Document:

exv10w1

 

Exhibit 10.1

Ciena Corporation

Incentive Bonus Plan

     1. Purpose. The purpose of this Incentive Bonus Plan is to foster continuing long-term growth
in earnings of Ciena Corporation by rewarding employees for achieving results critical to the
Company’s short- and long-term success, as measured by the accomplishment of assigned goals at
Company, business unit and individual levels.

     2. Definitions.

	 	(a)	 	Base Salary — The Participant’s annual base salary rate, before deductions
for taxes or benefits, in effect as of the last day of any Bonus Period.
	 
	 	(b)	 	Bonus Award — An amount awarded to a Participant pursuant to Section 5.
	 
	 	(c)	 	Bonus Period — Any fiscal period with respect to which the Committee
determines that Bonus Awards will be paid under this Plan.
	 
	 	(d)	 	Bonus Pool — An amount earned in any Bonus Period as determined pursuant to
Section 5, from which Bonus Awards may be paid.
	 
	 	(e)	 	CEO — The Chief Executive Officer of the Company.
	 
	 	(f)	 	Committee — The Compensation Committee of the Board of Directors of the
Company.
	 
	 	(g)	 	Company — Ciena Corporation, a Delaware corporation.
	 
	 	(h)	 	Eligible Grade Levels — For each Bonus Period, the positions or personnel
grade levels for the Company’s employees whom the Committee determines to be eligible
to receive a bonus under this Plan.
	 
	 	(i)	 	Eligible Employee — For each Bonus Period, a person whether or not an officer
or director of the Company or any Subsidiary, who (a) is regularly employed by the
Company or a Subsidiary on a full-time basis, or who, under conditions approved by the
Committee, is regularly employed by the Company or a Subsidiary on a part-time basis,
(b) has been employed by the Company or a Subsidiary for the entire Bonus Period and
in an Eligible Grade Level at the end of the Bonus Period, (c) is not eligible for the
payment of sales commissions, and (d) has not engaged in conduct that the Committee
determines to be against the best interests of the Company.
	 
	 	(j)	 	Financial Goals — Financial Goals for each Bonus Period shall mean the
measures of the Company’s financial performance, as determined by the Committee for
that Bonus Period, which if achieved would result in the payment of Bonuses.

 

 

	 	(k)	 	Participant — Each Eligible Employee for a Bonus Period whom the Committee
has designated to be a Participant in accordance with Section 3.
	 
	 	(l)	 	Performance Goals — Performance Goals are specific non-financial measures of
performance of the Company, an operating unit of the Company, or particular Eligible
Employees, the meeting of which is a condition of the payment of a Bonus.
	 
	 	(m)	 	Plan — The Incentive Bonus Plan as set forth herein, as from time to time
amended.
	 
	 	(n)	 	Subsidiary — Any corporation (a) in which the Company owns, directly or
indirectly, stock possessing 50 percent or more of the total combined voting power of
all classes of stock, (b) over which the Company has effective operating control, or
(c) in which the Company has a material interest as determined by the Committee.
	 
	 	(o)	 	Target Bonus — The targeted amount of Bonus Award established for each
Eligible Employee, expressed as a percentage of the Eligible Employee’s Base Salary
corresponding to the Eligible Employee’s position or grade level at the end of the
applicable Bonus Period, assuming the Financial Goals and Performance
Goals for such Bonus Period are
achieved at the 100% level established by the Committee.

     3. Designation of Participants. The Committee shall designate the Eligible Grade Levels from
which it shall select Eligible Employees to become Participants for a Bonus Period. The Committee
also shall approve as Participants such other Eligible Employees who are recommended for
participation by the CEO. Designation of a person as an Eligible Employee or a Participant for any
Bonus Period shall not bind the Committee to designate the person in any other Bonus Period.

     4. Establishment of Financial Goals, Performance Goals, and Target Bonus Percentages. For each
Bonus Period, the Committee shall establish in writing (a) the Financial Goals for the Bonus
Period, which may consist of a range, (b) the Performance Goals, if any, (c) the Target Bonus
percentage for each Eligible Grade Level (or group of Eligible Grade levels), and (d) any formulae
for adjusting the Target Bonus percentages for over- or under-achievement of the Financial Goals or
the Performance Goals.

     5. Determination of Awards.

	 	(a)	 	As soon as practicable after the end of each Bonus Period, the Committee
shall determine whether the Financial Goals and, to the extent applicable, the
Performance Goals for the Bonus Period were achieved with respect to each Participant,
and, if so, at what level of achievement under the formulae established for the Bonus
Period.
	 
	 	(b)	 	If the Committee determines that Financial Goals and Performance Goals for a
Bonus Period have been achieved, the Committee shall authorize the payment 

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	 	 	 	of Bonus
Awards corresponding to the level of achievement of the Financial Goals and the
Performance Goals.

     6. Vesting and Payment of Awards

	 	(a)	 	For any Bonus Period, no Bonus Award shall be payable or paid to a
Participant who does not remain an Eligible Employee throughout the Bonus Period or
who on the payment date for the Bonus Award has ceased to be an employee of the
Company or a Subsidiary, unless such termination of employment from the Company or the
Subsidiary was (i) on account of death, retirement on or after age 65 or disability,
or (ii) as a direct result of the sale of a Subsidiary, affiliate or business unit of
the Company, a restructuring or
realignment plan, or other Company-initiated termination, other than for cause).
	 
	 	(b)	 	Except to the extent the Participant is or becomes ineligible to receive a
Bonus Award pursuant to Section 6(a), Bonus Awards shall be immediately and fully
vested upon the Committee’s authorization of payment of awards for the applicable
Bonus Period. In general, Bonus Awards shall be paid to Participants within a
reasonable time after the Committee’s authorization of such awards.
	 
	 	(c)	 	All payments made under this Plan shall be subject to any required
withholdings.
	 
	 	(d)	 	Bonus Awards shall be payable solely from the general assets of the Company
and its Subsidiaries. No Participant shall have any right to, or interest in, any
specific assets of the Company or any Subsidiary in respect of Bonus Awards.

     7. No Assignment. Bonus Awards authorized under this Plan shall be paid only to Participants
(or, in the event of a Participant’s death, to the Participant’s heirs). No Bonus Award, nor any
part thereof, and no right or claim to any of the moneys payable pursuant to the provisions of this
Plan shall be anticipated, assigned, or otherwise encumbered, nor be subject to attachment,
garnishment, execution or levy of any kind, prior to the actual payment and delivery of said amount
to the Participant and any attempted assignment or other encumbrance or attachment, garnishment,
execution or levy shall be of no force or effect, except as otherwise provided by law.
Notwithstanding the above, if a Participant is adjudged incompetent, the Committee may direct that
any amounts payable be paid to the Participant’s guardian or legal representative.

     8. Employment and Plan Rights. The Plan shall not be deemed to give any Eligible Employee or
Participant the right to be retained in the employ of the Company or any Subsidiary, nor shall the
Plan interfere with the right of the Company or any Subsidiary to discharge any employee at any
time, nor shall the Plan be deemed to give any employee any right to any Bonus Award until such
award is authorized in accordance with Section 5.

