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Performance-Based Incentive Plan for Senior Management - KB Home

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                       KAUFMAN AND BROAD HOME CORPORATION

             PERFORMANCE-BASED INCENTIVE PLAN FOR SENIOR MANAGEMENT


                 SECTION 1.  Purpose.  The purposes of the Kaufman and Broad
Home Corporation Performance-Based Incentive Plan for Senior Management are to
promote the interests of  Kaufman and Broad Home Corporation (the "Company")
and its stockholders by (i) attracting and retaining exceptional executive
personnel and other key employees of the Company and its Affiliates, as defined
below; (ii) motivating such employees by means of performance-related
incentives to achieve long-range performance goals; (iii) enabling such
employees to participate in the long-term growth and financial success of the
Company; and (iv) qualifying compensation paid under the Plan for deductibility
under Section 162(m) of the Internal Revenue Code.

                 SECTION 2.  Definitions.  As used in the Plan, the following
terms shall have the meanings set forth below:

                 "Affiliate" shall mean (i) any entity that, directly or
indirectly, is controlled by the Company and (ii) any entity in which the
Company has a significant equity interest, in either case as determined by the
Committee.

                 "Award" shall mean any Performance-Based Bonus opportunity
granted under the Plan, as well as any Option, Stock Appreciation Right, award
of Restricted Stock, Restricted Stock Units or Other Stock-Based Award granted
under the Plan or granted in payment or settlement of a Performance-Based
Bonus.

                 "Award Agreement" shall mean any written agreement, contract,
or other instrument or document (which may include, if so designated by the
Committee, an Employment Agreement, as defined herein) evidencing any Award,
which may, but need not, be executed or acknowledged by a Participant.

                 "Board" shall mean the Board of Directors of the Company.

                 "Change of Ownership" shall be deemed to have occurred if
either (1) individuals who, as of the effective date of this Plan, constitute
the Board of the Company (as of the date hereof, the "Incumbent Board") cease
for any reason to constitute at least a majority of the directors constituting
the Board, provided that any person becoming a director subsequent to the
effective date of this Plan whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least three-quarters (3/4)
of the then directors who are members of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
(A) in connection with the acquisition by a third person, including a "group"
as such term is used in Section 13(d)(3) of the Exchange Act, of beneficial
ownership, directly or indirectly, of 20% or more of the combined voting
securities ordinarily having the right to vote for the election of directors of
the Company (unless such acquisition of beneficial ownership was approved by a
majority of the Board who are members of the Incumbent Board), or (B) in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Plan, considered as though such person were a member of the Incumbent
Board, or (2) the Board (a majority of which shall consist of directors who are
members of the Incumbent Board) has determined that a Change of Ownership, for
purposes of this Plan, shall have occurred.  If any of the events enumerated in
clauses (1) or (2) occur, the Board shall determine the effective date of the
Change of Ownership resulting therefrom, for purposes of the Plan.

                 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

                 "Committee" shall mean a committee of the Board designated by
the Board to administer the Plan and composed of not less than the minimum
number of persons from time to time required by Rule 16b-3, each of whom (i) to
the extent necessary to comply with Rule 16b-3 only, is a "disinterested
person" within the
<PAGE>   2
meaning of Rule 16b-3 and (ii) to the extent necessary to comply with Section
162(m) only, is an "outside director" within the meaning of Section 162(m).
Until otherwise determined by the Board, the Compensation Committee designated
by the Board shall be the Committee under the Plan.

                 "Company" shall mean Kaufman and Broad Home Corporation,
together with any successor thereto.

                 "Employment Agreement" shall mean (i) with respect to Awards
relating to performance in fiscal year 1995, an agreement between the Company
and a Participant, the effectiveness or continuing effectiveness of which is
contingent upon approval, or approval of the Plan, by the Company's
stockholders, which approval shall satisfy all applicable requirements of
Section 162(m) and (ii) with respect to Awards relating to performance in any
fiscal year of the Company after fiscal year 1995, an agreement between the
Company and a Participant entered into prior to the end of the first fiscal
quarter of such fiscal year.

