AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
Exhibit 10.1
 
 
                             PENSON WORLDWIDE, INC.
                            2000 STOCK INCENTIVE PLAN
 
                   (AS AMENDED AND RESTATED ON JULY 26, 2005)
 
 
 
                                  ARTICLE ONE
 
                               GENERAL PROVISIONS
 
      I.    PURPOSE OF THE PLAN
 
            This 2000 Stock Incentive Plan is intended to promote the interests
of Penson Worldwide, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
 
            Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
 
      II.   STRUCTURE OF THE PLAN
 
            A. The Plan shall be divided into three separate equity incentive
programs:
 
                  (i) the Discretionary Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock or stock appreciation rights tied to the value
of such Common Stock,
 
                  (ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of Common
Stock pursuant to restricted stock awards, restricted stock units or other share
right awards which vest upon the completion of a designated service period or
the attainment of pre-established performance milestones, or such shares of
Common Stock may be issued through direct purchase or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
 
                  (iii) the Automatic Grant Program under which eligible
non-employee Board members shall automatically receive grants at periodic
intervals over their period of continued Board service, and
 
            B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
 
      III.  ADMINISTRATION OF THE PLAN
 
            A. Prior to the Section 12 Registration Date, the Discretionary
Grant and Stock issuance Programs shall be administered by the Board unless
otherwise determined by the
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Board. Beginning with the Section 12 Registration Date, the following provisions
shall govern the administration of the Plan:
 
                  (i) The Board shall have the authority to administer the
Discretionary Grant and Stock Issuance Programs with respect to Section 16
Insiders but may delegate such authority in whole or in part to the Primary
Committee.
 
                  (ii) Administration of the Discretionary Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.
 
                  (iii) Administration of the Automatic Grant Program shall be
self-executing in accordance with the terms of that program.
 
            B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
 
                  (i) to establish such rules as it may deem appropriate for
proper administration of the Plan, to make all factual determinations, to
construe and interpret the provisions of the Plan and the awards thereunder and
to resolve any and all ambiguities thereunder;
 
                  (ii) to determine, (i) with respect to the awards of options
or stock appreciation rights under the Discretionary Grant Program, which
eligible persons are to receive such awards, the time or times when those awards
are to be made, the number of shares to be covered by each such award, the
exercise or vesting schedule (if any) applicable to the award, the maximum term
for which such award is to remain outstanding and the status of a granted option
as either an Incentive Option or a Non-Statutory Option and (ii) with respect to
stock issuances or other stock-based awards under the Stock Issuance Program,
which eligible persons are to receive such issuances or awards, the time or
times when the issuances or awards are to be made, the number of shares subject
to each such issuance or award, the vesting and issuance schedules applicable to
the shares which are the subject of such issuance or award and the consideration
for those shares;
 
                  (iii) to amend, modify or cancel any outstanding award with
the consent of the holder or accelerate the vesting of such award; and
 
                  (iv) to take such other discretionary actions as permitted
pursuant to the terms of the applicable program.
 
Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
 
            C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
 
 
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            D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grant, stock appreciation right,
stock issuance or other stock-based award under the Plan.
 
      IV.   ELIGIBILITY
 
            A. The persons eligible to participate in the Discretionary Grant
and Stock Issuance Programs are as follows:
 
                  (i) Employees,
 
                  (ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
 
                  (iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
 
            B. Only non-employee Board members shall be eligible to participate
in the Automatic Grant Program.
 
      V.    STOCK SUBJECT TO THE PLAN
 
            A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed Two
Million Seven Hundred Eight Thousand Three Hundred Thirty-Three (2,708,333)
shares. Such reserve is comprised of (i) Four Hundred Sixteen Thousand Six
Hundred Sixty-Six (416,666) shares of Common Stock previously authorized for
issuance under the Plan plus (ii) an increase of Two Million Two Hundred
Ninety-One Thousand Six Hundred Sixty-Six (2,291,666) shares approved by the
Board on July 26, 2005 (as adjusted for a 2.4-for-1 reverse stock split affected
on ________), subject to stockholder approval.
 
