fiscal year. The last day worked is the last day an employee is considered active. In the case of termination,
vacation or other payments can not be used to extend the last day worked. 

        NOTE: All information determining an employee's position and location will be retrieved from the HRIS system. Therefore, it is imperative that information
regarding changes in employee status, position, and location are received by the Personnel Records Department in a timely manner.

New Hires/Re-Hires  

        Incentive eligibility begins with the first complete calendar month worked in an eligible position. If the participant begins work on the first calendar or
workday of the month, they will be credited for a whole month worked. However, if the participant begins work on any calendar or workday other than the first, he/she will  not be entitled to receive an
incentive for that month. 

Promotions/Demotions/Position Change  

        Transferring from a non-eligible position to an eligible position:    Any employee transferred from a
non-eligible position to an eligible position during the incentive period will have an incentive based on the number of whole months worked in the incentive period. If the participant is
promoted on the first calendar or workday of the month, credit will be for a full month worked. The effective date of the promotion will be used to determine the number of whole months worked.
Eligibility begins with the first full month in the eligible position. 

        Transferring from an eligible position to another:    When an employee is transferred from one eligible position to another,
that month's incentive will be based on the prior position providing that the transfer occurred after the 15th of the month. When a transfer occurs on or before the 15th of
the month, that month's incentive will be based on the new position. 

        Transferring from an eligible position to a non-eligible position:    When an employee is transferred from an
eligible position to a non-eligible position, that month's incentive will be based on the prior eligible position until the first whole month in the new position begins. Once the first
whole month in the new position begins, the participant is no longer eligible for this Plan. 

Short-Term or Long-Term Disability, Workers' Compensation and other Leaves of Absence  

        Any participant on leave of absence or otherwise not actively working during the incentive period may be eligible for a prorated incentive excluding the period on
leave. The date the leave is effective and the date ending leave will be used to calculate the number of whole months worked in the 

incentive period. If an employee works through the end of the incentive period and then goes out on leave they will be paid the incentive when it is regularly paid. If an employee does not work
through the last day of the incentive period the incentive will not be paid out until they return from LOA. 

Termination Due to Death or Retirement  

        Any incentive earned will be prorated for the incentive period based upon the actual number of whole months worked and paid simultaneously with the normal
distribution of incentives. 

Plan Description  

        The Executive Incentive Plan is an annual incentive based on Corporate Performance and the achievement of specific individual business objectives of the
participants. Division Vice President's incentive is based on Division Performance in addition to the components listed above. All plan components are explained in detail in the paragraphs below. 

Determining Incentive  

        The incentive award is a percentage of base salary which is dependent on the position of the participant (see "Incentive Allocation Table"). The Target Payout %
multiplied by the participant's base salary on the last day of the fiscal year is the Target Incentive in dollars. Any eligible participant that is not an Officer will have an incentive based on the
Directors Target Payout as a percentage of base salary. The incentive weighting for the Chairman of the Board and the President is solely based on Corporate Performance (EPS). The incentive weighting
for Vice Presidents is 30% Individual Business Objectives and 70% Corporate Performance (EPS). The
incentive weighting for Division Vice Presidents is 30% Individual Business Objectives, 35% Corporate
Performance (EPS), and 35% Division Performance (see Division Sales & Profit Payout Matrix). The incentive weighting for Directors is  40%
Individual Business Objectives and 60% Corporate Performance (EPS). 

INCENTIVE ALLOCATION TABLE  

	 
	 	CHAIRMAN OF

THE BOARD
	 	PRESIDENT
	 	VICE

PRESIDENTS
	 	DIRECTORS

	TARGET PAYOUT AS A % OF BASE SALARY	 	60%	 	60%	 	35%	 	20%

Incentive Payout Calculation  

        The incentive payout is based solely on performance, therefore no limiting factors will be used in calculating the incentive. The Level of Performance is always
based on the last whole cent or percentage actually achieved (See Incentive Calculation Scenarios for calculation examples). 

Corporate Performance  

        The Corporate Performance is based on EPS (Earnings Per Share) excluding budgeted bonus calculated using the budgeted weighted shares outstanding. Refer to the
"Corporate Performance (EPS) Payout Matrix" to determine the incentive achieved for the Company portion of the incentive. There is no cap on the payout matrix. For every two cents in EPS achieved over
2.36, the payout increases by 10% (See Incentive Calculation Scenarios for calculation examples). 

Corporate Performance (EPS) Payout Matrix

(No Cap)  

	EPS
 
	 	EPS Excluding

budgeted

bonus
 
	 	Incentive Payout

(as percent

of target)
 

	2.05—2.06	 	2.12—2.13	 	50
	2.07—2.08	 	2.14—2.15	 	60
	2.09—2.10	 	2.16—2.17	 	70
	2.11—2.12	 	2.18—2.19	 	80
	2.13—2.14	 	2.20—2.21	 	90
	2.15—2.16	 	2.22—2.23	 	100
	2.17—2.18	 	2.24—2.25	 	110
	2.19—2.20	 	2.26—2.27	 	120
	2.21—2.22	 	2.28—2.29	 	130
	2.23—2.24	 	2.30—2.31	 	140
	2.25—2.26	 	2.32—2.33	 	150
	2.27—2.28	 	2.34—2.35	 	160
	2.29—2.30	 	2.36—2.37	 	170
	2.31—2.32	 	2.38—2.39	 	180
	2.33—2.34	 	2.40—2.41	 	190
	2.35—2.36	 	2.42—2.43	 	200
	Each .02 over 2.36	 	Each .02 over 2.43	 	Additional 10%

If there are any major changes in Corporate direction, budgets, or target, the Payout Matrix would be re-evaluated with Board/Compensation Committee
approval.