                 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

                 "Fair Market Value" shall mean the fair market value of the
property or other item being valued, as determined by the Committee in its sole
discretion.

                 "Incentive Stock Option" shall mean a right to purchase Shares
from the Company that is granted under Section 7 of the Plan and that is
intended to meet the requirements of Section 422 of the Code or any successor
provision thereto.

                 "Non-Qualified Stock Option" shall mean a right to purchase
Shares from the Company that is granted under Section 7 of the Plan and that is
not intended to be an Incentive Stock Option.

                 "Officer" shall mean, at any time, an individual who is an
officer of the Company or any of its subsidiaries.

                 "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option and shall include a Restoration Option.

                 "Other Stock-Based Award" shall mean any right granted under
Section 10 of the Plan.

                 "Participant" shall mean any Officer selected by the Committee
to receive an Award under the Plan.

                 "Performance-Based Bonus" shall mean a bonus opportunity
awarded in accordance with Section 6 of the Plan.

                 "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.

                 "Plan" shall mean this Kaufman and Broad Home Corporation
Performance-Based Incentive Plan for Senior Management.

                 "QDRO" shall mean a qualified domestic relations order meeting
such requirements as the Committee shall determine, in its sole discretion.

                 "Restoration Option" shall mean an Option granted pursuant to
Section 7(e) of the Plan.

                 "Restricted Stock" shall mean any Share granted under Section
9 of the Plan.

                 "Restricted Stock Unit" shall mean any unit granted under
Section 9 of the Plan.

                 "Rule 16b-3" shall mean Rule 16b-3 as promulgated and
interpreted by the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.
<PAGE>   3
                 "Section 162(m)" shall mean Section 162(m) of the Code and the
rules and other authorities thereunder promulgated by the Internal Revenue
Service of the Department of the Treasury.

                 "SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the Staff thereof.

                 "Shares" shall mean shares of the Common Stock, $1 par value,
of the Company, or such other securities of the Company as may be designated by
the Committee from time to time.

                 "Stock Appreciation Right" shall mean any right granted under
Section 8 of the Plan.

                 "Substitute Awards" shall mean Awards granted in assumption
of, or in substitution for, outstanding awards previously granted by a company
acquired by the Company or with which the Company combines.

                 SECTION 3.  Administration.

                 (a)  Authority of Committee.  The Plan shall be administered
by the Committee.  Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to:  (i)
designate Participants; (ii) determine the type or types of Awards to be
granted to an eligible Officer; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are to
be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) recommend to the
Board any amendment, alteration, suspension, discontinuance or termination of
the Plan, and subject to the shareholder approval requirement set forth in
Section 11(a) to take any such action not required by applicable law to be
taken by the Board, (ix) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan.

                 (b)  Committee Discretion Binding.  Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
stockholder and any Officer.
<PAGE>   4
                 SECTION 4.  Award Limits.

                 (a)  Plan Shares.  Subject to adjustment as provided in
Section 4(c), the number of Shares with respect to which Awards may be granted
under the Plan shall be 1,000,000.  If, after the effective date of the Plan,
any Shares covered by an Award denominated in Shares granted under the Plan, or
to which such an Award relates, are forfeited, or if such an Award is settled
for cash or otherwise terminates or is canceled without the delivery of Shares,
then the Shares covered by such Award, or to which such Award relates, or the
number of Shares otherwise counted against the aggregate number of Shares with
respect to which Awards may be granted, to the extent of any such settlement,
forfeiture, termination or cancellation, shall again become Shares with respect
to which Awards may be granted.  In the event that any Option or other Award
granted hereunder is exercised through the delivery of Shares or in the event
that withholding tax liabilities arising from such Award are satisfied by the
withholding of Shares by the Company, the number of Shares available for Awards
under the Plan shall be increased by the number of Shares so surrendered or
withheld.