            B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with the calendar year
2006, by an amount equal to one percent (1%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall such annual increase exceed Two
Hundred Seventy Thousand Eight Hundred Thirty-Three (270,833) shares.
 
            C. No one person participating in the Plan may receive stock
options, stand-alone stock appreciation rights, direct stock issuances (whether
vested or unvested) or other stock-based awards (whether in the form of
restricted stock units or other share-right awards) for more than Eight Hundred
Thirty-Three Thousand Three Hundred-Thirty Three (833,333) shares of Common
Stock in the aggregate per calendar year.
 
 
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            D. Shares of Common Stock subject to outstanding options or other
awards made under the Plan shall be available for subsequent issuance under the
Plan to the extent (i) those options or awards expire or terminate for any
reason prior to the issuance of the shares of Common Stock subject to those
options or awards or (ii) the awards are cancelled in accordance with the
cancellation-regrant provisions of Article Two. Unvested shares issued under the
Plan and subsequently forfeited or repurchased by the Corporation, at a price
per share not greater than the original issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for subsequent reissuance. Should the exercise price of
an option under the Plan be paid with shares of Common Stock, then the
authorized reserve of Common Stock under the Plan shall be reduced by the net
number of shares issued under the exercise. If shares of Common Stock otherwise
issuable under the Plan are withheld by the Corporation in satisfaction of the
withholding taxes incurred in connection with the exercise of an option or stock
appreciation right or the issuance of fully-vested shares under the Stock
Issuance Program, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the net number of shares issued
under the exercised option or stock appreciation right or the net number of
fully-vested shares issued under the Stock Issuance Program. Such withholding
shall in effect constitute a cash bonus under the Plan, payable directly to the
applicable taxing authorities on behalf of the individual concerned, in an
amount equal to the Fair Market Value of the withheld shares, and shall not be
treated as an issuance and immediate repurchase of those shares.
 
            E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities by which the share reserve is
to increase each calendar year pursuant to the automatic share increase
provisions of the Plan, (iii) the number and/or class of securities for which
any one person may be granted options, stand-alone stock appreciation rights,
direct stock issuances and other stock-based awards under the Plan per calendar
year, (iv) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Grant Program to new and continuing
non-employee Board members, (v) the number and/or class of securities and the
exercise or base price per share in effect under each outstanding option or
stock appreciation right under the Plan and (vi) the number and/or class of
securities subject to each outstanding restricted stock unit or other
stock-based award under the Plan and the issue price (if any) payable per share.
Such adjustments to the outstanding options, stock appreciation rights or other
stock-based awards are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under those options, stock
appreciation rights or other stock-based awards. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.
 
 
 
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                                   ARTICLE TWO
 
                           DISCRETIONARY GRANT PROGRAM
 
      I.    OPTION TERMS
 
            Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
 
            A. EXERCISE PRICE.
 
                  1. The exercise price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair Market
Value per share of Common Stock on the grant date.
 
                  2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of the documents
evidencing the option, be payable in one or more of the following forms:
 
                        (i) in cash or check made payable to the
Corporation;
 
                        (ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
 
                        (iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions to (a) a brokerage
firm (reasonably satisfactory to the Corporation for purposes of administering
such procedure in compliance with the Corporation's pre-clearance/
pre-notification policies) to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm on such settlement date in order to complete the sale.
 
            Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
 
            B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
 
 
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            C. CESSATION OF SERVICE.
 
                  1. The following provisions shall govern the exercise of any
options outstanding at the time of the Optionee's cessation of Service or death:
 
                        (i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such period of
time thereafter as shall be determined by the Plan Administrator and set forth
in the documents evidencing the option, but no such option shall be exercisable
after the expiration of the option term.
 
                        (ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by his or her
Beneficiary.
 
                        (iii) During the applicable post-Service exercise
period, the option may not be exercised for more than the number of vested
shares for which the option is at the time exercisable. No additional shares
shall vest under the option following the Optionee's cessation of Service,
except to the extent (if any) specifically authorized by the Plan Administrator
in its sole discretion pursuant to an express written agreement with the
Optionee. Upon the expiration of the applicable exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to
be outstanding for any shares for which the option has not been exercised.
 