Individual Business Objectives (IBOs)  

        Each Vice President, Division Vice President, and Director who participates in the plan sets individual business objectives in conjunction with his or her
immediate supervisor in December of each year. During this process challenging, measurable objectives that significantly impact the Company business objectives are to be mutually determined. No Vice
President or Director will have more than three IBOs without approval by the President. After the fiscal year, a percentage of achievement is then established by the immediate supervisor and approved
by the President. This amount is used to determine the Individual Business Objectives portion of the annual payout. If EPS is less than 2.05, there will be no payout for
Individual Business Objectives, regardless of individual achievement level. (See Incentive Calculation Scenarios for calculation examples. 

        In
addition to the calculated individual portion of the incentive, an award may be granted at the discretion of the President to individuals exceeding expected levels of performance. 

Division Performance (Division Vice Presidents Only) 

        The
Division Performance is based on actual sales and profit achievement versus flex budget. The President will approve all changes to the flex budget. The sales portion is actual sales
achieved v. flex budget for both Company and Franchise units and is weighted at 50% of the Division Performance portion. The profit portion is actual profit achieved v. flex budget for Company units
and is weighted at 50% of the Division Performance portion. Refer to the "Division Sales & Profit Payout Matrix" to determine the incentive achieved for the Division portion of the incentive
payout. If EPS is less than 2.05, there will be no payout for the Division Performance portion of the incentive. (See Incentive Calculation Scenario # 3
for calculation examples.) 

Division Sales & Profit Payout Matrix  

	Sales Achieved v.

Flex Budget and Profit

Achieved v. Flex Budget
	 	% of Incentive Achieved

	Less than 95.0%	 	0%
	95.0—95.9%	 	50.0%
	96.0—96.9%	 	60.0%
	97.0—97.9%	 	70.0%
	98.0—98.9%	 	80.0%
	99.0—99.9%	 	90.0%
	100.0—100.9%	 	100.0%
	101.0—101.9%	 	105.0%
	102.0—102.9%	 	110.0%
	103.0—103.9%	 	115.0%
	104.0—104.9%	 	120.0%
	105.0—105.9%	 	125.0%
	106.0—106.9%	 	130.0%
	107.0—107.9%	 	135.0%
	108.0%—108.9%	 	140.0%
	Each % over 108.9%	 	Additional 5%

Payment Distribution  

        Incentive payouts will be distributed within 90 days following the close of the fiscal year for which the incentive was earned. Payouts will be paid in a
separate check from the regular payroll check, and are subject to normal withholding deductions. 

Plan Administration  

        The Executive Incentive Plan is administered by the IHOP Human Resources Department. This Plan Document and its provisions regulate all plan guidelines and
participant eligibility. Any exception must be submitted in writing to the Human Resources Department and must be approved by the President. 

 
 

INCENTIVE CALCULATION SCENARIOS    
  

Example #1: Low Individual Achiever & Low Corporate Performance (EPS)  

        Assume a Vice President has a Base Salary of $200,000. 

Individual Component  

        The Individual Performance (IBOs) were reviewed and found that 2 out of 3 goals were achieved. The Individual Component is thus 67%. 

Company Component  

        The Corporate Performance is $2.20 EPS (Earnings Per Share) excluding budgeted bonus calculated using the budgeted weighted shares outstanding. Therefore, the
Incentive Achieved is 90% for the Company Component (see "Corporate Performance (EPS) Payout Matrix" on page 4 of the Plan). 

Step # 1—Target Payout  

	Base Salary	 	×	 	Target Payout %	 	=	 	Target Payout
	

$200,000	
 	

×	
 	

(35%)	
 	

=	
 	

$70,000

Step # 2—Individual Payout  

	Individual Component	 	x	 	Weighted as 30% of Target Payout	 	=	 	Individual Payout
	

67%	
 	

x	
 	

(30% × $70,000)	
 	

=	
 	

$14,070

Step # 3—Corporate Performance (EPS) Payout  

	Corporate Component EPS	 	x	 	Weighted as 70% of Target Payout	 	=	 	Corporate Performance (EPS) Payout
	

90%	
 	

x	
 	

(70% × $70,000)	
 	

=	
 	

$44,100

Step # 4—Incentive Payout  

	Individual Payout	 	+	 	Corporate Performance (EPS) Payout	 	=	 	Incentive Payout
	

$14,070	
 	

+	
 	

$44,100	
 	

=	
 	

$58,170

Example #2: High Individual Achiever & High Corporate Performance (EPS)  

        Assume a Director has a Base Salary of $100,000. 

Individual Component  

        The Individual Performance (IBOs) were reviewed and found 3 out of 3 goals were achieved. The Individual Component is thus 100%. 

Company Component  

        The Corporate Performance (EPS) is $2.35 EPS (Earnings Per Share) excluding budgeted bonus calculated using the budgeted weighted shares outstanding. Therefore,
the Incentive Achieved is 160% for the Company Component (see "Corporate Performance (EPS) Payout Matrix" on page 4 of the Plan). 

Step # 1—Target Payout  

	Base Salary	 	×	 	Target Payout %	 	=	 	Target Payout
	

$100,000	
 	

×	
 	

(20%)	
 	

=	
 	

$20,000

Step # 2—Individual Payout  

	Individual Component	 	x	 	Weighted as 40% of Target Payout	 	=	 	Individual Payout
	

100%	
 	

x	
 	

(40% × $20,000)	
 	

=	
 	

$8,000

Step # 3—Corporate Performance Payout  

	Company Component	 	x	 	Weighted as 60% of Target Payout	 	=	 	Corporate Performance (EPS) Payout
	

160%	
 	

x	
 	

(60% × $20,000)	
 	

=	
 	

$19,200

Step # 4—Incentive Payout  

	Individual Payout	 	+	 	Corporate Performance (EPS) Payout	 	=	 	Incentive Payout
	

$8,000	
 	

+	
 	

$19,200	
 	

=	
 	

$27,200

Example #3: High Individual, Corporate (EPS), and Division Performance.  