                 (b)      Individual Stock-Based Awards.  Subject to adjustment
as provided in Section 4(c), no Participant may receive stock-based Awards
under the Plan in any calendar year that relate to more than 100,000 Shares
(which number shall not be subject to reduction by any Restoration Options
granted to such Participant during such calendar year); provided, however, that
such number may be increased with respect to any Participant by any Shares
available for grant to such Participant in accordance with this Paragraph 4(b)
in any prior years that were not granted in such prior years.  No provision of
this Paragraph 4(b) shall be construed as limiting the amount of any cash-based
Award which may be granted to any Participant.

                 (c)  Adjustments.  In the event that the Committee determines
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number of Shares or other securities of the Company (or number and kind
of other securities or property) with respect to which Awards may be granted,
(ii) the number of Shares or other securities of the Company (or number and
kind of other securities or property) subject to outstanding Awards, and (iii)
the grant or exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, in each case, that (A) with respect to Awards of Incentive
Stock Options no such adjustment shall be authorized to the extent that such
authority would cause the Plan to fail to qualify under Section 422(b)(1) of
the Code, as from time to time amended and (B) with respect to any Award no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m) of the
Code, as from time to time amended.

                 (d)  Substitute Awards.  Any Shares underlying Substitute
Awards shall not, except in the case of Shares with respect to which Substitute
Awards are granted to individuals who are officers or directors of the Company
for purposes of Section 16 of the Exchange Act or any successor section
thereto, be counted against the Shares available for Awards under the Plan.

                 (e)  Sources of Shares Deliverable Under Awards.  Any Shares
delivered pursuant to an Award may consist, in whole or in part, of authorized
and unissued Shares or of Shares acquired by the Company on the open market or
otherwise.

                 (f)      Cash Award Limits.  (i) Any Participant who is the
Chief Executive Officer at the time of payment of an Award (other than a
stock-based Award) shall be eligible to be paid in any calendar year an amount
not in excess of $3,000,000 in respect of any such cash Award under the Plan,
(ii) no Participant other than a Participant described in clause (i) of this
Paragraph 4(f) shall be eligible to be paid in any calendar year more than
$2,000,000 in respect of any such cash Award.  No provision of this Paragraph
4(f) shall be construed as limiting the number of stock-based Awards that a
Participant may receive.
<PAGE>   5
                 SECTION 5.  Eligibility.  Any Officer, including any Officer
who is a director of the Company or any Affiliate, who is not a member of the
Committee, shall be eligible to be designated a Participant.

                 SECTION 6.  Performance-Based Bonuses.

                 (a)      At such times and in such manner as may be prescribed
by Section 162(m), the Committee may select Participants and award to such
Participants the opportunity to earn a Performance-Based Bonus, which will be
contingent upon the Company's attainment of performance goals selected by the
Committee.

                 (b)  Performance goals which may be employed by the Committee
for purposes of a Performance-Based Bonus awarded under Paragraph (a) will
include pre-tax income, after-tax income, cash flow, return on equity, return
on capital, earnings per share, unit volume, net sales or service quality, as
determined in accordance with GAAP, if applicable, which goals may relate to
the Company as a whole or, if applicable, to the performance of one or more
specific divisions or Affiliates.

                 (c)      Notwithstanding Paragraphs (a) and (b), the formula
for determining a Performance-Based Bonus to any Participant may, if so
determined by the Committee, be governed by the terms of an Employment
Agreement applicable to such Participant.

                 (d)      Performance-Based Bonuses awarded under Paragraph (a)
may be paid in cash, other Awards or any combination thereof, and the form of
payment may be governed, as to any Participant, by an Employment Agreement
applicable to such Participant.

                 SECTION 7.  Stock Options.

                 (a)   Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Officers to
whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations applicable
to the exercise of the Option.  The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant
both types of options.  In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as may
be prescribed by Section 422 of the Code, as from time to time amended, and any
regulations implementing such statute.