                        (iv) Should the Optionee's Service be terminated for
Misconduct or should the Optionee engage in Misconduct while his or her options
are outstanding, then all such options shall terminate immediately and cease to
be outstanding.
 
                  2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding:
 
                        (i) to extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service to such
period of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
 
                        (ii) to permit the option to be exercised, during the
applicable post-Service exercise period, for one or more additional installments
in which the Optionee would have vested had the Optionee continued in Service.
 
            D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
 
            E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase any or all of those unvested
shares at a price per share equal to the lower of (i) the exercise price paid
per share or (ii) the Fair Market Value per share of Common Stock at the time of
repurchase. The terms upon which such repurchase right shall be exercisable
(including the
 
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period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the document evidencing such repurchase right.
 
            F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of
inheritance following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to the
extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime (i) as a gift to one or more of the Optionee's
Family Members, to a trust in which the Optionee and/or one or more such Family
Members hold more than fifty percent (50%) of the beneficial interest or to an
entity in which more than fifty percent (50%) of the voting interests are owned
by the Optionee and/or one or more such Family Members or (ii) pursuant to a
domestic relations order. The terms applicable to the assigned portion shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
 
            Notwithstanding the foregoing, the Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding
options, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
 
      II.   INCENTIVE OPTIONS
 
            The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
 
            A. ELIGIBILITY. Incentive Options may only be granted to Employees.
 
            B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
 
            C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand dollars ($100,000).
 
            To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, then for
purposes of the foregoing limitations on the exercisability of those options as
Incentive Options, such options shall be deemed to become first exercisable in
that calendar year on the basis of the chronological order
 
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in which they were granted, except to the extent otherwise provided under
applicable law or regulation.
 
            D. SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
 
      III.  STOCK APPRECIATION RIGHTS
 
            A. AUTHORITY. The Plan Administrator shall have full power and
authority, exercisable in its sole discretion, to grant stock appreciation
rights in accordance with this Section III to selected Optionees or other
individuals eligible to receive option grants under the Discretionary Grant
Program.
 
            B. TYPES. Three types of stock appreciation rights shall be
authorized for issuance under this Section III: (i) tandem stock appreciation
rights ("Tandem Rights"), (ii) stand-alone stock appreciation rights
("Stand-alone Rights") and (iii) limited stock appreciation rights ("Limited
Rights").
 
            C. TANDEM RIGHTS. The following terms and conditions shall govern
the grant and exercise of Tandem Rights.
 
                  1. One or more Optionees may be granted a Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to elect between the exercise of the underlying option for shares of
Common Stock or the surrender of that option in exchange for a distribution from
the Corporation in an amount equal to the excess of (i) the Fair Market Value
(on the option surrender date) of the number of shares in which the Optionee is
at the time vested under the surrendered option (or surrendered portion thereof)
over (ii) the aggregate exercise price payable for such vested shares.
 
                  2. No such option surrender shall be effective unless it is
approved by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section III shall be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
 
                  3. If the surrender of an option is not approved by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
 
 
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            D. STAND-ALONE RIGHTS. The following terms and conditions shall
govern the grant and exercise of Stand-alone Rights:
 
                  1. One or more individuals eligible to participate in the
Discretionary Grant Program may be granted a Stand-alone Right not tied to any
underlying option under this Discretionary Grant Program. The Stand-alone Right
shall relate to a specified number of shares of Common Stock and shall be
exercisable upon such terms and conditions as the Plan Administrator may
establish. In no event, however, may the Stand-alone Right have a maximum term
in excess of ten (10) years measured from the grant date. Upon exercise of the
Stand-alone Right, the holder shall be entitled to receive a distribution from
the Corporation in an amount equal to the excess of (i) the aggregate Fair
Market Value (on the exercise date) of the shares of Common Stock underlying the
exercised right over (ii) the aggregate base price in effect for those shares.
 
                  2. The number of shares of Common Stock underlying each
Stand-alone Right and the base price in effect for those shares shall be
determined by the Plan Administrator in its sole discretion at the time the
Stand-alone Right is granted. In no event, however, may the base price per share
be less than the Fair Market Value per underlying share of Common Stock on the
grant date.
 