     9. Administration and Authority. The Plan shall be administered by the Committee except as
otherwise provided herein. The Committee shall, consistent with the Plan,

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	 	(a)	 	designate the Eligible Grade Levels, Eligible Employees and Participants in
the Plan for each Bonus Period,
	 
	 	(b)	 	determine the Financial Goals and Performance Goals for each Bonus Period,
	 
	 	(c)	 	establish Target Bonus percentages for Eligible Employees for each Bonus
Period,
	 
	 	(d)	 	establish Target Bonus percentages for the CEO,
	 
	 	(e)	 	review and approve Target Bonus percentages for any senior management
employees whose compensation is regularly reviewed by it,
	 
	 	(f)	 	adopt, amend and rescind rules and regulations for the administration of the
Plan and for its own acts and proceedings, and
	 
	 	(g)	 	decide all questions and settle all controversies and disputes which may
arise in connection with the Plan.

The Committee may delegate to the CEO such authority and responsibility under the Plan (other than
with respect to (d), above) as it may determine to be necessary or desirable. All decisions,
determinations and interpretations of the Committee, the CEO or their delegates with respect to the
exercise of their respective responsibilities, shall be binding on all parties concerned.

     10. Amendment and Termination. The Board of Directors of the Company, or the Committee, in
their absolute discretion, and without notice, may at any time amend or terminate the Plan,
provided that no such amendment or termination shall adversely affect the rights of any Participant
under any Bonus Award previously paid.

     11. Applicability of Plan Document. The Plan shall be applicable for Bonus Periods beginning
on and after May 1, 2006.

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Exhibit 10.1

AMENDED AND RESTATED

THORATEC CORPORATION

2006 INCENTIVE STOCK PLAN

Approved by Shareholders on May 25, 2006

Amended and Restated by the Board on May 25, 2006

Termination Date: May 24, 2016

I.      PURPOSES

     1.1 Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are
the Employees, Directors, and Consultants of the Company and its Affiliates.

     1.2 Available Stock Awards. The types of stock awards that may be granted under this
Plan shall be: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock
Bonuses, (iv) Restricted Stock Purchase Rights, (v) Stock Appreciation Rights, (vi) Phantom Stock
Units, (vii) Restricted Stock Units, (viii) Performance Share Bonuses, and (ix) Performance Share
Units.

     1.3 General Purpose. The Company, by means of this new Plan, which will serve as the
successor to the Company’s 1997 Stock Option Plan (“1997 Plan”), the Company’s 1996 Stock Option
Plan (“1996 Plan”), and the Company’s Nonemployee Directors Stock Option Plan (“Directors 1996
Plan”), seeks to create incentives for eligible Employees (including officers), Directors, and
Consultants of the Company, through their participation in the growth in value of the Common Stock
of the Company, to accept or continue their employment or other service relationship with the
Company, increase their interest in the Company’s welfare, and improve the operations and increase
the profits of the Company. The Plan will serve as a replacement for the 1997 Plan, the 1996 Plan,
and the Directors 1996 Plan. Stock awards granted under any of these plans shall continue to be
governed by the terms of the plan under which the stock award was granted that were in effect on
the date of grant of such award.

II.      DEFINITIONS

     2.1 “Affiliate” means a parent or subsidiary of the Company, with “parent” meaning an entity
that controls the Company directly or indirectly, through one or more intermediaries, and
“subsidiary” meaning an entity that is controlled by the Company directly or indirectly, through
one or more intermediaries. Solely with respect to the granting of any Incentive Stock Options,
Affiliate means any parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the
Code.

     2.2 “Beneficial Owner” means the definition given in Rule 13d-3 promulgated under the Exchange
Act.

 

 

     2.3 “Board” means the Board of Directors of the Company.

     2.4 “Change of Control” means the occurrence of any of the following events:

          (i) Any person or group is or becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the total voting power of the voting stock of the Company, including by way of merger,
consolidation or otherwise;

          (ii) The sale, exchange, lease or other disposition of all or substantially all of the assets
of the Company to a person or group of related persons, as such terms are defined or described in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act;

          (iii) A merger or consolidation or similar transaction involving the Company;

          (iv) A change in the composition of the Board occurring within a two-year period, as a result
of which fewer than a majority of the Directors are Incumbent Directors; or

          (v) A dissolution or liquidation of the Company.

     2.5 “Code” means the Internal Revenue Code of 1986, as amended.

     2.6 “Committee” means a committee of one or more members of the Board (or officers who are not
members of the Board to the extent allowed by law) appointed by the Board in accordance with
Section 3.3 of the Plan.

     2.7 “Common Stock” means the common shares of the Company.

     2.8 “Company” means Thoratec Corporation, a California corporation.

     2.9 “Consultant” means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for such services or
(ii) who is a member of the board of directors of an Affiliate. However, the term “Consultant”
shall not include either Directors who are not compensated by the Company for their services as a
Director or Directors who are compensated by the Company solely for their services as a Director.

     2.10 “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director, or Consultant is not interrupted or terminated. The
Participant’s Continuous Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Participant renders service to the Company or an Affiliate as an
Employee, Consultant, or Director, or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the Participant’s Continuous
Service. For example, a change in status from an Employee of the Company to a Consultant of an
Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the
chief executive officer of the Company, in that party’s sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of absence approved by
the Company or an Affiliate, including sick leave, military leave, or any other personal leave.

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     2.11 “Covered Employee” means the chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to
shareholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

     2.12 “Director” means a member of the Board of Directors of the Company.

     2.13 “Disability” means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code for all Incentive Stock Options. For all other Stock Awards,
“Disability” means physical or mental incapacitation such that for a period of six (6) consecutive
months or for an aggregate of nine (9) months in any twenty-four (24) consecutive month period, a
person is unable to substantially perform his or her duties. Any question as to the existence of
that person’s physical or mental incapacitation as to which the person or person’s representative
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to the person and the Company. If the person and the Company or an Affiliate
cannot agree as to a qualified independent physician, each shall appoint such a physician and those
two (2) physicians shall select a third (3rd) who shall make such determination in
writing. The determination of Disability made in writing to the Company or an Affiliate and the
person shall be final and conclusive for all purposes of the Stock Awards.

     2.14 “Eligible Director” means any Director who is not employed by the Company or an
Affiliate.

     2.15 “Employee” means any person employed by the Company or an Affiliate. Service as a
Director or compensation by the Company or an Affiliate solely for services as a Director shall not
be sufficient to constitute “employment” by the Company or an Affiliate.

     2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     2.17 “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no such sales were
reported) as quoted on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;

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

          (iii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board.

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     2.18 “Full-Value Stock Award” shall mean any of a Restricted Stock Bonus, Restricted Stock
Units, Phantom Stock Units, Performance Share Bonus, or Performance Share Units.

     2.19 “Incentive Stock Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     2.20 “Incumbent Directors” shall mean Directors who either (i) are Directors of the Company as
of the date the Plan first becomes effective pursuant to Article XVI hereof or (ii) are elected, or
nominated for election, to the Board with the affirmative votes of at least a majority of those
Directors whose election or nomination was not in connection with any transaction described in
subsections (i), (ii), or (iii) of Section 2.4, or in connection with an actual or threatened proxy
contest relating to the election of Directors to the Company.

     2.21 “Non-Employee Director” means a Director who either (i) is not a current Employee or
Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or
indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure
would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship
as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3.

     2.22 “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.

     2.23 “Officer” means a person who is an officer of the Company within the meaning of Section
16 of the Exchange Act and the rules and regulations promulgated thereunder.

     2.24 “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.

     2.25 “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.