                 (b)  Exercise Price.  The Committee in its sole discretion
shall establish the exercise price at the time each Option is granted, which
exercise price shall be not less than the Fair Market Value of the Shares
subject to the Option on the date of grant of the Option.

                 (c)  Exercise.  Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter.  The
Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal or
state securities laws, as it may deem necessary or advisable.

                 (d)  Payment.  No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option price therefor is
received by the Company.  Such payment may be made in cash, or its equivalent,
or, if and to the extent permitted by the Committee, by exchanging Shares owned
by the Participant (which are not the subject of any pledge or other security
interest), or by a combination of the foregoing, provided that the combined
value of all cash and cash equivalents and the Fair Market Value of any such
Shares so tendered to the Company as of the date of such tender is at least
equal to such option price plus the related amount of any taxes required to be
withheld by the Company in connection with such exercise, to the extent such
withholding taxes are then ascertainable.  If the amount of such taxes is not
ascertainable at the time of the notice of exercise, such amount shall be
tendered by you to the Company as soon as the same shall become ascertainable
and shall be communicated to you by the Company.
<PAGE>   6
                 (e)  Restoration Options.  In the event that any Participant
delivers Shares in payment of the exercise price of any Option granted
hereunder in accordance with Section 7(d), or in the event that the withholding
tax liability arising upon exercise of any Option by a Participant is satisfied
through the withholding by the Company of Shares otherwise deliverable upon
exercise of the Option, the Committee shall have the authority to grant or
provide for the automatic grant of a Restoration Option to such Participant.
The grant of a Restoration Option shall be subject to the satisfaction of such
conditions or criteria as the Committee in its sole discretion shall establish
from time to time.  A Restoration Option shall entitle the holder thereof to
purchase a number of Shares equal to the number of such Shares so delivered or
withheld upon exercise of the original Option, in the discretion of the
Committee.  A Restoration Option shall have a per share exercise price of not
less than the Fair Market Value of the Shares subject to such Restoration
Option on the date of grant thereof and such other terms and conditions as the
Committee in its sole discretion shall determine.

                 SECTION 8.  Stock Appreciation Rights.

                 (a)  Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Officers to
whom Stock Appreciation Rights shall be granted, the number of Shares to be
covered by each Stock Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof.  Stock
Appreciation Rights may be granted in tandem with another Award, in addition to
another Award, or freestanding and unrelated to another Award.  Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time.

                 (b)  Exercise and Payment.  A Stock Appreciation Right shall
entitle the Participant to receive an amount equal to the excess of the Fair
Market Value of a Share on the date of exercise of the Stock Appreciation Right
over the grant price thereof, provided that the Committee may for
administrative convenience determine that, with respect to any Stock
Appreciation Right which is not related to an Incentive Stock Option and which
can only be exercised for cash during limited periods of time in order to
satisfy the conditions of Rule 16b-3, the exercise of such Stock Appreciation
Right for cash during such limited period shall be deemed to occur for all
purposes hereunder on the day during such limited period on which the Fair
Market Value of the Shares is the highest.  Any such determination by the
Committee may be changed by the Committee from time to time and may govern the
exercise of Stock Appreciation Rights granted prior to such determination as
well as Stock Appreciation Rights thereafter granted.  The Committee shall
determine whether a Stock Appreciation Right shall be settled in cash, Shares
or a combination of cash and Shares.

                 (c)  Other Terms and Conditions.  Subject to the terms of the
Plan and any applicable Award Agreement, the Committee shall determine, at or
after the grant of a Stock Appreciation Right, the term, methods of exercise,
methods and form of settlement, and any other terms and conditions of any Stock
Appreciation Right.  Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as well as
Stock Appreciation Rights granted or exercised thereafter.  The Committee may
impose such conditions or restrictions on the exercise of any Stock
Appreciation Right as it shall deem appropriate.

                 SECTION 9.  Restricted Stock.