        Assume a DVP has a Base Salary of $180,000. 

Individual Component  

        The Individual Performance (IBOs) were reviewed and found 3 out of 3 goals were achieved. The Individual Component is thus 100%. 

Company Component  

        The Corporate Performance (EPS) is $2.34 EPS (Earnings Per Share) excluding budgeted bonus calculated using the budgeted weighted shares outstanding. Therefore,
the Incentive Achieved is 160% for the Company Component (see "Corporate Performance (EPS) Payout Matrix" on page 4 of the Plan). 

Division Component  

        Division performance is 102% of Flex Sales Budget and 104% of Flex Profit Budget. (see "Division Sales & Profit Payout Matrix" on page 5 of the Plan). 

Step # 1—Target Payout  

	Base Salary	 	×	 	Target Payout %	 	=	 	Target Payout
	

$180,000	
 	

×	
 	

(35%)	
 	

=	
 	

$63,000

Step # 2—Individual Payout  

	Individual Component	 	x	 	Weighted as 30% of Target Payout	 	=	 	Individual Payout
	

100%	
 	

x	
 	

(30% × $63,000)	
 	

=	
 	

$18,900

Step # 3—Corporate Performance (EPS) Payout  

	Company Component	 	x	 	Weighted as 35% of Target Payout	 	=	 	Company Target
	

160%	
 	

x	
 	

(35% × $63,000)	
 	

=	
 	

$35,280

Step # 4—Division Sales Payout at 102%  

	Division Component	 	x	 	Weighted as 50% of 35% of Target Payout	 	=	 	Division Sales Payout
	

110%	
 	

x	
 	

(17.5% × $63,000)	
 	

=	
 	

$12,128

Step # 5—Division Profit Payout at 104%  

	Division Component	 	x	 	Weighted as 50% of 35% of Target Payout	 	=	 	Division Profit Payout
	

120%	
 	

x	
 	

(17.5% × $63,000)	
 	

=	
 	

$13,230

Step # 6—Incentive Payout  

	Individual Payout	 	+	 	Company Payout	 	+	 	Division Sales Payout	 	=	 	Division Profit Payout	 	=	 	Incentive Payout
	

$18,900	
 	

+	
 	

$35,280	
 	

+	
 	

$12,128	
 	

+	
 	

$13,230	
 	

=	
 	

$79,538

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EXHIBIT 10.17

Executive Incentive Plan

INCENTIVE CALCULATION SCENARIOS<PAGE>

Exhibit 10.1

                           MENERVA TECHNOLOGIES, INC.

                            2000 STOCK INCENTIVE PLAN

 1.  Purposes of the Plan. The purposes of this Stock Incentive Plan are to
     ---------------------
     attract and retain the best available personnel, to provide additional
     incentive to Employees, Directors and Consultants and to promote the
     success of the Company's business.

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

(a)  "Administrator" means the Board or any of the Committees appointed to
      -------------
     administer the Plan.

(b)  "Applicable Laws" means the legal requirements relating to the
      ---------------
     administration of stock incentive plans, if any, under applicable
     provisions of federal and state securities laws, the corporate laws of
     California and, to the extent other than California, the corporate law of
     the state of the Company's incorporation, the Code, the rules of any
     applicable stock exchange or national market system, and the rules of any
     foreign jurisdiction applicable to Awards granted to residents therein.

(c)  "Award" means the grant of an Option, Restricted Stock, or other right or
      -----
     benefit under the Plan.

(d)  "Award Agreement" means the written agreement evidencing the grant of an
      ---------------
     Award executed by the Company and the Grantee, including any amendments
     thereto.

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

(f)  "Cause" means, with respect to the termination by the Company or a Related
      -----
     Entity of the Grantee's Continuous Service, that such termination is for
     "Cause" as such term is expressly defined in a then-effective written
     agreement between the Grantee and the Company or such Related Entity, or in
     the absence of such then-effective written agreement and definition, is
     based on, in the determination of the Administrator, the Grantee's: (i)
     performance of any act or failure to perform any act in bad faith and to
     the detriment of the Company or a Related Entity; (ii) dishonesty,
     intentional misconduct or material breach of any agreement with the Company
     or a Related Entity; or (iii) commission of a crime involving dishonesty,
     breach of trust, or physical or emotional harm to any person.

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

(h)  "Committee" means any committee appointed by the Board to administer the
      ---------
     Plan.

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

(j)  "Company" means Menerva Technologies, Inc., a Delaware corporation.
      -------

<PAGE>

(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 that the provision of services to the Company
        ------------------
       or a Related Entity in any capacity of Employee, Director or Consultant,
       is not interrupted or terminated. Continuous Service shall not be
       considered interrupted in the case of (i) any approved leave of absence,
       (ii) transfers among the Company, any Related Entity, or any successor,
       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 Award Agreement). An approved leave
       of absence shall include sick leave, military leave, or any other
       authorized personal leave. For purposes of Incentive Stock Options, no
       such leave may exceed ninety (90) days, unless reemployment upon
       expiration of such leave is guaranteed by statute or contract.

(m)    "Corporate Transaction" means any of the following transactions to which
        ---------------------
       the Company is a party:

(i)    a merger or consolidation in which the Company is not the surviving
       entity, except for a transaction the principal purpose of which is to
       change the state in which the Company is incorporated;

(ii)   the sale, transfer or other disposition of all or substantially all of
       the assets of the Company (including the capital stock of the Company's
       subsidiary corporations) in connection with the complete liquidation or
       dissolution of the Company;

(iii)  any reverse merger in which the Company is the surviving entity but in
       which securities possessing more than fifty percent (50%) of the total
       combined voting power of the Company's outstanding securities are
       transferred to a person or persons different from those who held such
       securities immediately prior to such merger; or

(iv)   acquisition by any person or related group of persons (other than the
       Company or by a Company-sponsored employee benefit plan) of beneficial
       ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
       securities possessing more than fifty percent (50%) of the total combined
       voting power of the Company's outstanding securities, but excluding any
       such transaction that the Administrator determines shall not be a
       Corporate Transaction.