     2.26 “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

     2.27 “Outside Director” means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is
not currently receiving direct or indirect remuneration from the Company or an “affiliated
corporation” for services in any capacity other than as a Director; or (ii) is otherwise considered
an “outside director” for purposes of Section 162(m) of the Code.

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     2.28 “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     2.29 “Performance Share Bonus” means a grant of shares of the Company’s Common Stock not
requiring a Participant to pay any amount of monetary consideration, and which grant is subject to
the provisions of Section 8.6 of the Plan.

     2.30 “Performance Share Unit” means the right to receive the value of one (1) share of the
Company’s Common Stock at the time the Performance Share Unit vests, with the further right to
elect to defer receipt of that value otherwise deliverable upon the vesting of an award of
Performance Share Units to the extent permitted in the Participant’s Stock Award Agreement. These
Performance Share Units are subject to the provisions of Section 8.7 of the Plan.

     2.31 “Phantom Stock Unit” means the right to receive the value of one (1) share of the
Company’s Common Stock, subject to the provisions of Section 8.4 of the Plan.

     2.32 “Plan” means this Thoratec Corporation 2006 Incentive Stock Plan.

     2.33 “Restricted Stock Bonus” means a grant of shares of the Company’s Common Stock not
requiring a Participant to pay any amount of monetary consideration, and which grant is subject to
the provisions of Section 8.1 of the Plan.

     2.34 “Restricted Stock Purchase Right” means the right to acquire shares of the Company’s
Common Stock upon the payment of the agreed-upon monetary consideration, subject to the provisions
of Section 8.2 of the Plan.

     2.35 “Restricted Stock Unit” means the right to receive the value of one (1) share of the
Company’s Common Stock at the time the Restricted Stock Unit vests, with the further right to elect
to defer receipt of that value otherwise deliverable upon the vesting of an award of restricted
stock to the extent permitted in the Participant’s agreement. These Restricted Stock Units are
subject to the provisions of Section 8.5 of the Plan.

     2.36 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

     2.37 “Securities Act” means the Securities Act of 1933, as amended.

     2.38 “Stock Appreciation Right” means the right to receive an amount equal to the Fair Market
Value of one (1) share of the Company’s Common Stock on the day the Stock Appreciation Right is
redeemed, reduced by the deemed exercise price or base price of such right, subject to the
provisions of Section 8.3 of the Plan.

     2.39 “Stock Award” means any Option award, Restricted Stock Bonus award, Restricted Stock
Purchase Right award, Stock Appreciation Right award, Phantom Stock Unit award, Restricted Stock
Unit award, Performance Share Bonus award, Performance Share Unit award, or other stock-based
award. These Awards may include, but are not limited to those listed in Section 1.2.

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     2.40 “Stock Award Agreement” means a written agreement, including an Option Agreement, between
the Company and a holder of a Stock Award setting forth the terms and conditions of an individual
Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the
Plan.

     2.41 “Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates.

III.      ADMINISTRATION

     3.1 Administration by Board. The Board shall administer the Plan unless and until the
Board delegates administration to a Committee, as provided in Section 3.3.

     3.2 Powers of Board. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

          (i) To determine from time to time which of the persons eligible under the Plan shall be
granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of
types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not
be identical), including the time or times when a person shall be permitted to receive Common Stock
pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock
Award shall be granted to each such person.

          (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

          (iii) To amend the Plan or a Stock Award as provided in Section 14 of the Plan.

          (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary,
desirable, convenient or expedient to promote the best interests of the Company that are not in
conflict with the provisions of the Plan.

          (v) To adopt sub-plans and/or special provisions applicable to Stock Awards regulated by the
laws of a jurisdiction other than and outside of the United States. Such sub-plans and/or special
provisions may take precedence over other provisions of the Plan, with the exception of Section 4
of the Plan, but unless otherwise superseded by the terms of such sub-plans and/or special
provisions, the provisions of the Plan shall govern.

          (vi) To authorize any person to execute on behalf of the Company any instrument required to
effect the grant of a Stock Award previously granted by the Board.

          (vii) To determine whether Stock Awards will be settled in shares of Common Stock, cash or in
any combination thereof.

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          (viii) To determine whether Stock Awards will be adjusted for Dividend Equivalents, with
“Dividend Equivalents” meaning a credit, made at the discretion of the Board, to the account of a
Participant in an amount equal to the cash dividends paid on one share of Common Stock for each
share of Common Stock represented by a Stock Award held by such Participant.

          (ix) To establish a program whereby Participants designated by the Board can reduce
compensation otherwise payable in cash in exchange for Stock Awards under the Plan.

          (x) To impose such restrictions, conditions or limitations as it determines appropriate as to
the timing and manner of any resales by a Participant or other subsequent transfers by the
Participant of any shares of Common Stock issued as a result of or under a Stock Award, including,
without limitation, (A) restrictions under an insider trading policy and (B) restrictions as to the
use of a specified brokerage firm for such resales or other transfers.

          (xi) To provide, either at the time a Stock Award is granted or by subsequent action, that a
Stock Award shall contain as a term thereof, a right, either in tandem with the other rights under
the Stock Award or as an alternative thereto, of the Participant to receive, without payment to the
Company, a number of shares of Common Stock, cash or a combination thereof, the amount of which is
determined by reference to the value of the Stock Award.

     3.3 Delegation to Committee.

          (i) General. The Board may delegate administration of the Plan to a Committee or
Committees consisting of one or more members of the Board or one or more officers of the Company
who are not members of the Board (to the extent allowed by law), and the term “Committee” shall
apply to any person or persons to whom such authority has been delegated. If administration is
delegated to a Committee, the Committee also may exercise, in connection with the administration of
the Plan, any of the powers and authority granted to the Board under the Plan, and the Committee
may delegate to a subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the Committee or
subcommittee, as applicable), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.

          (ii) Committee Composition when Common Stock is Publicly Traded. At such time as the
Common Stock is publicly traded, in the discretion of the Board, a Committee may consist solely of
two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two
or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority,
the Board or the Committee may (1) delegate to a committee of one or more individuals who are not
Outside Directors the authority to grant Stock Awards to eligible persons who are either (a) not
then Covered Employees and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom the Company wishes
to comply with Section 162(m) of the Code and/or (2) delegate to a committee of one or more
individuals who are not Non-Employee Directors the authority to grant Stock Awards to eligible
persons who are either (a) not then

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subject to Section 16 of the Exchange Act or (b) receiving a Stock Award as to which the Board
or Committee elects not to comply with Rule 16b-3 by having two or more Non-Employee Directors
grant such Stock Award.

     3.4 Effect of Board’s Decision. All determinations, interpretations and constructions
made by the Board in good faith shall not be subject to review by any person and shall be final,
binding and conclusive on all persons.

     3.5 Compliance with Section 16 of Exchange Act. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3, or any successor rule thereto. To the extent any provision of
this Plan or action by the Board fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Board, to comply with the
requirements of Section 16 of the Exchange Act; and neither the Company nor the Board shall be
liable if this Plan or any transaction under this Plan fails to comply with the applicable
conditions of Rule 16b-3 or any successor rule thereto, or if any person incurs any liability under
Section 16 of the Exchange Act.