                 (a)  Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Officers to
whom Shares of Restricted Stock shall be granted, the number of Shares of
Restricted Stock to be granted to each Participant, the duration of the period
during which, and the conditions under which, the Restricted Stock may be
forfeited to the Company, and the other terms and conditions of such Awards.
Notwithstanding any other provision of this Plan to the contrary, the period
during which such Awards may be forfeited to the Company shall not terminate
prior to the third anniversary of the date of grant of such Award; provided,
however, that the Committee may determine to have such period terminate after
the first anniversary of the date of grant of any such Award if the Committee
has established conditions for the earning of such Award that relate to
performance of the Company or one or more divisions or units thereof.  Subject
to the preceding sentence, once established, such performance vesting criteria
may be changed, adjusted or amended during the term of an Award.
<PAGE>   7
                 (b)  Transfer Restrictions.  Shares of Restricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered, except as
provided in the Plan or the applicable Award Agreements.  Certificates issued
in respect of Shares of Restricted Stock shall be registered in the name of the
Participant and deposited by such Participant, together with a stock power
endorsed in blank, with the Company.  Upon the lapse of the restrictions
applicable to such Shares of Restricted Stock, the Company shall deliver such
certificates to the Participant or the Participant's legal representative.

                 (c)  Dividends and Distributions.  Dividends and other
distributions paid on or in respect of any Shares of Restricted Stock may be
paid directly to the Participant, or may be reinvested in additional Shares of
Restricted Stock, as determined by the Committee in its sole discretion.

                 SECTION 10.  Change of Ownership.  Notwithstanding anything to
the contrary in this Plan, unless otherwise specifically determined by the
Committee at the time of grant, all Options theretofore granted and not fully
exercisable shall become exercisable in full and the restrictions on any other
outstanding Awards shall lapse upon the occurrence of a Change of Ownership.

                 SECTION 11.  Other Stock-Based Awards.  The Committee shall
have authority to grant to any Officer an "Other Stock-Based Award", which
shall consist of any right which is (i) not an Award described in Sections 6
through 9 above and (ii) an Award of Shares or an Award denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities convertible into
Shares), as deemed by the Committee to be consistent with the purposes of the
Plan; provided that any such rights must comply, to the extent deemed desirable
by the Committee, with Rule 16b-3 and applicable law.  Subject to the terms of
the Plan and any applicable Award Agreement, the Committee shall determine the
terms and conditions of any such Other Stock-Based Award.

                 SECTION 12.  Amendment and Termination.

                 (a)  Amendments to the Plan.  Subject to the authority of the
Committee as set forth in Section 3, the Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act, for which or with which the Board deems it necessary
or desirable to qualify or comply.  Notwithstanding anything to the contrary
herein, the Committee may amend the Plan in such manner as may be necessary so
as to have the Plan conform with local rules and regulations in any
jurisdiction outside the United States.

                 (b)  Amendments to Awards.  The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted, prospectively or
retroactively; provided that any such waiver, amendment, alteration,
suspension, discontinuance, cancellation or termination that would adversely
affect the rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent
of the affected Participant, holder or beneficiary; and provided further that
no outstanding Option may be amended to decrease the per Share exercise price
thereof, except in accordance with Section 4(c).

                 (c)  Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events.  The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) hereof) affecting the Company,
any Affiliate, or the financial statements of the Company or any Affiliate, or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
<PAGE>   8
                 (d)  Cancellation.  Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, the Committee may cause any Award
granted hereunder to be canceled in consideration of a cash payment or
alternative Award made to the holder of such canceled Award equal in value to
the Fair Market Value of such canceled Award.

                 SECTION 13.  General Provisions.

                 (a)  Dividend Equivalents.  In the sole and complete
discretion of the Committee, an Award, whether made as an Other Stock-Based
Award under Section 10 or as an Award granted pursuant to Sections 6 through 9
hereof, may provide the Participant with dividends or dividend equivalents,
payable in cash, Shares, other securities or other property on a current or
deferred basis.

