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                              LASERCARD CORPORATION

                     2004 EQUITY INCENTIVE COMPENSATION PLAN

                    (Adopted by the Board on August 9, 2004)

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                                TABLE OF CONTENTS

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SECTION 1. ESTABLISHMENT AND PURPOSE..............................................................................1

SECTION 2. DEFINITIONS............................................................................................1
         (a)    "Affiliate".......................................................................................1
         (b)    "Award"...........................................................................................1
         (c)    "Board of Directors"..............................................................................1
         (d)    "Change in Control"...............................................................................1
         (e)    "Code"............................................................................................2
         (f)    "Committee".......................................................................................2
         (g)    "Company".........................................................................................2
         (h)    "Consultant"......................................................................................2
         (i)    "Employee"........................................................................................2
         (j)    "Exchange Act"....................................................................................2
         (k)    "Exercise Price"..................................................................................2
         (l)    "Fair Market Value"...............................................................................2
         (m)    "ISO".............................................................................................3
         (n)    "Nonstatutory Option" or "NSO"....................................................................3
         (o)    "Offeree".........................................................................................3
         (p)    "Option"..........................................................................................3
         (q)    "Optionee"........................................................................................3
         (r)    "Outside Director"................................................................................3
         (s)    "Parent"..........................................................................................3
         (t)    "Participant".....................................................................................3
         (u)    "Plan"............................................................................................3
         (v)    "Purchase Price"..................................................................................3
         (w)    "Restricted Share"................................................................................3
         (x)    "Restricted Share Agreement"......................................................................3
         (y)    "SAR".............................................................................................3
         (z)    "SAR Agreement"...................................................................................3
         (aa)   "Service".........................................................................................3
         (bb)   "Share"...........................................................................................3
         (cc)   "Stock"...........................................................................................3
         (dd)   "Stock Option Agreement"..........................................................................4
         (ee)   "Stock Unit"......................................................................................4
         (ff)   "Stock Unit Agreement"............................................................................4
         (gg)   "Subsidiary"......................................................................................4
         (hh)   "Total and Permanent Disability"..................................................................4

SECTION 3. ADMINISTRATION.........................................................................................4
         (a)    Committee Composition.............................................................................4
         (b)    Committee for Non-Officer Grants..................................................................4
         (c)    Committee Procedures..............................................................................4
         (d)    Committee Responsibilities........................................................................4

SECTION 4. ELIGIBILITY............................................................................................5
         (a)    General Rule......................................................................................5
         (b)    Automatic Grants to Outside Directors.............................................................6
         (c)    Ten-Percent Stockholders..........................................................................6
         (d)    Attribution Rules.................................................................................6
         (e)    Outstanding Stock.................................................................................6
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SECTION 5. STOCK SUBJECT TO PLAN..................................................................................6
         (a)    Basic Limitation..................................................................................6
         (b)    Individual Award Limitation.......................................................................7
         (c)    Additional Shares.................................................................................7

SECTION 6. RESTRICTED SHARES......................................................................................7
         (a)    Restricted Stock Agreement........................................................................7
         (b)    Payment for Awards................................................................................7
         (c)    Vesting...........................................................................................7
         (d)    Voting and Dividend Rights........................................................................7
         (e)    Restrictions on Transfer of Shares................................................................7

SECTION 7. TERMS AND CONDITIONS OF OPTIONS........................................................................7
         (a)    Stock Option Agreement............................................................................7
         (b)    Number of Shares..................................................................................8
         (c)    Exercise Price....................................................................................8
         (d)    Withholding Taxes.................................................................................8
         (e)    Exercisability and Term...........................................................................8
         (f)    Exercise of Options Upon Termination of Service...................................................8
         (g)    Effect of Change in Control.......................................................................8
         (h)    Leaves of Absence.................................................................................8
         (i)    No Rights as a Stockholder........................................................................8
         (j)    Modification, Extension and Renewal of Options....................................................8
         (k)    Restrictions on Transfer of Shares................................................................9

SECTION 8. PAYMENT FOR SHARES.....................................................................................9
         (a)    General Rule......................................................................................9
         (b)    Surrender of Stock................................................................................9
         (c)    Services Rendered.................................................................................9
         (d)    Cashless Exercise.................................................................................9
         (e)    Exercise/Pledge...................................................................................9
         (f)    Other Forms of Payment............................................................................9
         (g)    Limitations under Applicable Law..................................................................9

SECTION 9. STOCK APPRECIATION RIGHTS..............................................................................9
         (a)    SAR Agreement....................................................................................10
         (b)    Number of Shares.................................................................................10
         (c)    Exercise Price...................................................................................10
         (d)    Exercisability and Term..........................................................................10
         (e)    Effect of Change in Control......................................................................10
         (f)    Exercise of SARs.................................................................................10
         (g)    Modification or Assumption of SARs...............................................................10

SECTION 10. STOCK UNITS..........................................................................................10
         (a)    Stock Unit Agreement.............................................................................10
         (b)    Payment for Awards...............................................................................10
         (c)    Vesting Conditions...............................................................................10
         (d)    Voting and Dividend Rights.......................................................................11
         (e)    Form and Time of Settlement of Stock Units.......................................................11
         (f)    Death of Recipient...............................................................................11
         (g)    Creditors' Rights................................................................................11

SECTION 11. TRANSFERABILITY; PERFORMANCE GOALS...................................................................11
         (a)    Transferability..................................................................................11
         (b)    Performance Goals................................................................................11
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SECTION 12. ADJUSTMENT OF SHARES.................................................................................12
         (a)    Adjustments......................................................................................12
         (b)    Dissolution or Liquidation.......................................................................12
         (c)    Reorganizations..................................................................................12
         (d)    Reservation of Rights............................................................................12

SECTION 13. DEFERRAL OF AWARDS...................................................................................13

SECTION 14. AWARDS UNDER OTHER PLANS.............................................................................13

SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.............................................................13
         (a)    Effective Date...................................................................................13
         (b)    Elections to Receive NSOs, Restricted Shares or Stock Units......................................13
         (c)    Number and Terms of NSOs, Restricted Shares or Stock Units.......................................13

SECTION 16. LEGAL AND REGULATORY REQUIREMENTS....................................................................14

SECTION 17. WITHHOLDING TAXES....................................................................................14
         (a)    General..........................................................................................14
         (b)    Share Withholding................................................................................14

SECTION 18. NO EMPLOYMENT RIGHTS.................................................................................14

SECTION 19. DURATION AND AMENDMENTS..............................................................................14
         (a)    Term of the Plan.................................................................................14
         (b)    Right to Amend or Terminate the Plan.............................................................14
         (c)    Effect of Termination............................................................................14

SECTION 20. EXECUTION............................................................................................15
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                              LASERCARD CORPORATION

                     2004 EQUITY INCENTIVE COMPENSATION PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE.

        The Plan was adopted by the Board of Directors on August 9, 2004,
subject to stockholder approval, which was effective on October 1, 2004 (the
"Effective Date"). The plan is a successor to the Company's Amended and Restated
Stock Option Plan (the "Prior Plan"). As of the Effective Date, no further
awards shall be made under the Prior Plan. However, the provisions of the Prior
Plan shall continue to apply to awards granted under the Prior Plan prior to the
Effective Date. In the event that this Plan is not approved by stockholders,
awards shall continue to be made under the Prior Plan in accordance with its
terms. The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging Employees,
Outside Directors and Consultants to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of restricted shares, stock units, options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.