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

(o)    "Disability" means that a Grantee would qualify for benefit payments
        ----------
       under the long-term disability policy of the Company or the Related
       Entity to which the Grantee provides services regardless of whether the
       Grantee is covered by such policy or is permanently unable to carry out
       the responsibilities and functions of the position held

<PAGE>

       by the Grantee by reason of any medically determinable physical or mental
       impairment. A Grantee will not be considered to have incurred a
       Disability unless he or she furnishes proof of such impairment sufficient
       to satisfy the Administrator in its discretion.

(p)    "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.

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

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

(i)    Where there exists a public market for the Common Stock, the Fair Market
       Value shall be (A) the closing price for a Share for the last market
       trading day prior to the time of the determination (or, if no closing
       price was reported on that date, on the last trading date on which a
       closing price was reported) on the stock exchange determined by the
       Administrator to be the primary market for the Common Stock or the Nasdaq
       National Market, whichever is applicable or (B) if the Common Stock is
       not traded on any such exchange or national market system, the average of
       the closing bid and asked prices of a Share on the Nasdaq Small Cap
       Market for the day prior to the time of the determination (or, if no such
       prices were reported on that date, on the last date on which such prices
       were reported), in each case, as reported in The Wall Street Journal or
       such other source as the Administrator deems reliable; or

(ii)   In the absence of an established market for the Common Stock of the type
       described in (i), above, the Fair Market Value thereof shall be
       determined by the Administrator in good faith and in a manner consistent
       with Section 260.140.50 of Title 10 of the California Code of
       Regulations.

(s)    "Grantee" means an Employee, Director or Consultant who receives an Award
        -------
       under the Plan.

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

(u)    "Non-Qualified Stock Option" means an Option not intended to qualify as
        --------------------------
       an Incentive Stock Option.

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

(w)    "Option" means an option to purchase Shares pursuant to an Award
        ------
       Agreement granted under the Plan.

<PAGE>

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

(y)  "Plan" means this 2000 Stock Incentive Plan.
      ----

(z)  "Post-Termination Exercise Period" means the period specified in the Award
      --------------------------------
     Agreement of not less than three (3) months commencing on the date of
     termination (other than termination by the Company or any Related Entity
     for Cause) of the Grantee's Continuous Service, or such longer period as
     may be applicable upon death or Disability.

(aa) "Registration Date" means the first to occur of (i) the closing of the
      -----------------
     first sale to the general public of (A) the Common Stock or (B) the same
     class of securities of a successor corporation (or its Parent) issued
     pursuant to a Corporate Transaction in exchange for or in substitution of
     the Common Stock, pursuant to a registration statement filed with and
     declared effective by the Securities and Exchange Commission under the
     Securities Act of 1933, as amended; and (ii) in the event of a Corporate
     Transaction, the date of the consummation of the Corporate Transaction if
     the same class of securities of the successor corporation (or its Parent)
     issuable in such Corporate Transaction shall have been sold to the general
     public pursuant to a registration statement filed with and declared
     effective by the Securities and Exchange Commission under the Securities
     Act of 1933, as amended, on or prior to the date of consummation of such
     Corporate Transaction.

(bb) "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.

(cc) "Restricted Stock" means Shares issued under the Plan to the Grantee for
      ----------------
     such consideration, if any, and subject to such restrictions on transfer,
     rights of first refusal, repurchase provisions, forfeiture provisions, and
     other terms and conditions as established by the Administrator.

(dd) "Share" means a share of the Common Stock.
      -----

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

 3.  Stock Subject to the Plan.
     -------------------------

(a)  Subject to the provisions of Section 11(a) below, the maximum aggregate
     number of Shares which may be issued pursuant to all Awards (including
     Incentive Stock Options) is two million one hundred sixty thousand
     (2,160,000) Shares. The Shares may be authorized, but unissued, or
     reacquired Common Stock.

(b)  Any Shares covered by an Award (or portion of an Award) which is forfeited
     or canceled, expires or is settled in cash, shall be deemed not to have
     been issued for purposes of determining the maximum aggregate number of
     Shares which may be

<PAGE>

       issued under the Plan. Shares that actually have been issued under the
       Plan pursuant to an Award shall not be returned to the Plan and shall not
       become available for future issuance under the Plan, except that if
       unvested Shares are forfeited, or repurchased by the Company at their
       original purchase price, such Shares shall become available for future
       grant under the Plan.

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

  (a)  Plan Administrator. With respect to grants of Awards to Employees,
       ------------------
       Directors, or Consultants, the Plan shall be administered by (A) the
       Board or (B) a Committee (or a subcommittee of the Committee) designated
       by the Board, which Committee shall be constituted in such a manner as to
       satisfy Applicable Laws. Once appointed, such Committee shall continue to
       serve in its designated capacity until otherwise directed by the Board.

  (b)  Multiple Administrative Bodies. The Plan may be administered by different
       ------------------------------
       bodies with respect to Directors, Officers, Consultants, and Employees
       who are neither Directors nor Officers.