                  3. Stand-alone Rights shall be subject to the same
transferability restrictions applicable to Non-Statutory Options. In addition,
one or more beneficiaries may be designated for an outstanding Stand-alone Right
in accordance with substantially the same terms and provisions as set forth in
Section I.F of this Article Two.
 
                  4. The distribution with respect to an exercised Stand-alone
Right shall be made in shares of Common Stock valued at Fair Market Value on the
exercise date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
 
                  5. The holder of a Stand-alone Right shall have no stockholder
rights with respect to the shares subject to the Stand-alone Right unless and
until such person shall have exercised the Stand-alone Right and become a holder
of record of the shares of Common Stock issued upon the exercise of such
Stand-alone Right.
 
            E. LIMITED RIGHTS. The following terms and conditions shall govern
the grant and exercise of Limited Rights under this Article Two:
 
                  1. One or more Section 16 Insiders may, in the Plan
Administrator's sole discretion, be granted Limited Rights with respect to their
outstanding options under this Article Two.
 
                  2. Upon the occurrence of a Hostile Take-Over, the Section 16
Insider shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Tender-Offer) to surrender each option with such a
Limited Right to the Corporation. The Section 16 Insider shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the number of shares in which the Optionee
is at the time vested under the surrendered option (or surrendered portion
thereof) over
 
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(ii) the aggregate exercise price payable for those vested shares. Such cash
distribution shall be made within five (5) days following the option surrender
date.
 
                  3. The Plan Administrator shall pre-approve, at the time such
Limited Right is granted, the subsequent exercise of that right in accordance
with the terms of the grant and the provisions of this Section III. No
additional approval of the Plan Administrator or the Board shall be required at
the time of the actual option surrender and cash distribution. Any unsurrendered
portion of the option shall continue to remain outstanding and become
exercisable in accordance with the terms of the instrument evidencing such
grant.
 
            F. POST-SERVICE EXERCISE. The provisions governing the exercise of
Tandem, Stand-alone and Limited Stock Appreciation Rights following the
cessation of the recipient's Service shall be substantially the same as those
set forth in Section I.C of this Article Two for the options granted under the
Discretionary Grant Program, and the Plan Administrator's discretionary
authority under Section I.C.2 of this Article Two shall also extend to any
outstanding Tandem, Stand-alone or Limited Stock Appreciation Rights.
 
      IV.   CHANGE IN CONTROL/HOSTILE TAKE-OVER
 
            A. Each option or stock appreciation right outstanding at the time
of a Change in Control shall automatically accelerate so that each such option
or stock appreciation right shall, immediately prior to the effective date of
the Change in Control, become exercisable for all the shares of Common Stock at
the time subject to that option or stock appreciation right and may be exercised
for any or all of those shares as fully vested shares of Common Stock. However,
an outstanding option or stock appreciation right shall NOT become exercisable
on such an accelerated basis if and to the extent: (i) such option or stock
appreciation right is, in connection with the Change in Control, to be assumed
by the successor corporation (or parent thereof) or is otherwise to continue in
full force and effect pursuant to the terms of the Change in Control or (ii)
such option or stock appreciation right is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing at the
time of the Change in Control on any shares as to which the option or stock
appreciation right is not otherwise at that time exercisable and provides for
subsequent payout of that spread in accordance with the same exercise/vesting
schedule applicable to those shares or (iii) the acceleration of such option or
stock appreciation right is subject to other limitations imposed by the Plan
Administrator.
 
            B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control, except to
the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
 
            C. Immediately following the consummation of the Change in Control,
all outstanding options or stock appreciation rights shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise expressly continued in full force and effect
pursuant to the terms of the Change in Control.
 