SECTION 2. DEFINITIONS.

        (A)     "AFFILIATE" shall mean any entity other than a Subsidiary, if
the Company and/or one of more Subsidiaries own not less than 50% of such
entity.

        (B)     "AWARD" shall mean any award of an Option, a SAR, a Restricted
Share or a Stock Unit under the Plan.

        (C)     "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.

        (D)     "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:

                (i)     A change in the composition of the Board of Directors
occurs, as a result of which fewer than one-half of the incumbent directors are
directors who either:

                        (A)     Had been directors of the Company on the
"look-back date" (as defined below) (the "original directors"); or

                        (B)     Were elected, or nominated for election, to the
Board of Directors with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time of the
election or nomination and the directors whose election or nomination was
previously so approved (the "continuing directors"); or

                (ii)    Any "person" (as defined below) who by the acquisition
or aggregation of securities, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights accruing
under special circumstances) having the right to vote at elections of directors
(the "Base Capital Stock"); except that any change in the relative beneficial
ownership of the Company's securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base Capital Stock,
and any decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or indirectly,
such person's beneficial ownership of any securities of the Company; or

                (iii)   The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
persons who were not stockholders of the Company immediately

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prior to such merger, consolidation or other reorganization own immediately
after such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the continuing or
surviving entity and (B) any direct or indirect parent corporation of such
continuing or surviving entity; or

                (iv)    The sale, transfer or other disposition of all or
substantially all of the Company's assets.

        For purposes of subsection (d)(i) above, the term "look-back" date shall
mean the later of (1) the Effective Date or (2) the date 24 months prior to the
date of the event that may constitute a Change in Control.

        For purposes of subsection (d)(ii) above, the term "person" shall have
the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act
but shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent or Subsidiary and
(2) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the Stock.

        Any other provision of this Section 2(d) notwithstanding, a transaction
shall not constitute a Change in Control if its sole purpose is to change the
state of the Company's incorporation or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
Company's securities immediately before such transaction.

        (E)     "CODE" shall mean the United States Internal Revenue Code of
1986, as amended.

        (F)     "COMMITTEE" shall mean the Compensation Committee as designated
by the Board of Directors, which is authorized to administer the Plan, as
described in Section 3 hereof.

        (G)     "COMPANY" shall means LaserCard Corporation, a Delaware
corporation.

        (H)     "CONSULTANT" shall mean a consultant or advisor who provides
bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor or a member of the board of directors of a Parent or a
Subsidiary who is not an Employee. Service as a Consultant shall be considered
Service for all purposes of the Plan.

        (I)     "EMPLOYEE" shall mean any individual who is a common-law
employee of the Company, a Parent or a Subsidiary.

        (J)     "EXCHANGE ACT" shall mean the United States Securities Exchange
Act of 1934, as amended.

        (K)     "EXERCISE PRICE" shall mean, in the case of an Option, the
amount for which one Common Share may be purchased upon exercise of such Option,
as specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.

        (L)     "FAIR MARKET VALUE" with respect to a Share, shall mean the
market price of one Share of Stock, determined by the Committee as follows:

                (i)     If the Stock was traded over-the-counter in the United
Sates on the date in question but was not traded on The United States Nasdaq
Stock Market, then the Fair Market Value shall be equal to the last transaction
price quoted for such date by the United States OTC Bulletin Board or, if not so
quoted, shall be equal to the mean between the last reported representative bid
and asked prices quoted for such date by the principal United States automated
inter-dealer quotation system on which the Stock is quoted or, if the Stock is
not quoted on any such system, by the Pink Sheets LLC;

                (ii)    If the Stock was traded on The United States Nasdaq
Stock Market, then the Fair Market Value shall be equal to the last reported
sale price quoted for such date by The United States Nasdaq Stock Market;

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                (iii)   If the Stock was traded on a United States stock
exchange on the date in question, then the Fair Market Value shall be equal to
the closing price reported for such date by the applicable
composite-transactions report; and

                (iv)    If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.

In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.

        (M)     "ISO" shall mean an employee incentive stock option described in
Section 422 of the Code.

        (N)     "NONSTATUTORY OPTION" OR "NSO" shall mean an employee stock
option that is not an ISO.

        (O)     "OFFEREE" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan (other than upon exercise of
an Option).

        (P)     "OPTION" shall mean an ISO or Nonstatutory Option granted under
the Plan and entitling the holder to purchase Shares.

        (Q)     "OPTIONEE" shall mean an individual or estate who holds an
Option or SAR.

        (R)     "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors
who is not a common-law employee of, or paid consultant to, the Company, a
Parent or a Subsidiary. Service as an Outside Director shall be considered
Service for all purposes of the Plan, except as provided in Section 4(a).

        (S)     "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be a Parent commencing as of such
date.

        (T)     "PARTICIPANT" shall mean an individual or estate who holds an
Award.

        (U)     "PLAN" shall mean this 2004 Equity Incentive Compensation Plan
of LaserCard Corporation, as amended from time to time.

        (V)     "PURCHASE PRICE" shall mean the consideration for which one
Share may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.

        (W)     "RESTRICTED SHARE" shall mean a Share awarded under the Plan.

        (X)     "RESTRICTED SHARE AGREEMENT" shall mean the agreement between
the Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.

        (Y)     "SAR" shall mean a stock appreciation right granted under the
Plan.

        (Z)     "SAR AGREEMENT" shall mean the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions pertaining to
his or her SAR.

        (AA)    "SERVICE" shall mean service as an Employee, Consultant or
Outside Director.

        (BB)    "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 (if applicable).

        (CC)    "STOCK" shall mean the Common Stock of the Company.

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        (DD)    "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his Option.

        (EE)    "STOCK UNIT" shall mean a bookkeeping entry representing the
equivalent of one Share, as awarded under the Plan.

        (FF)    "STOCK UNIT AGREEMENT" shall mean the agreement between the
Company and the recipient of a Stock Unit which contains the terms, conditions
and restrictions pertaining to such Stock Unit.