IV.      SHARES SUBJECT TO THE PLAN

     4.1 Share Reserve. Subject to the provisions of Section 13 of the Plan relating to
adjustments upon changes in Common Stock, the maximum aggregate number of shares of Common Stock
that may be issued pursuant to Stock Awards shall not exceed Two Million Two Hundred Thousand
(2,200,000) shares of Common Stock (“Share Reserve”), provided that each share of Common Stock
issued pursuant to a Stock Award shall reduce the Share Reserve by one (1) share. No more than
fifty percent (50%) of the Share Reserve may be issued under the terms of a Full-Value Stock Award.
To the extent that a distribution pursuant to a Stock Award is made in cash, the Share Reserve
shall be reduced by the number of shares of Common Stock subject to the redeemed or exercised
portion of the Stock Award. Notwithstanding any other provision of the Plan to the contrary, the
maximum aggregate number of shares of Common Stock that may be issued under the Plan pursuant to
Incentive Stock Options is Two Million Two Hundred Thousand (2,200,000) shares of Common Stock
(“ISO Limit”), subject to the adjustments provided for in Section 13 of the Plan. No more than an
aggregate of five percent (5%) of the initial Share Reserve at the time of the adoption of this
Plan and five percent (5%) of any increase in the Share Reserve as may be approved by the
shareholders of the Company from time to time may be granted under Accelerated Vesting Restricted
Stock Bonuses and Accelerated Vesting Restricted Stock Units (as defined in Sections 8.1(ii) and 8.5(ii), respectively).

     4.2 Reversion of Shares to the Share Reserve.

          (i) If any Stock Award granted under this Plan shall for any reason (A) expire, be cancelled
or otherwise terminate, in whole or in part, without having been exercised or redeemed in full, (B)
be reacquired by the Company prior to vesting, or (C) be repurchased at cost by the Company prior
to vesting, the shares of Common Stock not acquired by Participant under such Stock Award shall
revert or be added to the Share Reserve and become available for issuance under the Plan; provided,
however, that shares of Common Stock shall not revert or be

8

 

added to the Share Reserve that are (a) tendered in payment of an Option, (b) withheld by the
Company to satisfy any tax withholding obligation, or (c) repurchased by the Company with Option
proceeds, and provided, further, that shares of Common Stock covered by a Stock Appreciation Right,
to the extent that it is exercised and settled in shares of Common Stock, and whether or not shares
of Common Stock are actually issued to the Participant upon exercise of the Stock Appreciation
Right, shall be considered issued or transferred pursuant to the Plan.

          (ii) Shares of Common Stock that are not acquired by a holder of a stock award granted under
the 1997 Plan, the 1996 Plan, or the Directors 1996 Plan shall not revert or be added to the Share
Reserve or become available for issuance under the Plan.

     4.3 Source of Shares. The shares of Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.

V.      ELIGIBILITY

     5.1 Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only
to Employees. Stock Awards other than Incentive Stock Options may be granted to Employees,
Directors, and Consultants.

     5.2 Ten Percent Shareholders. A Ten Percent Shareholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.

     5.3 Annual Section 162(m) Limitation. Subject to the provisions of Section 13 of the
Plan relating to adjustments upon changes in the shares of Common Stock, no Employee shall be
eligible to be granted Incentive Stock Options, Nonstatutory Stock Options, or Stock Appreciation
Rights covering more than Three Hundred Fifty Thousand (350,000) shares of Common Stock during any
fiscal year; provided that in connection with his or her initial service, an Employee may be
granted Incentive Stock Options, Nonstatutory Stock Options, or Stock Appreciation Rights covering
not more than an additional Two Hundred Fifty Thousand (250,000) shares of Common Stock, which
shall not count against the limit set forth in the preceding sentence.

     5.4. Consultants.

          (i) A Consultant shall not be eligible for the grant of a Stock Award if, at the time of
grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to
register either the offer or the sale of the Company’s securities to such Consultant because of the
nature of the services that the Consultant is providing to the Company, or because the Consultant
is not a natural person, or as otherwise provided by the rules governing the use of Form S-8,
unless the Company determines both (1) that such grant (A) shall be registered in another manner
under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (2) that such grant complies with the securities laws of all other relevant
jurisdictions.

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          (ii) Form S-8 generally is available to consultants and advisors only if (A) they are natural
persons; (B) they provide bona fide services to the issuer, its parents, or its majority owned
subsidiaries; and (C) the services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or maintain a market for the
issuer’s securities.

VI.      OPTION PROVISIONS

     Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common Stock purchased upon exercise of
each type of Option. The provisions of separate Options need not be identical, but each Option
shall include (through incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:

     6.1 Term. Subject to the provisions of Section 5.2 of the Plan regarding grants of
Incentive Stock Options to Ten Percent Shareholders, no Option shall be exercisable after the
expiration of ten (10) years from the date it was granted, and no Option granted to an Eligible
Director pursuant to Article VII shall be exercisable after the expiration of five (5) years from
the date it was granted.

     6.2 Exercise Price of an Incentive Stock Option. Subject to the provisions of Section
5.2 of the Plan regarding Ten Percent Shareholders, the exercise price of each Incentive Stock
Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.

     6.3 Exercise Price of a Nonstatutory Stock Option. The exercise price of each
Nonstatutory Stock Option shall be not less than one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding
the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that
set forth in the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section 424(a) of the
Code.

     6.4 Consideration. The purchase price of Common Stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash
or by check at the time the Option is exercised or (ii) at the discretion of the Board at the time
of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option): (1) by
delivery to the Company of other Common Stock, (2) pursuant to a “same day sale” program to the
extent permitted by law, (3) reduction of the Company’s liability to the Optionholder, (4) by any
other form of consideration permitted by law, but in no event shall a promissory note or other form
of deferred payment constitute a permissible form of consideration for an Option

10

 

granted under the Plan, or (5) by some combination of the foregoing. In the absence of a
provision to the contrary in the individual Optionholder’s Option Agreement, payment for Common
Stock pursuant to an Option may only be made in the form of cash, check, or pursuant to a “same day
sale” program.

     Unless otherwise specifically provided in the Option, the purchase price of Common Stock
acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such longer or shorter period
of time required to avoid a charge to earnings for financial accounting purposes).

     6.5 Transferability of an Incentive Stock Option. An Incentive Stock Option shall not
be transferable except by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing,
the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

     6.6 Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall
be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock Option
does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

     6.7 Vesting Generally. Options granted under the Plan shall be exercisable at such
time and upon such terms and conditions as may be determined by the Board. The vesting provisions
of individual Options may vary. If vesting is based on the Participant’s Continuous Service, such
Options shall not fully vest in less than three (3) years. If vesting is based on the achievement
of performance criteria, such Options shall not fully vest in less than one (1) year. The
provisions of this Section 6.7 are subject to any Option provisions governing the minimum number of
shares of Common Stock as to which an Option may be exercised. Notwithstanding the foregoing
provisions of this Section 6.7, Options granted in recognition of a Participant’s long-term
Continuous Service may vest fully in periods shorter than those described above or may be fully
vested upon grant.

     6.8 Termination of Continuous Service. In the event an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination) but only within such period of time as is specified in the
Option Agreement (and in no event later than the expiration of the term of such Option as set forth
in the Option Agreement). If, after termination, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall terminate. In the
absence of a provision to the contrary in the individual Optionholder’s Option Agreement, the

11

 

Option shall remain exercisable for three (3) months following the termination of the
Optionholder’s Continuous Service.