  (c)  Powers of the Administrator. Subject to Applicable Laws and the
       ---------------------------
       provisions of the Plan (including any other powers given to the
       Administrator hereunder), and except as otherwise provided by the Board,
       the Administrator shall have the authority, in its discretion:

  (i)  to select the Employees, Directors and Consultants to whom Awards may be
       granted from time to time hereunder;

 (ii)  to determine whether and to what extent Awards are granted hereunder;

(iii)  to determine the number of Shares or the amount of other consideration to
       be covered by each Award granted hereunder;

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

  (v)  to determine the terms and conditions of any Award granted hereunder;

 (vi)  to establish additional terms, conditions, rules or procedures to
       accommodate the rules or laws of applicable foreign jurisdictions and to
       afford Grantees favorable treatment under such rules or laws; provided,
       however, that no Award shall be granted under any such additional terms,
       conditions, rules or procedures with terms or conditions which are
       inconsistent with the provisions of the Plan;

(vii)  to amend the terms of any outstanding Award granted under the Plan,
       provided that any amendment that would adversely affect the Grantee's
       rights under an outstanding Award shall not be made without the Grantee's
       written consent;

<PAGE>

(viii) to construe and interpret the terms of the Plan and Awards, including
       without limitation, any notice of award or Award Agreement, granted
       pursuant to the Plan; and

(ix)   to take such other action, not inconsistent with the terms of the Plan,
       as the Administrator deems appropriate.

  5.   Eligibility. Awards other than Incentive Stock Options may be granted to
       -----------
       Employees, Directors and Consultants. Incentive Stock Options may be
       granted only to Employees of the Company, a Parent or a Subsidiary. An
       Employee, Director or Consultant who has been granted an Award may, if
       otherwise eligible, be granted additional Awards. Awards may be granted
       to such Employees, Directors or Consultants who are residing in foreign
       jurisdictions as the Administrator may determine from time to time.

  6.   Terms and Conditions of Awards.
       ------------------------------

 (a)   Type of Awards. The Administrator is authorized under the Plan to award
       --------------
       any type of arrangement to an Employee, Director or Consultant that is
       not inconsistent with the provisions of the Plan and that by its terms
       involves or might involve the issuance of (i) Shares, (ii) an Option, or
       (iii) any other security with the value derived from the value of the
       Shares. Such awards include, without limitation, Options, or sales or
       bonuses of Restricted Stock, and an Award may consist of one or more such
       securities or benefits in any combination or alternative.

 (b)   Designation of Award. Each Award shall be designated in the Award
       --------------------
       Agreement. In the case of an Option, the Option shall be designated as
       either an Incentive Stock Option or a Non-Qualified Stock Option.
       However, notwithstanding such designation, to the extent that the
       aggregate Fair Market Value of Shares subject to Options designated as
       Incentive Stock Options which become exercisable for the first time by a
       Grantee during any calendar year (under all plans of the Company or any
       Parent or Subsidiary) exceeds $100,000, such excess Options, to the
       extent of the Shares covered thereby in excess of the foregoing
       limitation, shall be treated as Non-Qualified Stock Options. For this
       purpose, Incentive Stock Options shall be taken into account in the order
       in which they were granted, and the Fair Market Value of the Shares shall
       be determined as of the grant date of the relevant Option.

 (c)   Conditions of Award. Subject to the terms of the Plan, the Administrator
       -------------------
       shall determine the provisions, terms, and conditions of each Award
       including, but not limited to, the Award vesting schedule, repurchase
       provisions, rights of first refusal, forfeiture provisions, form of
       payment (cash, Shares, or other consideration) upon settlement of the
       Award, payment contingencies, and satisfaction of any performance
       criteria. The performance criteria established by the Administrator may
       be based on any one of, or combination of, increase in share price,
       earnings per share, total shareholder return, return on equity, return on
       assets, return on investment, net operating income, cash flow, revenue,
       economic value added, personal management objectives, or other measure of
       performance selected by the Administrator. Partial

<PAGE>

     achievement of the specified criteria may result in a payment or vesting
     corresponding to the degree of achievement as specified in the Award
     Agreement.

(d)  Acquisitions and Other Transactions. The Administrator may issue Awards
     -----------------------------------
     under the Plan in settlement, assumption or substitution for, outstanding
     awards or obligations to grant future awards in connection with the Company
     or a Related Entity acquiring another entity, an interest in another entity
     or an additional interest in a Related Entity whether by merger, stock
     purchase, asset purchase or other form of transaction.

(e)  Deferral of Award Payment. The Administrator may establish one or more
     -------------------------
     programs under the Plan to permit selected Grantees the opportunity to
     elect to defer receipt of consideration upon exercise of an Award,
     satisfaction of performance criteria, or other event that absent the
     election would entitle the Grantee to payment or receipt of Shares or other
     consideration under an Award. The Administrator may establish the election
     procedures, the timing of such elections, the mechanisms for payments of,
     and accrual of interest or other earnings, if any, on amounts, Shares or
     other consideration so deferred, and such other terms, conditions, rules
     and procedures that the Administrator deems advisable for the
     administration of any such deferral program.

(f)  Award Exchange Programs. The Administrator may establish one or more
     -----------------------
     programs under the Plan to permit selected Grantees to exchange an Award
     under the Plan for one or more other types of Awards under the Plan on such
     terms and conditions as determined by the Administrator from time to time.

(g)  Separate Programs. The Administrator may establish one or more separate
     -----------------
     programs under the Plan for the purpose of issuing particular forms of
     Awards to one or more classes of Grantees on such terms and conditions as
     determined by the Administrator from time to time.

(h)  Early Exercise. The Award Agreement may, but need not, include a provision
     --------------
     whereby the Grantee may elect at any time while an Employee, Director or
     Consultant to exercise any part or all of the Award prior to full vesting
     of the Award. Any unvested Shares received pursuant to such exercise may be
     subject to a repurchase right in favor of the Company or a Related Entity
     or to any other restriction the Administrator determines to be appropriate.

(i)  Term of Award. The term of each Award shall be the term stated in the Award
     -------------
     Agreement, provided, however, that the term shall be no more than ten (10)
     years from the date of grant thereof. However, in the case of an Incentive
     Stock Option granted to a Grantee who, at the time the Option is granted,
     owns stock representing more than ten percent (10%) of the voting power of
     all classes of stock of the Company or any Parent or Subsidiary, the term
     of the Incentive Stock Option shall be five (5) years from the date of
     grant thereof or such shorter term as may be provided in the Award
     Agreement.