        (GG)    "SUBSIDIARY" shall mean any corporation, if the Company and/or
one or more other Subsidiaries own not less than 50% of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.

        (HH)    "TOTAL AND PERMANENT DISABILITY" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted, or can be expected to last, for a continuous period of
not less than 12 months.

SECTION 3. ADMINISTRATION.

        (A)     COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist of two or more directors of the Company,
who shall be appointed by the Board. In addition, the composition of the
Committee shall satisfy (i) such requirements as the United States Securities
and Exchange Commission may establish for administrators acting under plans
intended to qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act; and (ii) such requirements as the United States Internal Revenue
Service may establish for outside directors acting under plans intended to
qualify for exemption under Section 162(m)(4)(C) of the Code.

        (B)     COMMITTEE FOR NON-OFFICER GRANTS. The Board may also appoint one
or more separate committees of the Board, each composed of one or more directors
of the Company who need not satisfy the requirements of Section 3(a), who may
administer the Plan with respect to Employees who are not considered officers or
directors of the Company under Section 16 of the Exchange Act, may grant Awards
under the Plan to such Employees and may determine all terms of such grants.
Within the limitations of the preceding sentence, any reference in the Plan to
the Committee shall include such committee or committees appointed pursuant to
the preceding sentence. The Board of Directors may also authorize one or more
officers of the Company to designate Employees, other than officers under
Section 16 of the Exchange Act, to receive Awards and/or to determine the number
of such Awards to be received by such persons; provided, however, that the Board
of Directors shall specify the total number of Awards that such officers may so
award.

        (C)     COMMITTEE PROCEDURES. The Board of Directors shall designate one
of the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.

        (D)     COMMITTEE RESPONSIBILITIES. Subject to the provisions of the
Plan, the Committee shall have full authority and discretion to take the
following actions:

                (i)     To interpret the Plan and to apply its provisions;

                (ii)    To adopt, amend or rescind rules, procedures and forms
relating to the Plan;

                (iii)   To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;

                (iv)    To determine when Awards are to be granted under the
Plan;

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                (v)     To select the Offerees and Optionees;

                (vi)    To determine the number of Shares to be made subject to
each Award;

                (vii)   To prescribe the terms and conditions of each Award,
including (without limitation) the Exercise Price or Purchase Price, and the
vesting or duration of the Award (including accelerating the vesting of Awards,
either at the time of the Award or thereafter, without the consent of the
Participant), to determine whether an Option is to be classified as an ISO or as
a Nonstatutory Option, and to specify the provisions of the agreement relating
to such Award;

                (viii)  To establish or verify the extent of satisfaction of any
performance goals or other conditions applicable to the grant, issuance,
exercisability, vesting and/or ability to retain any Award;

                (ix)    To amend any outstanding Award agreement, subject to
applicable legal restrictions and to the consent of the Participant if the
Participant's rights or obligations would be adversely affected;

                (x)     To prescribe the consideration for the grant of each
Award or other right under the Plan and to determine the sufficiency of such
consideration;

                (xi)    To determine the disposition of each Award or other
right under the Plan in the event of a Participant's divorce or dissolution of
marriage;

                (xii)   To determine whether Options or other rights under the
Plan will be granted in replacement of other grants under an incentive or other
compensation plan of an acquired business;

                (xiii)  To correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or any Award agreement; and

                (xiv)   To take any other actions deemed necessary or advisable
for the administration of the Plan.

Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.

SECTION 4. ELIGIBILITY.

        (A)     GENERAL RULE. Only Employees shall be eligible for the grant of
ISOs. Only Employees, Consultants and Outside Directors shall be eligible for
the grant of Restricted Shares, Stock Units, Nonstatutory Options or SARs.

        (B)     AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.

                (i)     Each Outside Director who first joins the Board of
Directors on or after the Effective Date shall receive a Nonstatutory Option,
subject to approval of the Plan by the Company's stockholders, to purchase
15,000 Shares (subject to adjustment under Section 12) on the Effective Date or,
if later, on his or her appointment or election to the Board of Directors.

                (ii)    As of the date of each regular annual meeting of the
Company's stockholders, commencing with the annual meeting occurring on the
Effective Date, each Outside Director who is not eligible for

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the grant of an initial option under Section 4(b)(i) and who has been elected or
reelected or is continuing to serve as a member of the Board of Directors as of
the adjournment of such meeting shall receive an Option to purchase 6,000 Shares
(subject to adjustment under Section 12), provided that such Outside Director
has served on the Board of Directors for the immediately preceding six-month
period.

                (iii)   Each Option granted under this Section 4(b)(i) shall
vest and become exercisable as to one fourth of the Shares at the end of the
12th full calendar month following the date the Option was granted and as to an
additional 1/4th of the Shares at the end of each subsequent twelve-month period
following the date the Option was granted; provided, however, that each such
Option shall become fully vested if a Change in Control occurs with respect to
the Company during the Outside Director's Service (unless otherwise provided by
the Board in the Outside Director's Nonstatutory Option agreement). Each Option
granted under Section (4)(ii) shall be fully vested and immediately exercisable
on the date of grant.

                (iv)    The Exercise Price of all Nonstatutory Options granted
to an Outside Director under this Section 4(b) shall be equal to 100% of the
Fair Market Value of a Share on the date of grant, payable in one of the forms
described in Section 8(a), (b) or (d).

                (v)     All Nonstatutory Options granted to an Outside Director
under this Section 4(b) shall terminate on the earlier of (A) the tenth
anniversary of the date of grant of such Options, (B) the first anniversary of
the date of termination of such Outside Director's Service by reason of death or
Total and Permanent Disability, (C) the date three months after the termination
of such Outside Director's Service for any reason other than death or Total and
Permanent Disability, or (D) the first anniversary of the Outside Director's
death during the three-month period specified in Section 4(b)(v)(C); provided,
however, that any such Options that are not vested upon the termination of the
Outside Director's Service for any reason shall terminate immediately and may
not be exercised. The Board may also provide for earlier termination in the
Outside Director's Nonstatutory Option agreement.

        (C)     TEN-PERCENT STOCKHOLDERS. An Employee who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company, a Parent or Subsidiary shall not be eligible for the grant of an ISO
unless such grant satisfies the requirements of Section 422(c)(5) of the Code.

        (D)     ATTRIBUTION RULES. For purposes of Section 4(c) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for such Employee's brother/s, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or for
a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries.

        (E)     OUTSTANDING STOCK. For purposes of Section 4(c) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person (and therefore that may be subject to ISOs granted under the Plan).

SECTION 5. STOCK SUBJECT TO PLAN.