     6.9 Extension of Termination Date. An Optionholder’s Option Agreement may also provide
that if the exercise of the Option following the termination of the Optionholder’s Continuous
Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the registration requirements
under the Securities Act or other applicable securities law, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option Agreement or (ii)
the expiration of a period of three (3) months after the termination of the Optionholder’s
Continuous Service during which the exercise of the Option would not be in violation of such
registration requirements or other applicable securities law. The provisions of this Section 6.9
notwithstanding, in the event that a sale of the shares of Common Stock received upon exercise of
his or her Option would subject the Optionholder to liability under Section 16(b) of the Exchange
Act, then the Option will terminate on the earlier of (1) the fifteenth (15th) day after
the last date upon which such sale would result in liability, or (2) two hundred ten (210) days
following the date of termination of the Optionholder’s employment or other service to the Company
(and in no event later than the expiration of the term of the Option).

     6.10 Disability of Optionholder. In the event that an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his
or her Option to the extent that the Optionholder was entitled to exercise such Option as of the
date of termination, but only within such period of time as is specified in the Option Agreement
(and in no event later than the expiration of the term of such Option as set forth in the Option
Agreement). If, after termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate. In the absence of a provision
to the contrary in the individual Optionholder’s Option Agreement, the Option shall remain
exercisable for twelve (12) months following such termination.

     6.11 Death of Optionholder. In the event (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period
(if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous
Service for a reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder’s death pursuant to Section 6.5 or
6.6 of the Plan, but only within such period of time as is specified in the Option Agreement (and
in no event later than the expiration of the term of such Option as set forth in the Option
Agreement). If, after death, the Option is not exercised within the time specified in the Option
Agreement, the Option shall terminate. In the absence of a provision to the contrary in the
individual Optionholder’s Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionholder’s death.

     6.12 Early Exercise Generally Not Permitted. The Company’s general policy is not to
allow the Optionholder to exercise the Option as to any part or all of the shares of Common Stock
subject to the Option prior to the vesting of the Option. If, however, an Option Agreement does
permit such early exercise, any unvested shares of Common Stock so purchased may be

12

 

subject to a repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.

VII.      NON-DISCRETIONARY STOCK AWARDS FOR ELIGIBLE DIRECTORS

     In addition to any other Stock Awards that Eligible Directors may be granted on a
discretionary basis under the Plan, each Eligible Director of the Company shall be automatically
granted without the necessity of action by the Board, the following Stock Awards.

     7.1 Initial Grant. On the date that a Director commences service on the Board and
satisfies the definition of an Eligible Director, an initial grant of restricted stock in the form
of a Restricted Stock Bonus award or an award of Restricted Stock Units shall automatically be made
to that Eligible Director (the “Initial Grant”). Unless expressly provided in this Article VII,
such Initial Grant shall be subject to the applicable provisions of Section 8.1 or Section 8.5, as
the case may be. In the absence of an affirmative decision by the Board to the contrary, the
Initial Grant shall be in the form of a Restricted Stock Bonus award. The number of shares subject
to this Initial Grant shall be Seven Thousand (7,000) shares; provided, however, that prior to the
date of grant the Board may, in its sole discretion, provide that a different number of shares
shall be subject to this Initial Grant. The other terms governing this Initial Grant shall be as
determined by the Board in its sole discretion.. If at the time a Director commences service on the
Board, the Director does not satisfy the definition of an Eligible Director, such Director shall
not be entitled to an Initial Grant at any time, even if such Director subsequently becomes an
Eligible Director.

     7.2 Annual Grant. An annual grant of restricted stock in the form of a Restricted
Stock Bonus award or an award of Restricted Stock Units (the “Annual Grant”) shall automatically be
made to each Director who (1) is re-elected to the Board and (2) is an Eligible Director on the
relevant grant date. Unless expressly provided in this Article VII, such Annual Grant shall be
subject to the applicable provisions of Section 8.1 or Section 8.5, as the case may be. In the
absence of an affirmative decision by the Board to the contrary, the Annual Grant shall be in the
form of a Restricted Stock Bonus award. The number of shares subject to this Annual Grant shall be
Five Thousand (5,000) shares. The other terms governing this Annual Grant shall be as determined by
the Board in its sole discretion. The date of grant of an Annual Grant is the date of the first
meeting of the Board following the annual meeting of the Company’s shareholders (even if that Board
meeting is held on the same day as the annual meeting of the shareholders).

     7.3 Vesting. Initial Grants and Annual Grants granted pursuant to this Article shall
be subject to a share reacquisition right in favor of the Company. Such grants shall vest as to one
fourth (1/4) of the total award annually, such that the award is fully vested after four (4) years
of Continuous Service. In the event a Director’s Continuous Service terminates, the Company shall
automatically reacquire without cost any shares of Common Stock held by the Director that have not
vested as of the date of such termination and any unvested Restricted Stock Units shall
automatically expire as of the date of such termination.

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VIII.       PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS

     8.1 Restricted Stock Bonus Awards. Each Restricted Stock Bonus agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem appropriate.
Restricted Stock Bonuses shall be paid by the Company in shares of the Common Stock of the Company.
The terms and conditions of Restricted Stock Bonus agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Bonus agreements need not be identical, but each
Restricted Stock Bonus agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. A Restricted Stock Bonus may be awarded in consideration for past
services actually rendered to the Company or an Affiliate for its benefit; provided, however, that
in the case of a Restricted Stock Bonus to be made to a new Employee, Director, or Consultant who
has not performed prior services for the Company, the Restricted Stock Bonus will not be awarded
until the Board determines that such person has rendered services to the Company for a sufficient
period of time to ensure proper issuance of the shares in compliance with the California
Corporations Code.

          (ii) Vesting. Vesting shall generally be based on the Participant’s Continuous
Service. Shares of Common Stock awarded under the Restricted Stock Bonus agreement shall be subject
to a share reacquisition right in favor of the Company in accordance with a vesting schedule to be
determined by the Board. Absent a provision to the contrary in the Participant’s Restricted Stock
Bonus agreement, so long as the Participant remains in Continuous Service with the Company, a
Restricted Stock Bonus granted to the Participant shall vest as to one fourth (1/4) of the total
Restricted Stock Bonus award on each annual anniversary of the grant date, such that the Restricted
Stock Bonus is fully vested after four (4) years of Continuous Service from the grant date. If
vesting is based on the Participant’s Continuous Service, such Restricted Stock Bonus shall not
fully vest in less than three (3) years. If vesting is based on the achievement of performance
criteria, such Restricted Stock Bonus shall not fully vest in less than one (1) year.
Notwithstanding the foregoing provisions of this Section 8.1(ii), a Restricted Stock Bonus granted
in recognition of a Participant’s long-term Continuous Service may vest fully in periods shorter
than those described above or may be fully vested upon grant (“Accelerated Vesting Restricted Stock
Bonuses”), subject to provisions of the last sentence of Section 4.1.

          (iii) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company shall automatically reacquire without cost any or all of
the shares of Common Stock held by the Participant that have not vested as of the date of
termination under the terms of the Restricted Stock Bonus agreement.

          (iv) Transferability. Rights to acquire shares of Common Stock under the Restricted
Stock Bonus agreement shall be transferable by the Participant only upon such terms and conditions
as are set forth in the Restricted Stock Bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the Restricted Stock Bonus agreement remains
subject to the terms of the Restricted Stock Bonus agreement.