                 (b)  Nontransferability.  No Award shall be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by a
Participant, except by will or the laws of descent and distribution, provided,
however, that an Award may be transferable, to the extent set forth in the
applicable Award Agreement, (i) if such Award Agreement provisions do not
disqualify such Award for exemption under Rule 16b-3, or (ii) if such Award is
not intended to qualify for exemption under such rule.

                 (c)  No Rights to Awards.  Except as may be provided in an
Employment Agreement, no Officer, Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Employees, Participants, or holders or beneficiaries of Awards.
The terms and conditions of Awards need not be the same with respect to each
recipient.

                 (d)  Share Certificates.  All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.

                 (e)  Delegation.  Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more officers or managers
of the Company or any Affiliate, or to a committee of such officers or
managers, the authority, subject to such terms and limitations as the Committee
shall determine, to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Awards held by,
Officers who are not officers or directors of the Company for purposes of
Section 16 of the Exchange Act, or any successor section thereto, or who are
otherwise not subject to such Section.

                 (f)  Withholding.  A Participant may be required to pay to the
Company or any Affiliate and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any Award, from any payment due or
transfer made under any Award or under the Plan or from any compensation or
other amount owing to a Participant the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding taxes
in respect of an Award, its exercise, or any payment or transfer under an Award
or under the Plan and to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such
taxes.  The Committee may provide for additional cash payments to holders of
Awards to defray or offset any tax arising from the grant, vesting, exercise or
payments of any Award.
<PAGE>   9
                 (g)  Award Agreements.  Each Award hereunder shall be
evidenced by an Award Agreement which shall be delivered to the Participant and
shall specify the terms and conditions of the Award and any rules applicable
thereto, including but not limited to the effect on such Award of the death,
retirement or other termination of employment of a Participant.

                 (h)  No Limit on Other Compensation Arrangements.  Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of bonuses, options, restricted stock, Shares and
other types of Awards provided for hereunder (subject to shareholder approval
if such approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.

                 (i)  No Right to Employment.  The grant of an Award shall not
be construed as giving a Participant the right to be retained in the employ of
the Company or any Affiliate.  Further, the Company or an Affiliate may at any
time dismiss a Participant from employment, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.

                 (j)  No Rights as Stockholder.  Subject to the provisions of
the applicable Award, no Participant or holder or beneficiary of any Award
shall have any rights as a stockholder with respect to any Shares to be
distributed under the Plan until he or she has become the holder of such
Shares.  Notwithstanding the foregoing, in connection with each grant of
Restricted Stock hereunder, the applicable Award shall specify if and to what
extent the Participant shall not be entitled to the rights of a stockholder in
respect of such Restricted Stock.

                 (k)  Governing Law.  The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
California, except to the extent that the General Corporation Law of the State
of Delaware shall be applicable to the Company.

                 (l)  Severability.  If any provision of the Plan or any Award
is or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, Person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.

                 (m)  Other Laws.  The Committee may refuse to issue or
transfer any Shares or other consideration under an Award if, acting in its
sole discretion, it determines that the issuance or transfer of such Shares or
such other consideration might violate any applicable law or regulation or
entitle the Company to recover the same under Section 16(b) of the Exchange
Act, and any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary.  Without limiting
the generality of the foregoing, no Award granted hereunder shall be construed
as an offer to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws and any other laws
to which such offer, if made, would be subject.

                 (n)  No Trust or Fund Created.  Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person.  To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.

                 (o)  No Fractional Shares.  No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be canceled,
<PAGE>   10
terminated, or otherwise eliminated.

                 (p)      Headings.  Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.  Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.

                 SECTION 13.  Term of the Plan.

                 (a)  Effective Date.  The Plan shall be effective as of
December 1, 1994, subject to approval by the shareholders of the Company within
one year thereafter.

                 (b)  Expiration Date.  No Incentive Stock Option shall be
granted under the Plan after November 30, 2004.   Unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award granted
hereunder may, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under any such Award shall, continue after the authority
for grant of new Awards hereunder has been exhausted.