        (A)     BASIC LIMITATION. Shares offered under the Plan shall be
authorized but unissued Shares or treasury Shares. The maximum aggregate number
of Shares that may be subject to Awards granted under the Plan (and therefore
that may be subject to ISOs granted under the Plan) shall not exceed three
hundred thousand (300,000) Shares, plus any Shares remaining available for grant
of awards under the Prior Plan on the Effective Date (including Shares subject
to outstanding options under the Prior Plan on the Effective Date that are
subsequently forfeited or terminate for any other reason before being exercised
and unvested Shares that are forfeited pursuant to such Prior Plan after the
Effective Date). The limitations of this Section 5(a) shall be subject to
adjustment pursuant to Section 12. The number of Shares that are subject to
Options or other Awards outstanding at any time under the Plan shall not exceed
the number of Shares which then remain available for issuance under the Plan.
The Company, during the term of the Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the requirements of the Plan.

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        (B)     INDIVIDUAL AWARD LIMITATION. Subject to the provisions of
Section 12, no Participant may receive Options, SARs, Restricted Shares or Stock
Units under the Plan in any consecutive twelve-month period that relate to more
than 100,000 Shares; provided, however, that this limit shall be increased to
200,000 Shares for grants in the first twelve months of the Participant's
Service.

        (C)     ADDITIONAL SHARES. If Restricted Shares or Shares issued upon
the exercise of Options are forfeited, then such Shares shall again become
available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being settled or exercised,
then the corresponding Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 5(a) and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Shares (if
any) actually issued in settlement of such SARs shall reduce the number
available in Section 5(a) and the balance shall again become available for
Awards under the Plan.

SECTION 6. RESTRICTED SHARES.

        (A)     RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares
under the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.

        (B)     PAYMENT FOR AWARDS. Subject to the following sentence,
Restricted Shares may be sold or awarded under the Plan for such consideration
as the Committee may determine, including (without limitation) cash, cash
equivalents, past services and future services; provided that payment may not be
made by delivery of a promissory note. To the extent that an Award consists of
newly issued Restricted Shares, the Award recipient shall furnish consideration
with a value not less than the par value of such Restricted Shares in the form
of cash, cash equivalents, or past services rendered to the Company (or a Parent
or Subsidiary), as the Committee may determine.

        (C)     VESTING. Each Award of Restricted Shares may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events. The Committee
may determine, at the time of granting Restricted Shares of thereafter, that all
or part of such Restricted Shares shall become vested in the event that a Change
in Control occurs with respect to the Company.

        (D)     VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.

        (E)     RESTRICTIONS ON TRANSFER OF SHARES. Restricted Shares shall be
subject to such rights of repurchase, rights of first refusal or other
restrictions as the Committee may determine. Such restrictions shall be set
forth in the applicable Restricted Stock Agreement and shall apply in addition
to any general restrictions that may apply to all holders of Shares.

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

        (A)     STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option 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 deems appropriate for
inclusion in a Stock Option Agreement. The Stock Option Agreement shall specify
whether the Option is an ISO or an NSO. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. Options may
be granted in consideration of a reduction in the Optionee's other compensation.

                                       7
<PAGE>

        (B)     NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 12.

        (C)     EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in Section 4(c), and the Exercise Price of an NSO shall not be less 100% of the
Fair Market Value of a Share on the date of grant. Subject to the foregoing in
this Section 7(c), the Exercise Price under any Option shall be determined by
the Committee at its sole discretion. The Exercise Price shall be payable in one
of the forms described in Section 8

        (D)     WITHHOLDING TAXES. As a condition to the exercise of an Option,
the Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

        (E)     EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of Option shall in no event exceed 10 years from
the date of grant (five years for ISOs granted to Employees described in Section
4(c)). A Stock Option Agreement may provide for accelerated exercisability in
the event of the Optionee's death, disability, or retirement or other events and
may provide for expiration prior to the end of its term in the event of the
termination of the Optionee's Service. Options may be awarded in combination
with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. Subject to the foregoing in
this Section 7(e), the Committee at its sole discretion shall determine when all
or any installment of an Option is to become exercisable and when an Option is
to expire.

        (F)     EXERCISE OF OPTIONS UPON TERMINATION OF SERVICE. Each Stock
Option Agreement shall set forth the extent to which the Optionee shall have the
right to exercise the Option following termination of the Optionee's Service
with the Company and its Subsidiaries, and the right to exercise the Option of
any executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.

        (G)     EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company.

        (H)     LEAVES OF ABSENCE. An Employee's Service shall cease when such
Employee ceases to be actively employed by, or a Consultant to, the Company (or
any subsidiary) as determined in the sole discretion of the Board of Directors.
For purposes of Options, Service does not terminate when an Employee goes on a
bona fide leave of absence, that was approved by the Company in writing, if the
terms of the leave provide for continued service crediting, or when continued
service crediting is required by applicable law. However, for purposes of
determining whether an Option is entitled to ISO status, an Employee's Service
will be treated as terminating 90 days after such Employee went on leave, unless
such Employee's right to return to active work is guaranteed by law or by a
contract. Service terminates in any event when the approved leave ends, unless
such Employee immediately returns to active work. The Company determines which
leaves count toward Service, and when Service terminates for all purposes under
the Plan.

        (I)     NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 12.

        (J)     MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
options or may accept the cancellation of outstanding options

                                       8
<PAGE>

(to the extent not previously exercised), whether or not granted hereunder, in
return for the grant of new Options for the same or a different number of Shares
and at the same or a different exercise price, or in return for the grant of the
same or a different number of Shares. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, adversely
affect his or her rights or obligations under such Option. In addition,
notwithstanding any other provision of the Plan, in no event shall the Committee
cancel any outstanding Option for the purpose of reissuing the Option to the
Optionee at a lower exercise price or reduce the exercise price of an
outstanding Option.

        (K)     RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon
exercise of an Option shall be subject to such special forfeiture conditions,
rights of repurchase, rights of first refusal and other transfer restrictions as
the Committee may determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to any general
restrictions that may apply to all holders of Shares.

SECTION 8. PAYMENT FOR SHARES.

        (A)     GENERAL RULE. The entire Exercise Price or Purchase Price of
Shares issued under the Plan shall be payable in lawful money of the United
States of America at the time when such Shares are purchased, except as provided
in Section 8(b) through Section 8(f) below.

        (B)     SURRENDER OF STOCK. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative. Such Shares shall be valued at their Fair Market Value on the
date when the new Shares are purchased under the Plan. The Optionee shall not
surrender, or attest to the ownership of, Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation expense
(or additional compensation expense) with respect to the Option for financial
reporting purposes.

        (C)     SERVICES RENDERED. At the discretion of the Committee, Shares
may be awarded under the Plan in consideration of services rendered to the
Company or a Subsidiary prior to the award. If Shares are awarded without the
payment of a Purchase Price in cash, the Committee shall make a determination
(at the time of the award) of the value of the services rendered by the Offeree
and the sufficiency of the consideration to meet the requirements of Section
6(b).