14

 

     8.2 Restricted Stock Purchase Awards. Each Restricted Stock Purchase Right agreement
shall be in such form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of the Restricted Stock Purchase Right agreements may change
from time to time, and the terms and conditions of separate Restricted Stock Purchase Right
agreements need not be identical, but each Restricted Stock Purchase Right agreement shall include
(through incorporation of provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:

          (i) Purchase Price. The purchase price under each Restricted Stock Purchase Right
agreement shall be such amount as the Board shall determine and designate in such Restricted Stock
Purchase Right agreement. The purchase price shall not be less than one hundred percent (100%) of
the Common Stock’s Fair Market Value on the date such award is made or at the time the purchase is
consummated.

          (ii) Consideration. The purchase price of Common Stock acquired pursuant to the
Restricted Stock Purchase Right agreement shall be paid either: (A) in cash or by check at the time
of purchase; or (B) at the discretion of the Board, according to a deferred payment or other
similar arrangement with the Participant to the extent permitted by law.

          (iii) Vesting. The Board shall determine the criteria under which shares of Common
Stock under the Restricted Stock Purchase Right agreement may vest; the criteria may or may not
include performance criteria or Continuous Service. Shares of Common Stock acquired under the
Restricted Stock Purchase Right agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be determined by the Board.

          (iv) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company may repurchase any or all of the shares of Common Stock
held by the Participant that have not vested as of the date of termination under the terms of the
Restricted Stock Purchase Right agreement.

          (v) Transferability. Rights to acquire shares of Common Stock under the Restricted
Stock Purchase Right agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Restricted Stock Purchase Right agreement, as the Board shall
determine in its discretion, so long as Common Stock awarded under the Restricted Stock Purchase
Right agreement remains subject to the terms of the Restricted Stock Purchase Right agreement.

     8.3 Stock Appreciation Rights. Two types of Stock Appreciation Rights (“SARs”) shall
be authorized for issuance under the Plan: (1) stand-alone SARs and (2) stapled SARs.

          (i) Stand-Alone SARs. The following terms and conditions shall govern the grant and
redeemability of stand-alone SARs:

     (A) The stand-alone SAR shall cover a specified number of underlying shares of Common Stock
and shall be redeemable upon such terms and conditions as the Board may establish. Upon redemption
of the stand-alone SAR, the holder shall be entitled to receive a distribution from the Company in
an amount equal to the excess of (i) the aggregate Fair Market

15

 

Value (on the redemption date) of the shares of Common Stock underlying the redeemed right
over (ii) the aggregate base price in effect for those shares.

     (B) The number of shares of Common Stock underlying each stand-alone SAR and the base price in
effect for those shares shall be determined by the Board in its sole discretion at the time the
stand-alone SAR is granted. In no event, however, may the base price per share be less than one
hundred percent (100%) of the Fair Market Value per underlying share of Common Stock on the grant
date.

     (C) The distribution with respect to any redeemed stand-alone SAR may be made in shares of
Common Stock valued at Fair Market Value on the redemption date, in cash, or partly in shares and
partly in cash, as the Board shall in its sole discretion deem appropriate.

          (ii) Stapled SARs. The following terms and conditions shall govern the grant and
redemption of stapled SARs:

     (A) Stapled SARs may only be granted concurrently with an Option to acquire the same number of
shares of Common Stock as the number of such shares underlying the stapled SARs.

     (B) Stapled SARs shall be redeemable upon such terms and conditions as the Board may establish
and shall grant a holder the right to elect among (i) the exercise of the concurrently granted
Option for shares of Common Stock, whereupon the number of shares of Common Stock subject to the
stapled SARs shall be reduced by an equivalent number, (ii) the redemption of such stapled SARs in
exchange for a distribution from the Company in an amount equal to the excess of the Fair Market
Value (on the redemption date) of the number of vested shares which the holder redeems over the
aggregate base price for such vested shares, whereupon the number of shares of Common Stock subject
to the concurrently granted Option shall be reduced by any equivalent number, or (iii) a
combination of (i) and (ii).

     (C) The distribution to which the holder of stapled SARs shall become entitled under this
Section 8 upon the redemption of stapled SARs as described in Section 8.3(ii)(B) above may be made
in shares of Common Stock valued at Fair Market Value on the redemption date, in cash, or partly in
shares and partly in cash, as the Board shall in its sole discretion deem appropriate.

     8.4 Phantom Stock Units. The following terms and conditions shall govern the grant and
redeemability of Phantom Stock Units:

          (i) Phantom Stock Unit awards shall be redeemable by the Participant upon such terms and
conditions as the Board may establish. The value of a single Phantom Stock Unit shall be equal to
the Fair Market Value of a share of Common Stock, unless the Board otherwise provides in the terms
of the Stock Award Agreement.

          (ii) The distribution with respect to any exercised Phantom Stock Unit award may be made in
shares of Common Stock valued at Fair Market Value on the redemption date, in cash, or partly in
shares and partly in cash, as the Board shall in its sole discretion deem appropriate.

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     8.5 Restricted Stock Units. The following terms and conditions shall govern the grant
and redeemability of Restricted Stock Units:

     A Restricted Stock Unit is the right to receive the value of one (1) share of the Company’s
Common Stock at the time the Restricted Stock Unit vests. To the extent permitted by the Board in
the terms of his or her Restricted Stock Unit agreement, a Participant may elect to defer receipt
of the value of the shares of Common Stock otherwise deliverable upon the vesting of an award of
Restricted Stock Units, so long as such deferral election complies with applicable law, including
to the extent applicable, the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). An election to defer such delivery shall be irrevocable and shall be made in writing on
a form acceptable to the Company. The election form shall be filed prior to the vesting date of
such Restricted Stock Units in a manner determined by the Board. When the Participant vests in such
Restricted Stock Units, the Participant will be credited with a number of Restricted Stock Units
equal to the number of shares of Common Stock for which delivery is deferred. Restricted Stock
Units may be paid by the Company by delivery of shares of Common Stock, in cash, or a combination
thereof, as the Board shall in its sole discretion deem appropriate, in accordance with the timing
and manner of payment elected by the Participant on his or her election form, or if no deferral
election is made, as soon as administratively practicable following the vesting of the Restricted
Stock Unit.

     Each Restricted Stock Unit agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit
agreements may change from time to time, and the terms and conditions of separate Restricted Stock
Unit agreements need not be identical, but each Restricted Stock Unit agreement shall include
(through incorporation of provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:

          (i) Consideration. A Restricted Stock Unit may be awarded in consideration for past
services actually rendered to the Company or an Affiliate for its benefit. The Board shall have the
discretion to provide that the Participant pay for such Restricted Stock Unit with cash or other
consideration permissible by law.

          (ii) Vesting. Vesting shall generally be based on the Participant’s Continuous
Service. If vesting is based on the Participant’s Continuous Service, such Restricted Stock Unit
award shall not fully vest in less than three (3) years. If vesting is based on the achievement of
performance criteria, such Restricted Stock Unit award shall not fully vest in less than one (1)
year. Notwithstanding the foregoing provisions of this Section 8.5(ii), a Restricted Stock Unit
granted in recognition of a Participant’s long-term Continuous Service may vest fully in periods
shorter than those described above (“Accelerated Vesting Restricted Stock Units”), subject to
provisions of the last sentence of Section 4.1.

          (iii) Termination of Participant’s Continuous Service. The unvested portion of the
Restricted Stock Unit award shall expire immediately upon the termination of Participant’s
Continuous Service.