<PAGE>

(j)     Transferability of Awards. Non-Qualified Stock Options shall be
        -------------------------
        transferable (i) at the discretion of the Administrator and to the
        extent provided in the Award Agreement and in a manner consistent with
        Section 260.140.41 of Title 10 of the California Code of Regulations and
        (ii) by will, and by the laws of descent and distribution. Incentive
        Stock Options and other Awards may not be sold, pledged, assigned,
        hypothecated, transferred, or disposed of in any manner other than by
        will or by the laws of descent or distribution and may be exercised,
        during the lifetime of the Grantee, only by the Grantee.

(k)     Time of Granting Awards. The date of grant of an Award shall for all
        -----------------------
        purposes be the date on which the Administrator makes the determination
        to grant such Award, or such other date as is determined by the
        Administrator. Notice of the grant determination shall be given to each
        Employee, Director or Consultant to whom an Award is so granted within a
        reasonable time after the date of such grant.

7.      Award Exercise or Purchase Price, Consideration and Taxes.
        ---------------------------------------------------------

(a)     Exercise or Purchase Price. The exercise or purchase price, if any, for
        --------------------------
        an Award shall be as follows:

(i)     In the case of an Incentive Stock Option:

(A)     granted to an Employee who, at the time of the grant of such Incentive
        Stock Option owns stock representing more than ten percent (10%) of the
        voting power of all classes of stock of the Company or any Parent or
        Subsidiary, the per Share exercise price shall be not less than one
        hundred ten percent (110%) of the Fair Market Value per Share on the
        date of grant; or

(B)     granted to any Employee other than an Employee described in the
        preceding paragraph, the per Share exercise price shall be not less than
        one hundred percent (100%) of the Fair Market Value per Share on the
        date of grant.

(ii)    In the case of a Non-Qualified Stock Option:

(A)     granted to a person who, at the time of the grant of such Option, owns
        stock representing more than ten percent (10%) of the voting power of
        all classes of stock of the Company or any Parent or Subsidiary, the per
        Share exercise price shall be not less than one hundred ten percent
        (110%) of the Fair Market Value per Share on the date of grant; or

(B)     granted to any person other than a person described in the preceding
        paragraph, the per Share exercise price shall be not less than
        eighty-five percent (85%) of the Fair Market Value per Share on the date
        of grant.

(iii)   In the case of the sale of Shares:

(A)     granted to a person who, at the time of the grant of such Award, or at
        the time the purchase is consummated, owns stock representing more than
        ten percent (10%) of

<PAGE>

        the voting power of all classes of stock of the Company or any Parent or
        Subsidiary, the per Share purchase price shall be not less than one
        hundred percent (100%) of the Fair Market Value per Share on the date of
        grant; or

(B)     granted to any person other than a person described in the preceding
        paragraph, the per Share purchase price shall be not less than
        eighty-five percent (85%) of the Fair Market Value per Share on the date
        of grant.

(iv)    In the case of other Awards, such price as is determined by the
        Administrator.

(v)     Notwithstanding the foregoing provisions of this Section 7(a), in the
        case of an Award issued pursuant to Section 6(d), above, the exercise or
        purchase price for the Award shall be determined in accordance with the
        principles of Section 424(a) of the Code.

(b)     Consideration. Subject to Applicable Laws, the consideration to be paid
        -------------
        for the Shares to be issued upon exercise or purchase of an Award
        including the method of payment, shall be determined by the
        Administrator (and, in the case of an Incentive Stock Option, shall be
        determined at the time of grant). In addition to any other types of
        consideration the Administrator may determine, the Administrator is
        authorized to accept as consideration for Shares issued under the Plan
        the following, provided that the portion of the consideration equal to
        the par value of the Shares must be paid in cash or other legal
        consideration permitted by the Delaware General Corporation Law:

(i)     cash;

(ii)    check;

(iii)   delivery of Grantee's promissory note with such recourse, interest,
        security, and redemption provisions as the Administrator determines as
        appropriate;

(iv)    if the exercise or purchase occurs on or after the Registration Date,
        surrender of Shares or delivery of a properly executed form of
        attestation of ownership of Shares as the Administrator may require
        (including withholding of Shares otherwise deliverable upon exercise of
        the Award) which have a Fair Market Value on the date of surrender or
        attestation equal to the aggregate exercise price of the Shares as to
        which said Award shall be exercised (but only to the extent that such
        exercise of the Award would not result in an accounting compensation
        charge with respect to the Shares used to pay the exercise price unless
        otherwise determined by the Administrator);

(v)     with respect to Options, if the exercise occurs on or after the
        Registration Date, payment through a broker-dealer sale and remittance
        procedure pursuant to which the Grantee (A) shall provide written
        instructions to a Company designated brokerage firm to effect the
        immediate sale of some or all of the purchased Shares and remit to the
        Company, out of the sale proceeds available on the settlement date,
        sufficient funds to cover the aggregate exercise price payable for the
        purchased Shares and (B)

<PAGE>

      shall provide written directives to the Company to deliver the
      certificates for the purchased Shares directly to such brokerage firm in
      order to complete the sale transaction; or

(vi)  any combination of the foregoing methods of payment.

(c)   Taxes. No Shares shall be delivered under the Plan to any Grantee or other
      -----
      person until such Grantee or other person has made arrangements acceptable
      to the Administrator for the satisfaction of any foreign, federal, state,
      or local income and employment tax withholding obligations, including,
      without limitation, obligations incident to the receipt of Shares or the
      disqualifying disposition of Shares received on exercise of an Incentive
      Stock Option. Upon exercise of an Award the Company shall withhold or
      collect from Grantee an amount sufficient to satisfy such tax obligations.