        (D)     CASHLESS EXERCISE. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part by delivery (on a form
prescribed by the Committee) of an irrevocable direction to a securities broker
to sell Shares and to deliver all or part of the sale proceeds to the Company in
payment of the aggregate Exercise Price.

        (E)     EXERCISE/PLEDGE. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.

        (F)     OTHER FORMS OF PAYMENT. To the extent that a Stock Option
Agreement or Restricted Stock Agreement so provides, payment may be made in any
other form that is consistent with applicable laws, regulations and rules;
provided that payment may not be made by delivery of a promissory note.

        (G)     LIMITATIONS UNDER APPLICABLE LAW. Notwithstanding anything
herein or in a Stock Option Agreement or Restricted Stock Agreement to the
contrary, payment may not be made in any form that is unlawful, as determined by
the Committee in its sole discretion.

SECTION 9. STOCK APPRECIATION RIGHTS.

        (A)     SAR AGREEMENT. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements

                                       9
<PAGE>

entered into under the Plan need not be identical. SARs may be granted in
consideration of a reduction in the Optionee's other compensation.

        (B)     NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Shares to which the SAR pertains and shall provide for the adjustment of such
number in accordance with Section 12.

        (C)     EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. A SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.

        (D)     EXERCISABILITY AND TERM. Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. A SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.

        (E)     EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.

        (F)     EXERCISE OF SARS. Upon exercise of a SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and
cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Shares received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of surrender)
of the Shares subject to the SARs exceeds the Exercise Price.

        (G)     MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company or
by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of a SAR shall, without the consent
of the holder, may alter or impair his or her rights or obligations under such
SAR. In addition, notwithstanding any other provision of the Plan, in no event
shall the Committee cancel any outstanding SAR for the purpose of reissuing the
SAR to the Optionee at a lower exercise price or reduce the exercise price of an
outstanding SAR.

SECTION 10. STOCK UNITS.

        (A)     STOCK UNIT AGREEMENT. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.

        (B)     PAYMENT FOR AWARDS. To the extent that an Award is granted in
the form of Stock Units, no cash consideration shall be required of the Award
recipients.

        (C)     VESTING CONDITIONS. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company.

                                       10
<PAGE>

        (D)     VOTING AND DIVIDEND RIGHTS. The holders of Stock Units shall
have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Shares, or in a combination of both. Prior to distribution, any dividend
equivalents which are not paid shall be subject to the same conditions and
restrictions (including without limitation, any forfeiture conditions) as the
Stock Units to which they attach.

        (E)     FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Shares over a series of trading days. Vested
Stock Units may be settled in a lump sum or in installments. The distribution
may occur or commence when all vesting conditions applicable to the Stock Units
have been satisfied or have lapsed, or it may be deferred to any later date. The
amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the number of
such Stock Units shall be subject to adjustment pursuant to Section 12.

        (F)     DEATH OF RECIPIENT. Any Stock Unit Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Unit Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Unit Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.

        (G)     CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.

SECTION 11. TRANSFERABILITY; PERFORMANCE GOALS

        (A)     TRANSFERABILITY. Except to the extent determined by the
Committee, no Award shall be assigned or transferred by a Participant other than
by will or the laws of descent and distribution, and during the lifetime of the
Participant may be exercised only by such Participant or his or her guardian or
legal representative.

        (B)     PERFORMANCE GOALS. The number of Shares or other benefits
granted, issued, retainable and/or vested under an Award may be made subject to
the attainment of performance goals for a specified period of time relating to
one or more of the following performance criteria, either individually,
alternatively or in any combination, applied to either the Company as a whole or
to a business unit or Subsidiary, either individually, alternatively or in any
combination, and measured either annually or cumulatively over a period of
years, on an absolute basis or relative to a pre-established target, to previous
years' results or to a designated comparison group or index, in each case as
specified by the Committee in the Award: (a) cash flow, (b) earnings per share,
(c) earnings before interest, taxes and amortization, (d) return on equity, (e)
total stockholder return, (f) share price performance, (g) return on capital,
(h) return on assets or net assets, (i) revenue, (j) income or net income, (k)
operating income or net operating income, (l) operating profit or net operating
profit, (m) operating margin or profit margin, (n) return on operating revenue,
(o) return on invested capital, (p) market segment shares, (q) sales, (r) unit
openings or (s) customer satisfaction ("Qualifying Performance Criteria"). The
Committee may appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following events that
occurs during a performance period: (i) asset write-downs, (ii) litigation or
claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs and (v) any
extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in managements' discussion and analysis of financial
condition and results

                                       11
<PAGE>

of operations appearing in the Company's annual report to stockholders for the
applicable year. The Committee shall determine the Qualifying Performance
Criteria not later than the 90th day of the performance period, and shall
determine and certify, for each Participant, the extent to which the Qualifying
Performance Criteria have been met. The Committee may not in any event increase
the amount of compensation payable under the Plan upon the attainment of a
Qualifying Performance Goal to a Participant who is a "covered employee" within
the meaning of Section 162(m) of the Code.

SECTION 12. ADJUSTMENT OF SHARES.

        (A)     ADJUSTMENTS. In the event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material
effect on the price of Shares, a combination or consolidation of the outstanding
Stock (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of:

                (i)     The number of Options, SARs, Restricted Shares and Stock
Units available for future Awards under Section 5;

                (ii)    The limitations set forth in Section 5(a) and (b);

                (iii)   The number of Shares covered by each outstanding Option
and SAR;

                (iv)    The Exercise Price under each outstanding Option and
SAR; or

                (v)     The number of Stock Units included in any prior Award
which has not yet been settled.

Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

        (B)     DISSOLUTION OR LIQUIDATION. To the extent not previously
exercised or settled, Options, SARs and Stock Units shall terminate immediately
prior to the dissolution or liquidation of the Company.

        (C)     REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for:

                (i)     The continuation of the outstanding Awards by the
Company, if the Company is a surviving corporation;

                (ii)    The assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary;

                (iii)   The substitution by the surviving corporation or its
parent or subsidiary of its own awards for the outstanding Awards;

                (iv)    Full acceleration of the expiration date of the
outstanding unexercised Awards to a date not earlier than thirty (30) days after
notice to the Participant; or

                (v)     Settlement of the full value of the outstanding Awards
in cash or cash equivalents (including deferred compensation pending vesting)
followed by cancellation of such Awards.

        (D)     RESERVATION OF RIGHTS. Except as provided in this Section 12, an
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or

                                       12
<PAGE>

any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the terms of any
outstanding Award, including the number or Exercise Price of Shares subject to
an Award. The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

SECTION 13. DEFERRAL OF AWARDS.