          (iv) Transferability. Rights to acquire the value of shares of Common Stock under the
Restricted Stock Unit agreement shall be transferable by the Participant only upon such

17

 

terms and conditions as are set forth in the Restricted Stock Unit agreement, as the Board
shall determine in its discretion, so long as any Common Stock awarded under the Restricted Stock
Unit agreement remains subject to the terms of the Restricted Stock Unit agreement.

     8.6 Performance Share Bonus Awards. Each Performance Share Bonus agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem appropriate.
Performance Share Bonuses shall be paid by the Company in shares of the Common Stock of the
Company. The terms and conditions of Performance Share Bonus agreements may change from time to
time, and the terms and conditions of separate Performance Share Bonus agreements need not be
identical, but each Performance Share Bonus agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

          (i) Consideration. A Performance Share Bonus may be awarded in consideration for past
services actually rendered to the Company or an Affiliate for its benefit. In the event that a
Performance Share Bonus is granted to a new Employee, Director, or Consultant who has not performed
prior services for the Company, the Performance Share Bonus will not be awarded until the Board
determines that such person has rendered services to the Company for a sufficient period of time to
ensure proper issuance of the shares in compliance with the California Corporations Code.

          (ii) Vesting. Vesting shall be based on the achievement of certain performance
criteria, whether financial, transactional or otherwise, as determined by the Board. A Performance
Share Bonus shall not fully vest in less than one (1) year. Vesting shall be subject to the
Performance Share Bonus agreement. Upon failure to meet performance criteria, shares of Common
Stock awarded under the Performance Share Bonus agreement shall be subject to a share reacquisition
right in favor of the Company in accordance with a vesting schedule to be determined by the Board.

          (iii) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company shall reacquire any or all of the shares of Common Stock
held by the Participant that have not vested as of the date of termination under the terms of the
Performance Share Bonus agreement.

          (iv) Transferability. Rights to acquire shares of Common Stock under the Performance
Share Bonus agreement shall be transferable by the Participant only upon such terms and conditions
as are set forth in the Performance Share Bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the Performance Share Bonus agreement remains
subject to the terms of the Performance Share Bonus agreement.

     8.7 Performance Share Units. The following terms and conditions shall govern the grant
and redeemability of Performance Share Units:

     A Performance Share Unit is the right to receive the value of one (1) share of the Company’s
Common Stock at the time the Performance Share Unit vests. To the extent permitted by the Board in
the terms of his or her Performance Share Unit agreement, a Participant may elect to defer receipt
of the value of shares of Common Stock otherwise

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deliverable upon the vesting of an award of performance shares. An election to defer such
delivery shall be irrevocable and shall be made in writing on a form acceptable to the Company. The
election form shall be filed prior to the vesting date of such performance shares in a manner
determined by the Board. When the Participant vests in such performance shares, the Participant
will be credited with a number of Performance Share Units equal to the number of shares of Common
Stock for which delivery is deferred. Performance Share Units may be paid by the Company by
delivery of shares of Common Stock, in cash, or a combination thereof, as the Board shall in its
sole discretion deem appropriate, in accordance with the timing and manner of payment elected by
the Participant on his or her election form, or if no deferral election is made, as soon as
administratively practicable following the vesting of the Performance Share Unit.

     Each Performance Share Unit agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and conditions of Performance Share Unit
agreements may change from time to time, and the terms and conditions of separate Performance Share
Unit agreements need not be identical, but each Performance Share Unit agreement shall include
(through incorporation of provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:

          (i) Consideration. A Performance Share Unit may be awarded in consideration for past
services actually rendered to the Company or an Affiliate for its benefit. The Board shall have the
discretion to provide that the Participant pay for such Performance Share Unit with cash or other
consideration permissible by law.

          (ii) Vesting. Vesting shall be based on the achievement of certain performance
criteria, whether financial, transactional or otherwise, as determined by the Board. Vesting shall
be subject to the Performance Share Unit agreement. The terms of the Performance Share Unit
agreement notwithstanding, a Performance Share Unit may not fully vest in less than one (1) year.

          (iii) Termination of Participant’ Continuous Service. The unvested portion of any
Performance Share Unit shall expire immediately upon the termination of Participant’s Continuous
Service.

          (iv) Transferability. Rights to acquire the value of shares of Common Stock under the
Performance Share Unit agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Performance Share Unit agreement, as the Board shall determine
in its discretion, so long as Common Stock awarded under the Performance Share Unit agreement
remains subject to the terms of the Performance Share Unit agreement.

IX.      COVENANTS OF THE COMPANY

     9.1 Availability of Shares. During the term of the Stock Awards, the Company shall
keep available at all times the number of shares of Common Stock required to satisfy such Stock
Awards.

     9.2 Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise,

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redemption or satisfaction of the Stock Awards; provided, however, that this undertaking shall
not require the Company to register under the Securities Act the Plan or any Stock Award or any
Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock
related to such Stock Awards unless and until such authority is obtained.

X.      USE OF PROCEEDS FROM STOCK

     Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds
of the Company.

XI.      CANCELLATION AND RE-GRANT OF OPTIONS

     11.1 The Board shall have the authority to effect, at any time and from time to time, (i) the
repricing of any outstanding Options under the Plan and/or (ii) with the consent of the affected
Optionholders, the cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or different number of shares
of Common Stock, but having an exercise price per share not less than one hundred percent (100%) of
the Fair Market Value or, in the case of a Ten Percent Shareholder (as described in Section 5.2 of
the Plan), not less than one hundred ten percent (110%) of the Fair Market Value) per share of
Common Stock on the new grant date. Notwithstanding the foregoing, the Board may grant an Option
with an exercise price lower than that set forth above if such Option is granted as part of a
transaction to which Section 424(a) of the Code applies. Notwithstanding anything to the contrary
in this Section 11.1, prior to the implementation of any such repricing or cancellation of one or
more outstanding Options, the Board shall obtain the approval of the shareholders of the Company to
the extent required by any New York Stock Exchange, Nasdaq or other securities exchange listing
requirements, or applicable law.

     11.2 Shares subject to an Option cancelled under this Section 11 shall continue to be counted
against the maximum award of Options permitted to be granted pursuant to Section 5.3 of the Plan.
The repricing of an Option under this Section 11, resulting in a reduction of the exercise price,
shall be deemed to be a cancellation of the original Option and the grant of a substitute Option;
in the event of such repricing, both the original and the substituted Options shall be counted
against the maximum awards of Options permitted to be granted pursuant to Section 5.3 of the Plan.
The provisions of this Section 11.2 shall be applicable only to the extent required by Section
162(m) of the Code.

XII.      MISCELLANEOUS

     12.1 Acceleration of Exercisability and Vesting. The Board (or Committee, if so
authorized by the Board) shall have the power to accelerate exercisability and/or vesting of any
Stock Award granted pursuant to the Plan upon a Change of Control or upon the death, Disability or
termination of Continuous Service of the Participant. In furtherance of such power, the Board or
Committee may accelerate the time at which a Stock Award may first be exercised

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or the time during which a Stock Award or any part thereof will vest in accordance with the
Plan, notwithstanding any provisions in the Stock Award Agreement to the contrary.

     12.2 Shareholder Rights. No Participant shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Common Stock subject to a Stock
Award except to the extent that the Company has issued the shares of Common Stock relating to such
Stock Award.