8.    Exercise of Award.
      -----------------

(a)   Procedure for Exercise; Rights as a Shareholder.
      -----------------------------------------------

(i)   Any Award granted hereunder shall be exercisable at such times and under
      such conditions as determined by the Administrator under the terms of the
      Plan and specified in the Award Agreement but in the case of an Option, in
      no case at a rate of less than twenty percent (20%) per year over five (5)
      years from the date the Option is granted, subject to reasonable
      conditions such as continued employment. Notwithstanding the foregoing, in
      the case of an Option granted to an Officer, Director or Consultant, the
      Award Agreement may provide that the Option may become exercisable,
      subject to reasonable conditions such as such Officer's, Director's or
      Consultant's Continuous Service, at any time or during any period
      established in the Award Agreement.

(ii)  An Award shall be deemed to be exercised when written notice of such
      exercise has been given to the Company in accordance with the terms of the
      Award by the person entitled to exercise the Award and full payment for
      the Shares with respect to which the Award is exercised, including, to the
      extent selected, use of the broker-dealer sale and remittance procedure to
      pay the purchase price as provided in Section 7(b)(v). Until the issuance
      (as evidenced by the appropriate entry on the books of the Company or of a
      duly authorized transfer agent of the Company) of the stock certificate
      evidencing such Shares, no right to vote or receive dividends or any other
      rights as a shareholder shall exist with respect to Shares subject to an
      Award, notwithstanding the exercise of an Option or other Award. No
      adjustment will be made for a dividend or other right for which the record
      date is prior to the date the stock certificate is issued, except as
      provided in the Award Agreement or Section 11(a), below.

(b)   Exercise of Award Following Termination of Continuous Service. In the
      -------------------------------------------------------------
      event of termination of a Grantee's Continuous Service for any reason
      other than Disability or death (but not in the event of a Grantee's change
      of status from Employee to

<PAGE>

      Consultant or from Consultant to Employee), such Grantee may, but only
      during the Post-Termination Exercise Period (but in no event later than
      the expiration date of the term of such Award as set forth in the Award
      Agreement), exercise the Award to the extent that the Grantee was entitled
      to exercise it at the date of such termination or to such other extent as
      may be determined by the Administrator. The Grantee's Award Agreement may
      provide that upon the termination of the Grantee's Continuous Service for
      Cause, the Grantee's right to exercise the Award shall terminate
      concurrently with the termination of Grantee's Continuous Service. In the
      event of a Grantee's change of status from Employee to Consultant, an
      Employee's Incentive Stock Option shall convert automatically to a
      Non-Qualified Stock Option on the day three (3) months and one day
      following such change of status. To the extent that the Grantee is not
      entitled to exercise the Award at the date of termination, or if the
      Grantee does not exercise such Award to the extent so entitled within the
      Post-Termination Exercise Period, the Award shall terminate.

(c)   Disability of Grantee. In the event of termination of a Grantee's
      ---------------------
      Continuous Service as a result of his or her Disability, Grantee may, but
      only within twelve (12) months from the date of such termination (and in
      no event later than the expiration date of the term of such Award as set
      forth in the Award Agreement), exercise the Award to the extent that the
      Grantee was otherwise entitled to exercise it at the date of such
      termination; provided, however, that if such Disability is not a
      "disability" as such term is defined in Section 22(e)(3) of the Code, in
      the case of an Incentive Stock Option such Incentive Stock Option shall
      automatically convert to a Non-Qualified Stock Option on the day three (3)
      months and one day following such termination. To the extent that the
      Grantee is not entitled to exercise the Award at the date of termination,
      or if Grantee does not exercise such Award to the extent so entitled
      within the time specified herein, the Award shall terminate.

(d)   Death of Grantee. In the event of a termination of the Grantee's
      ----------------
      Continuous Service as a result of his or her death, or in the event of the
      death of the Grantee during the Post-Termination Exercise Period or during
      the twelve (12) month period following the Grantee's termination of
      Continuous Service as a result of his or her Disability, the Grantee's
      estate or a person who acquired the right to exercise the Award by bequest
      or inheritance may exercise the Award, but only to the extent that the
      Grantee was entitled to exercise the Award as of the date of termination,
      within twelve (12) months from the date of death (but in no event later
      than the expiration of the term of such Award as set forth in the Award
      Agreement). To the extent that, at the time of death, the Grantee was not
      entitled to exercise the Award, or if the Grantee's estate or a person who
      acquired the right to exercise the Award by bequest or inheritance does
      not exercise such Award to the extent so entitled within the time
      specified herein, the Award shall terminate.

 9.   Conditions Upon Issuance of Shares.
      ----------------------------------

(a)   Shares shall not be issued pursuant to the exercise of an Award unless the
      exercise of such Award and the issuance and delivery of such Shares
      pursuant thereto shall

<PAGE>

      comply with all Applicable Laws, and shall be further subject to the
      approval of counsel for the Company with respect to such compliance.

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

10.   Repurchase Rights. If the provisions of an Award Agreement grant to the
      -----------------
      Company the right to repurchase Shares upon termination of the Grantee's
      Continuous Service, the Award Agreement shall (or may, with respect to
      Awards granted or issued to Officers, Directors or Consultants) provide
      that:

(a)   the right to repurchase must be exercised, if at all, within ninety (90)
      days of the termination of the Grantee's Continuous Service (or in the
      case of Shares issued upon exercise of Awards after the date of
      termination of the Grantee's Continuous Service, within ninety (90) days
      after the date of the Award exercise);

(b)   the consideration payable for the Shares upon exercise of such repurchase
      right shall be made in cash or by cancellation of purchase money
      indebtedness within the ninety (90) day periods specified in Section
      10(a);

(c)   the amount of such consideration shall (i) be equal to the original
      purchase price paid by Grantee for each such Share; provided, that the
      right to repurchase such Shares at the original purchase price shall lapse
      at the rate of at least twenty percent (20%) of the Shares subject to the
      Award per year over five (5) years from the date the Award is granted
      (without respect to the date the Award was exercised or became
      exercisable), and (ii) with respect to Shares, other than Shares subject
      to repurchase at the original purchase price pursuant to clause (i) above,
      not less than the Fair Market Value of the Shares to be repurchased on the
      date of termination of Grantee's Continuous Service; and

(d)   the right to repurchase Shares, other than the right to repurchase Shares
      at the original purchase price pursuant to clause (i) of Section 10(c),
      shall terminate on the Registration Date.