        The Committee (in its sole discretion) may permit or require a
Participant to:

        (a)     Have cash that otherwise would be paid to such Participant as a
result of the exercise of a SAR or the settlement of Stock Units credited to a
deferred compensation account established for such Participant by the Committee
as an entry on the Company's books;

        (b)     Have Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted into an
equal number of Stock Units; or

        (c)     Have Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or the settlement of
Stock Units converted into amounts credited to a deferred compensation account
established for such Participant by the Committee as an entry on the Company's
books. Such amounts shall be determined by reference to the Fair Market Value of
such Shares as of the date when they otherwise would have been delivered to such
Participant.

        A deferred compensation account established under this Section 13 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 13.

SECTION 14. AWARDS UNDER OTHER PLANS.

        The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Shares issued under this Plan. Such Shares shall
be treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.

SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.

        (A)     EFFECTIVE DATE. No provision of this Section 15 shall be
effective unless and until the Board has determined to implement such provision.

        (B)     ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Section 15 shall be filed with the Company on the prescribed form.

        (C)     NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.

                                       13
<PAGE>

SECTION 16. LEGAL AND REGULATORY REQUIREMENTS.

        Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the United States Securities
Act of 1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations and the regulations of any stock exchange on
which the Company's securities may then be listed, and the Company has obtained
the approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.

SECTION 17. WITHHOLDING TAXES.

        (A)     GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.

        (B)     SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to him or her or by surrendering all or a portion of any Shares that
he or she previously acquired. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash. In no event
may a Participant have Shares withheld that would otherwise be issued to him or
her in excess of the number necessary to satisfy the legally required minimum
tax withholding.

SECTION 18. NO EMPLOYMENT RIGHTS.

        No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason, with or
without notice.

SECTION 19. DURATION AND AMENDMENTS.

        (A)     TERM OF THE PLAN. The Plan, as set forth herein, shall terminate
automatically ten (10) years after its adoption by the Board. The Plan may be
terminated on any earlier date pursuant to Subsection (b) below.

        (B)     RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any Award granted before amendment of the Plan shall not be materially impaired
by such amendment, except with consent of the Participant. An amendment of the
Plan shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules.

        (C)     EFFECT OF TERMINATION. No Awards shall be granted under the Plan
after the termination thereof. The termination of the Plan shall not affect any
Award previously granted under the Plan.

                [Remainder of this page intentionally left blank]

                                       14
<PAGE>

SECTION 20. EXECUTION.

        To record the adoption of the Plan by the Board of Directors, the
Company has caused its authorized officer to execute the same.

                                LASERCARD CORPORATION

                                By
                                  ----------------------------------------------

                                Name
                                    --------------------------------------------

                                Title
                                     -------------------------------------------

                                       15Amendment No. 7 to Preferred Stock Rights Agreement

  
 Exhibit 4.8 

 
 AMENDMENT NO. 7 
 TO 
 PREFERRED STOCK RIGHTS AGREEMENT

  
 This Amendment No. 7 to Preferred Stock Rights Agreement
(this “Amendment”) is dated as of February 10, 2005, between Critical Path, Inc. (the “Company”), and Computershare Trust Company, Inc. (the “Rights Agent”), with reference to the following:

  
 A. The Company and the Rights Agent entered into that certain
Preferred Stock Rights Agreement, dated as of March 19, 2001, as amended by that certain Amendment No. 1 to Preferred Stock Rights Agreement, dated as of November 6, 2001, that certain Amendment No. 2 to Preferred Stock Rights Agreement, dated as of
November 18, 2003, that certain Amendment No. 3 to Preferred Stock Rights Agreement, dated as of January 16, 2004, that certain Amendment No. 4 to Preferred Stock Rights Agreement, dated as of March 9, 2004, that certain Amendment No. 5 to Preferred
Stock Rights Agreement dated as of June 24, 2004 and that certain Amendment No. 6 to Preferred Stock Rights Agreement dated December 29, 2004 (the “Agreement”). 
  
 B. Under the Agreement, the Company and the Rights Agent may amend the Agreement, at any time prior to a Distribution Date,
which has yet to occur. 
  
 NOW, THEREFORE, pursuant to Section 27
of the Agreement, the Company and the Rights Agent hereby amend, effective upon the date hereof, the Agreement as follows: 
  

	1.	The definition of the term “Acquiring Person” set forth in Section 1(a) of the Agreement is amended and restated to read in its entirety as follows:

  
 “(a) “ACQUIRING
PERSON” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding, but shall not include the Company, any
Subsidiary of the Company or any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall be deemed to
be an Acquiring Person as the result of an acquisition of Common Shares, Exchangeable Shares or Common Voting Equivalents by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by
reason of share repurchases by the Company and shall, after such share repurchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company (other than pursuant to a dividend or distribution paid or made by (i) the
Company on the outstanding Common Shares of the Company in Common Shares of the Company or pursuant to a split or subdivision of the outstanding Common Shares of the Company, (ii) Exchangeco on the outstanding Exchangeable Shares in Exchangeable
Shares or pursuant to a split or subdivision of the outstanding Exchangeable Shares or (iii) the Company on the outstanding Common Voting Equivalents in Common Voting Equivalents or pursuant to a split or subdivision of the 

  

 
outstanding Common Voting Equivalents), then such Person shall be deemed to be an Acquiring Person unless, upon becoming the Beneficial Owner of such
additional Common Shares of the Company, such Person does not beneficially own 15% or more of the Common Shares of the Company then outstanding. Notwithstanding the foregoing: 
  

	 	(i)	if the Company’s Board of Directors determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the provisions of this
Section 1(a), has become such inadvertently (including, without limitation, because (x) such Person was unaware that such Person Beneficially Owned a percentage of the Common Shares of the Company that would otherwise cause such Person to be
an “Acquiring Person,” as defined pursuant to the provisions of this Section 1(a), or (y) such Person was aware of the extent of the Common Shares of the Company such Person Beneficially Owned but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any intention of changing or influencing control of the Company, and if such Person divested or divests as promptly as practicable a sufficient number of Common Shares or
Common Voting Equivalents, so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the provisions of this Section 1(a), then such Person shall not be deemed to be or to have become an “Acquiring
Person” for any purposes of this Agreement; 

  

	 	(ii)	if, as of the date of this Agreement, any Person is the Beneficial Owner of 15% or more of the Common Shares of the Company outstanding, such Person shall not be or become an
“Acquiring Person,” as defined pursuant to the provisions of this Section 1(a), unless and until such time as such Person shall become the Beneficial Owner of additional Common Shares of the Company (other than pursuant to a
dividend or distribution paid or made by (x) the Company on the outstanding Common Shares in Common Shares or pursuant to a split or subdivision of the outstanding Common Shares or (y) Exchangeco on the outstanding Exchangeable Shares in
Exchangeable Shares or pursuant to a split or subdivision of the outstanding Exchangeable Shares), unless, upon becoming the Beneficial Owner of such additional Common Shares of the Company, such Person is not then the Beneficial Owner of 15% or
more of the Common Shares of the Company then outstanding; and 