     12.3 No Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to
continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award
was granted or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate,
or (iii) the service of a Director pursuant to the Bylaws of the Company, and any applicable
provisions of the corporate law of the state or other jurisdiction in which the Company is
domiciled, as the case may be.

     12.4 Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair
Market Value (determined at the time of grant) of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any Optionholder during any calendar year
(under all plans of the Company and its Affiliates) exceeds One Hundred Thousand dollars
($100,000), or such other limit as may be set by law, the Options or portions thereof which exceed
such limit (according to the order in which they were granted) shall be treated as Nonstatutory
Stock Options.

     12.5 Investment Assurances. The Company may require a Participant, as a condition of
exercising or redeeming a Stock Award or acquiring Common Stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant’s knowledge and experience in
financial and business matters and/or to employ a purchaser representative reasonably satisfactory
to the Company who is knowledgeable and experienced in financial and business matters and that he
or she is capable of evaluating, alone or together with the purchaser representative, the merits
and risks of acquiring the Common Stock; (ii) to give written assurances satisfactory to the
Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the
Participant’s own account and not with any present intention of selling or otherwise distributing
the Common Stock; and (iii) to give such other written assurances as the Company may determine are
reasonable in order to comply with applicable law. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock under the Stock Award has been registered under a then currently effective
registration statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws, and in either case otherwise complies with
applicable law. The Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable laws, including, but not limited to, legends restricting the transfer of the
Common Stock.

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     12.6 Withholding Obligations. To the extent provided by the terms of a Stock Award
Agreement, the Participant may satisfy any federal, state, local, or foreign tax withholding
obligation relating to the exercise or redemption of a Stock Award or the acquisition, vesting,
distribution, or transfer of Common Stock under a Stock Award by any of the following means (in
addition to the Company’s right to withhold from any compensation or other amounts payable to the
Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of Common Stock
otherwise issuable to the Participant, provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii)
delivering to the Company owned and unnumbered shares of Common Stock.

     12.7 Section 409A. Notwithstanding anything in the Plan to the contrary, it is the
intent of the Company that all Stock Awards granted under this Plan (including, but not limited to,
Restricted Stock Units, Phantom Stock Units, and Performance Share Units) shall not cause an
imposition of the additional taxes provided for in Section 409A(a)(1)(B) of the Code; furthermore,
it is the intent of the Company that the Plan shall be administered so that the additional taxes
provided for in Section 409A(a)(1)(B) of the Code are not imposed.

XIII.      ADJUSTMENTS UPON CHANGES IN STOCK

     13.1 Capitalization Adjustments. If any change is made in the Common Stock subject to
the Plan, or subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend,
spinoff, dividend in property other than cash, stock split, liquidating dividend, extraordinary
dividends or distributions, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the Company), the Plan
may be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4.1 above, the maximum number of securities subject to award to any person
pursuant to Section 5.3 above, and the number of securities subject to Initial Grants and Annual
Grants to Eligible Directors under Article VII of the Plan, and the outstanding Stock Awards may be
appropriately adjusted in the class(es) and number of securities or other property and price per
share of the securities or other property subject to such outstanding Stock Awards. The Board may
make such adjustments in its sole discretion, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall not be treated as a
transaction “without receipt of consideration” by the Company.)

     13.2 Adjustments Upon a Change of Control.

          (i) In the event of a Change of Control as defined in Section 2.4(i) through 2.4(iv), such as
an asset sale, merger, or change in Board composition, then the Board or the board of directors of
any surviving entity or acquiring entity may provide or require that the surviving or acquiring
entity shall: (1) assume or continue all or any part of the Stock Awards outstanding under the Plan
or (2) substitute substantially equivalent stock awards (including an award to acquire
substantially the same consideration paid to the shareholders in the transaction by which the
Change of Control occurs) for those outstanding under the Plan. In the event any surviving entity
or acquiring entity refuses to assume or continue such Stock Awards or to

22

 

substitute similar stock awards for those outstanding under the Plan, then with respect to
Stock Awards held by Participants whose Continuous Service has not terminated, the Board in its
sole discretion and without liability to any person may: (1) provide for the payment of a cash
amount in exchange for the cancellation of a Stock Award equal to the product of (x) the excess, if
any, of the Fair Market Value per share of Common Stock at such time over the exercise or
redemption price, if any, times (y) the total number of shares then subject to such Stock
Award; (2) continue the Stock Awards; or (3) notify Participants holding an Option, Stock
Appreciation Right, Phantom Stock Unit, Restricted Stock Unit or Performance Share Unit that they
must exercise or redeem any portion of such Stock Award (including, at the discretion of the Board,
any unvested portion of such Stock Award) at or prior to the closing of the transaction by which
the Change of Control occurs and that the Stock Awards shall terminate if not so exercised or
redeemed at or prior to the closing of the transaction by which the Change of Control occurs. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards shall terminate if
not exercised or redeemed prior to the closing of the transaction by which the Change of Control
occurs. The Board shall not be obligated to treat all Stock Awards, even those that are of the same
type, in the same manner.

          (ii) In the event of a Change of Control as defined in Section 2.4(v), such as a dissolution
of the Company, all outstanding Stock Awards shall terminate immediately prior to such event.

XIV.       AMENDMENT OF THE PLAN AND STOCK AWARDS

     14.1 Amendment of Plan. The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 13 of the Plan relating to adjustments upon changes in
Common Stock, no amendment shall be effective unless approved by the shareholders of the Company to
the extent shareholder approval is necessary to satisfy the requirements of Section 422 of the
Code, any New York Stock Exchange, Nasdaq or other securities exchange listing requirements, or
other applicable law or regulation.

     14.2 Shareholder Approval. The Board may, in its sole discretion, submit any other
amendment to the Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

     14.3 Contemplated Amendments. It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with
the maximum benefits provided or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan
and/or Incentive Stock Options granted under it into compliance therewith.

     14.4 No Material Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be materially impaired by any amendment of the Plan unless (i) the
Company requests the consent of the Participant and (ii) the Participant consents in writing.

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     14.5 Amendment of Stock Awards. The Board at any time, and from time to time, may
amend the terms of any one or more Stock Awards subject to and consistent with the terms of the
Plan, including Sections 14.1 and 14.2; provided, however, that the rights of the Participant under
any Stock Award shall not be materially impaired by any such amendment unless (i) the Company
requests the consent of the Participant and (ii) the Participant consents in writing.

XV.      TERMINATION OR SUSPENSION OF THE PLAN

     15.1 Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of
the date that the Plan is approved by the shareholders of the Company, as the adoption of the Plan
by the Board is conditioned upon such shareholder approval. No Stock Awards may be granted under
the Plan while the Plan is suspended or after it is terminated.

     15.2 No Material Impairment of Rights. Suspension or termination of the Plan shall not
materially impair rights and obligations under any Stock Award granted while the Plan is in effect
except with the written consent of the Participant.

XVI.      EFFECTIVE DATE OF PLAN

     The Plan shall become effective immediately following its approval by the shareholders of the
Company, which approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board. If the Plan is approved by the shareholders of the Company, the 1997 Plan,
the 1996 Plan, and the Directors 1996 Plan shall terminate on the effective date of the Plan. If
the Plan is not approved by the shareholders of the Company, the 1997 Plan, the 1996 Plan, and the
Directors 1996 Plan shall continue unaffected. No Stock Awards may be granted under the Plan prior
to the time that the shareholders have approved the Plan.

XVII.      CHOICE OF LAW

     The law of the State of California shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.

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