11.   Adjustments Upon Changes in Capitalization or Corporate Transaction.
      -------------------------------------------------------------------

(a)   Adjustments upon Changes in Capitalization. Subject to any required action
      ------------------------------------------
      by the shareholders of the Company, the number of Shares covered by each
      outstanding Award, and the number of Shares which have been authorized for
      issuance under the Plan but as to which no Awards have yet been granted or
      which have been returned to the Plan, the exercise or purchase price of
      each such outstanding Award, as well as any other terms that the
      Administrator determines require adjustment shall be proportionately
      adjusted for (i) any increase or decrease in the number of issued Shares
      resulting from a stock split, reverse stock split, stock dividend,
      combination or reclassification of the Shares, or similar transaction
      affecting the Shares, (ii) any other

<PAGE>

      increase or decrease in the number of issued Shares effected without
      receipt of consideration by the Company, or (iii) as the Administrator may
      determine in its discretion, any other transaction with respect to Common
      Stock to which Section 424(a) of the Code applies or a similar
      transaction; provided, however that conversion of any convertible
      securities of the Company shall not be deemed to have been "effected
      without receipt of consideration." Such adjustment shall be made by the
      Administrator and its determination shall be final, binding and
      conclusive. Except as the Administrator determines, no issuance by the
      Company of shares of stock of any class, or securities convertible into
      shares of stock of any class, shall affect, and no adjustment by reason
      hereof shall be made with respect to, the number or price of Shares
      subject to an Award.

(b)   Corporate Transaction.
      ---------------------

      (i)   Termination of Award if Not Assumed. In the event of a Corporate
            -----------------------------------
Transaction, each Award will terminate upon the consummation of the Corporate
Transaction, unless the Award is assumed by the successor corporation or Parent
thereof in connection with the Corporate Transaction.

      (ii)  Acceleration of Award Upon Corporate Transaction. Except as provided
            ------------------------------------------------
otherwise in an individual Award Agreement, in the event of any Corporate
Transaction there will not be any acceleration of vesting or exercisability of
any Award.

12.   Effective Date and Term of Plan. The Plan shall become effective upon the
      -------------------------------
      earlier to occur of its adoption by the Board or its approval by the
      shareholders of the Company. It shall continue in effect for a term of ten
      (10) years unless sooner terminated. Subject to Section 17, below, and
      Applicable Laws, Awards may be granted under the Plan upon its becoming
      effective.

13.   Amendment, Suspension or Termination of the Plan.
      ------------------------------------------------

(a)   The Board may at any time amend, suspend or terminate the Plan. To the
      extent necessary to comply with Applicable Laws, the Company shall obtain
      shareholder approval of any Plan amendment in such a manner and to such a
      degree as required.

(b)   No Award may be granted during any suspension of the Plan or after
      termination of the Plan.

(c)   Any amendment, suspension or termination of the Plan (including
      termination of the Plan under Section 12, above) shall not affect Awards
      already granted, and such Awards shall remain in full force and effect as
      if the Plan had not been amended, suspended or terminated, unless mutually
      agreed otherwise between the Grantee and the Administrator, which
      agreement must be in writing and signed by the Grantee and the Company.

<PAGE>

14.   Reservation of Shares.
      ---------------------

(a)   The Company, during the term of the Plan, will at all times reserve and
      keep available such number of Shares as shall be sufficient to satisfy the
      requirements of the Plan.

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

15.   No Effect on Terms of Employment/Consulting Relationship. The Plan shall
      --------------------------------------------------------
      not confer upon any Grantee any right with respect to the Grantee's
      Continuous Service, nor shall it interfere in any way with his or her
      right or the Company's right to terminate the Grantee's Continuous Service
      at any time, with or without cause, and with or without notice. The
      Company's ability to terminate the employment of a Grantee who is employed
      at will is in no way affected by its determination that the Grantee's
      Continuous Service has been terminated for Cause for the purposes of this
      Plan.

16.   No Effect on Retirement and Other Benefit Plans. Except as specifically
      -----------------------------------------------
      provided in a retirement or other benefit plan of the Company or a Related
      Entity, Awards shall not be deemed compensation for purposes of computing
      benefits or contributions under any retirement plan of the Company or a
      Related Entity, and shall not affect any benefits under any other benefit
      plan of any kind or any benefit plan subsequently instituted under which
      the availability or amount of benefits is related to level of
      compensation. The Plan is not a "Retirement Plan" or "Welfare Plan" under
      the Employee Retirement Income Security Act of 1974, as amended.

17.   Shareholder Approval. Continuance of the Plan shall be subject to approval
      --------------------
      by the shareholders of the Company within twelve (12) months before or
      after the date the Plan is adopted. Such shareholder approval shall be
      obtained in the degree and manner required under Applicable Laws. Any
      Award exercised before shareholder approval is obtained shall be rescinded
      if shareholder approval is not obtained within the time prescribed, and
      Shares issued on the exercise of any such Award shall not be counted in
      determining whether shareholder approval is obtained.

18.   Information to Grantees.  The Company shall provide to each Grantee,
      -----------------------
      during the period for which such Grantee has one or more Awards
      outstanding, copies of financial statements at least annually.

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