  

	 	(iii)	the term “Acquiring Person” shall not mean: 

  

	 	A.	 General Atlantic Partners 74, L.P., a Delaware limited partnership, GAP Coinvestment Partners II, L.P., a Delaware limited partnership, GapStar, LLC, a Delaware
limited liability company and GAPCO GmbH & Co. KG, a German limited partnership (referred to collectively with their respective Affiliates and Associates as “GAP”) so long as GAP does not increase (other than an increase resulting
solely from a reduction of the number of shares of outstanding Common Shares of the Company, including 

  

 2 

	 	 
by reason of repurchases of Common Shares or Common Voting Equivalents by the Company, or a dividend or distribution paid or made by the Company or
Exchangeco on, or a split or subdivision of, any shares of their respective capital stock) its Beneficial Ownership of Common Shares of the Company to a percentage of the outstanding shares of Common Shares of the Company at any time that is greater
than: (1) the percentage of the outstanding shares of Common Shares of the Company represented by the sum of (x) the shares of Common Shares of the Company as to which GAP has Beneficial Ownership as of the close of business on December 29, 2004,
assuming, for purposes of this calculation, all warrants and other securities convertible into or exercisable for Common Shares or Common Voting Equivalents, or any other rights to purchase Common Shares or Common Voting Equivalents, in all cases
where held or enjoyed by GAP, are immediately convertible or exercisable, plus (y) the shares of Common Shares of the Company as to which GAP obtains (or is entitled to obtain) Beneficial Ownership directly from the Company pursuant to the
consummation of the transactions described in that certain Note and Warrant Purchase Agreement (the “December Purchase Agreement”), dated December 29, 2004, by and among the Company and the “Investors” party thereto, including;
or (2) such lesser percentage of shares of Common Shares of the Company as to which GAP has Beneficial Ownership following any transfer of securities by GAP after consummation of the transactions described in the December Purchase Agreement (except
that this clause A shall pertain only until such time as GAP has Beneficial Ownership of less than fifteen percent (15%) of the outstanding shares of Common Shares of the Company); provided, that any shares of Common Shares of the
Company Beneficially Owned by one or more officers or directors of the Company where (x) such officers or directors are also included within the term “GAP” and (y) such shares of Common Shares and Common Voting Equivalents were distributed
directly by the Company to such officers or directors as equity-based compensation, shall be excluded from the calculation of the Beneficial Ownership of GAP for purposes of the definition of “Acquiring Person” if the inclusion of such
shares of Common Shares and Common Voting Equivalents in such calculation, by itself, would otherwise cause GAP to be an Acquiring Person; 

  

	 	B.	 Cenwell Limited, Campina Enterprises Limited, Great Affluent Limited, Lion Cosmos Limited and Dragonfield Limited (referred to collectively with their respective
Affiliates and Associates as “Cenwell”) so long as Cenwell does not increase (other than an increase resulting solely from a reduction of the number of shares of outstanding Common Shares of the Company, including by 

  

 3 

	 	 
reason of repurchases of Common Shares or Common Voting Equivalents by the Company, or a dividend or distribution paid or made by the Company or Exchangeco
on, or a split or subdivision of, any shares of their respective capital stock) its Beneficial Ownership of Common Shares of the Company to a percentage of the outstanding shares of Common Shares of the Company at any time that is greater than: (1)
the percentage of the outstanding shares of Common Shares of the Company represented by the sum of (x) the shares of Common Shares of the Company as to which Cenwell has Beneficial Ownership as of the close of business on December 29, 2004,
assuming, for purposes of this calculation, all warrants and other securities convertible into or exercisable for Common Shares or Common Voting Equivalents, or any other rights to purchase Common Shares or Common Voting Equivalents, in all cases
where held or enjoyed by Cenwell, are immediately convertible or exercisable, plus (y) the shares of Common Shares of the Company as to which Cenwell obtains (or is entitled to obtain) Beneficial Ownership directly from the Company pursuant
to the consummation of the transactions described in the December Purchase Agreement; or (2) such lesser percentage of shares of Common Shares of the Company as to which Cenwell has Beneficial Ownership following any transfer of securities by
Cenwell after consummation of the transactions described in the December Purchase Agreement (except that this clause B. shall pertain only until such time as Cenwell has Beneficial Ownership of less than fifteen percent (15%) of the
outstanding shares of Common Shares of the Company); provided, that any shares of Common Shares of the Company Beneficially Owned by one or more officers or directors of the Company where (x) such officers or directors are also included
within the term “Cenwell” and (y) such shares of Common Shares and Common Voting Equivalents were distributed directly by the Company to such officers or directors as equity-based compensation, shall be excluded from the calculation of the
Beneficial Ownership of Cenwell for purposes of the definition of “Acquiring Person” if the inclusion of such shares of Common Shares and Common Voting Equivalents in such calculation, by itself, would otherwise cause Cenwell to be an
Acquiring Person; 

  

	 	C.	 Vectis CP Holdings, LLC (referred to collectively with its Affiliates and Associates as “Vectis”) so long as Vectis does not increase (other than an
increase resulting solely from a reduction of the number of shares of outstanding Common Shares of the Company, including by reason of repurchases of Common Shares or Common Voting Equivalents by the Company, or a dividend or distribution paid or
made by the Company or Exchangeco on, or a split or subdivision of, any shares of their respective capital stock) 

  

 4 

	 	 
its Beneficial Ownership of Common Shares of the Company to a percentage of the outstanding shares of Common Shares of the Company at any time that is
greater than: (1) the percentage of the outstanding shares of Common Shares of the Company represented by the sum of (x) the shares of Common Shares of the Company as to which Vectis has Beneficial Ownership as of the close of business on November
7, 2001 (if any), plus (y) the shares of Common Shares of the Company as to which Vectis obtains Beneficial Ownership directly from the Company pursuant to the consummation of the transactions described in that certain Stock and Warrant
Purchase and Exchange Agreement (the “2001 Purchase Agreement”), dated November 7, 2001, by and among the Company and the “Purchasers” named therein, plus (z) the shares of Common Shares of the Company as to which Vectis
obtains Beneficial Ownership directly from the Company pursuant to the rights offering for an aggregate amount up to $21,000,000 of Series E Preferred Stock of the Company pursuant to which the Company will distribute transferable rights to certain
holders of Common Shares; or (2) such lesser percentage of shares of Common Shares of the Company as to which Vectis has Beneficial Ownership following any transfer of securities by Vectis after consummation of the transactions described in the 2001
Purchase Agreement (except that this clause C. shall pertain only until such time as Vectis has Beneficial Ownership of less than fifteen percent (15%) of the outstanding shares of Common Shares of the Company); provided, that any
shares of Common Shares of the Company Beneficially Owned by one or more officers or directors of the Company where (x) such officers or directors are also included within the term “Vectis” and (y) such shares of Common Shares and Common
Voting Equivalents were distributed directly by the Company to such officers or directors as equity-based compensation, shall be excluded from the calculation of the Beneficial Ownership of Vectis for purposes of the definition of “Acquiring
Person” if the inclusion of such shares of Common Shares and Common Voting Equivalents in such calculation, by itself, would otherwise cause Vectis to be an Acquiring Person; 

  

	 	D.	 Permal U.S. Opportunities Limited, Zaxis Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited and Zaxis Partners, L.P., (referred to
collectively with their Affiliates and Associates as “Apex”) so long as Apex does not increase (other than an increase resulting solely from a reduction of the number of shares of outstanding Common Shares of the Company, including by
reason of repurchases of Common Shares or Common Voting Equivalents by the Company, or a dividend or distribution paid or made by the Company or Exchangeco on, or a split or subdivision of, any shares of their respective capital stock) its 

  

 5 

	 	 
Beneficial Ownership of Common Shares of the Company to a percentage of the outstanding shares of Common Shares of the Company at any time that is greater
than: (1) the percentage of the outstanding shares of Common Shares of the Company represented by the sum of (x) the shares of Common Shares of the Company as to which Apex has Beneficial Ownership as of the close of business on January 16, 2004,
assuming, for purposes of this calculation, all warrants and other securities convertible into or exercisable for Common Shares or Common Voting Equivalents, or any other rights to purchase Common Shares or Common Voting Equivalents, in all cases
where held or enjoyed by Apex, are immediately convertible or exercisable, plus (y) the shares of Common Shares of the Company as to which Apex obtains (or is entitled to obtain) Beneficial Ownership directly from the Company pursuant to the
consummation of the transactions described in the Convertible Note Purchase Agreement (the “January Purchase Agreement”), dated January 16, 2004, by and among the Company and the “Lenders” party thereto, including, without
limitation, the Issuable Shares or the Common Shares (each as defined in the January Purchase Agreement), plus (z) the shares of Common Shares of the Company as to which Apex obtains (or is entitled to obtain) Beneficial Ownership directly
from the Company pursuant to the consummation of the transactions described in the Convertible Note Purchase Agreement (the “March Purchase Agreement”), dated March 9, 2004, by and among the Company and the “Lenders” party
thereto, including, without limitation, the Issuable Shares or the Common Shares (each as defined in the March Purchase Agreement); or (2) such lesser percentage of shares of Common Shares of the Company as to which Apex has Beneficial Ownership
following any transfer of securities by Apex after consummation of the transactions described in the February Purchase Agreement (except that this clause D. shall pertain only until such time as Apex has Beneficial Ownership of less than
fifteen percent (15%) of the outstanding shares of Common Shares of the Company). 

  

	 	E.	 Peter Kellner (referred to collectively with his Affiliates and Associates as “Kellner”) so long as Kellner does not increase (other than an increase
resulting solely from a reduction of the number of shares of outstanding Common Shares of the Company, including by reason of repurchases of Common Shares or Common Voting Equivalents by the Company, or a dividend or distribution paid or made by the
Company or Exchangeco on, or a split or subdivision of, any shares of their respective capital stock) its Beneficial Ownership of Common Shares of the Company to a percentage of the outstanding shares of Common Shares of the Company at any time that
is greater than: (1) the percentage of the 

  

 6 

	 	 
outstanding shares of Common Shares of the Company represented by the sum of (x) the shares of Common Shares of the Company as to which Kellner has
Beneficial Ownership as of the close of business on December 29, 2004, assuming, for purposes of this calculation, all warrants and other securities convertible into or exercisable for Common Shares or Common Voting Equivalents, or any other rights
to purchase Common Shares or Common Voting Equivalents, in all cases where held or enjoyed by Kellner, are immediately convertible or exercisable, plus (y) the shares of Common Shares of the Company as to which Kellner obtains (or is entitled
to obtain) Beneficial Ownership directly from the Company pursuant to the consummation of the transactions described in the December Purchase Agreement; or (2) such lesser percentage of shares of Common Shares of the Company as to which Kellner has
Beneficial Ownership following any transfer of securities by Kellner after consummation of the transactions described in the December Purchase Agreement (except that this clause E. shall pertain only until such time as Kellner has Beneficial
Ownership of less than fifteen percent (15%) of the outstanding shares of Common Shares of the Company). 

  

	2.	A new Section 1 (rr) shall be added to the Agreement: 

  
 “Common Voting Equivalents” shall mean the Company’s outstanding shares of Series D Cumulative Redeemable Convertible Preferred Stock,
Series E Redeemable Convertible Preferred Stock and Series F Redeemable Convertible Preferred Stock. 
  

	3.	Section 29 of the Agreement is amended and restated to read in its entirety as follows: 

  
 “Section 29. Determinations and Actions by the Board of Directors, etc. For all purposes of this
Agreement, any calculation of the number of Common Shares of the Company outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of the Company of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act; provided, however, that the number of Common Shares of the Company outstanding at any particular
time will include the aggregate number of Common Shares of the Company issuable upon exchange of all Exchangeable Shares and issuable upon conversion of all Common Voting Equivalents outstanding at that particular time. The Board of Directors of the
Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or the Company, or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power (i) to interpret the provisions of this Agreement and (ii) to make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in
good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other parties and (y) not subject the Board to any liability to the holders of the Rights.” 
  

 7 

 The undersigned officer of the Company, being an appropriate officer of the Company and authorized to do
so by resolution of the board of directors of the Company, hereby certifies to the Rights Agent that this Amendment is in compliance with the terms of Section 27 of the Agreement. 
  
 This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument. 
  
 IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. 
  

			
	 CRITICAL PATH, INC.

		
	 By
	 	 /s/ Michael J. Zukerman

	 Name:
	 	 Michael J. Zukerman

	 Title:
	 	 Executive Vice President and General Counsel

  

 8 

			
	 COMPUTERSHARE TRUST COMPANY, INC.

		
	 By
	 	 /s/ Zachary DeLisa

	 Name:
	 	 Zachary DeLisa

	 Title:
	 	 Operations Manager

	
	 COMPUTERSHARE TRUST COMPANY, INC.

		
	 By
	 	 /s/ Kellie Gwinn

	 Name:
	 	 Kellie Gwinn

	 Title:
	 	 Vice President

  

 9

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