 
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            D. Each option which is assumed in connection with a Change in
Control or otherwise continued in effect shall be appropriately adjusted,
immediately after such Change in Control, to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. In the event outstanding Stand-alone Rights are to be assumed
in connection with a Change in Control transaction or otherwise continued in
effect, the shares of Common Stock underlying each such Stand-alone Right shall
be adjusted immediately after such Change in Control so as to apply to the
number and class of securities into which those shares of Common Stock would
have been converted in consummation of such Change in Control had those shares
actually been outstanding at that time. Appropriate adjustments to reflect such
Change in Control shall also be made to (i) the exercise price payable per share
under each outstanding option, provided the aggregate exercise price payable for
such securities shall remain the same, (ii) the base price per share in effect
under each outstanding Stand-Alone Right, provided the aggregate base price
shall remain the same, (iii) the maximum number and/or class of securities
available for issuance over the remaining term of the Plan, (iv) the maximum
number and/or class of securities for which any one person may be granted
options, stand-alone stock appreciation rights, direct stock issuances and other
stock-based awards under the Plan per calendar year, (v) the maximum number
and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the automatic share increase
provisions of the Plan, and (vi) the number and/or class of securities for which
option grants are subsequently to be made under the Director Automatic Grant
Program to new and continuing non-employee Board members. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption or continuation
of the outstanding options or stock appreciation rights, substitute one or more
shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control.
 
            E. The Plan Administrator may at any time provide that one or more
options or stock appreciation rights will automatically accelerate in connection
with a Change in Control, whether or not those options or stock appreciation
rights are assumed or otherwise continued in full force and effect pursuant to
the terms of the Change in Control. Any such option or stock appreciation right
shall accordingly become exercisable, immediately prior to the effective date of
such Change in Control, for all of the shares of Common Stock at the time
subject to that option or stock appreciation right and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. In addition, the
Plan Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall not be assignable in connection with such Change in
Control and shall terminate upon the consummation of such Change in Control.
 
            F. The Plan Administrator may at any time provide that one or more
options will automatically accelerate upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control in which those
options or stock appreciation rights do not otherwise accelerate. Any options or
stock appreciation rights so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1) year period measured from the effective
date of the Involuntary Termination. In
 
                                       11
<PAGE>
addition, the Plan Administrator may at any time provide that one or more of the
Corporation's repurchase rights shall immediately terminate upon such
Involuntary Termination.
 
            G. The Plan Administrator may at any time provide that one or more
options will automatically accelerate in connection with a Hostile Take-Over.
Any such option or stock appreciation right shall become exercisable,
immediately prior to the effective date of such Hostile Take-Over, for all of
the shares of Common Stock at the time subject to that option or stock
appreciation right and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. In addition, the Plan Administrator may at
any time provide that one or more of the Corporation's repurchase rights shall
terminate automatically upon the consummation of such Hostile Take-Over.
Alternatively, the Plan Administrator may condition such automatic acceleration
and termination upon an Involuntary Termination of the Optionee's Service within
a designated period (not to exceed eighteen (18) months) following the effective
date of such Hostile Take-Over. Each option or stock appreciation right so
accelerated shall remain exercisable far fully-vested shares until the
expiration or sooner termination of the option term.
 
            H. The portion of any Incentive Option accelerated in connection
with a Change in Control or Hostile Take Over shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
 
      V.    EXCHANGE/REPRICING PROGRAMS
 
            A. The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders, the
cancellation of any or all outstanding options or stock appreciation right under
the Discretionary Grant Program and to grant in exchange one or more of the
following: (i) new options or stock appreciation rights covering the same or a
different number of shares of Common Stock but with an exercise or base price
per share based on the Fair Market Value per share of Common Stock on the new
grant date or (ii) cash or shares of Common Stock, whether vested or unvested,
equal in value to the value of the cancelled options or stock appreciation
rights.
 
            B. The Plan Administrator shall also have the authority, exercisable
at any time and from time to time, with the consent of the affected holders, to
reduce the exercise or base price of one or more outstanding options or stock
appreciation rights to a price not less than the then current Fair Market Value
per share of Common Stock or issue new options or stock appreciation rights with
a lower exercise or base price in immediate cancellation of outstanding options
or stock appreciation rights with a higher exercise or base price.
 
 
 
                                       12
<PAGE>
                                  ARTICLE THREE
 
                             STOCK ISSUANCE PROGRAM
 
      I.    STOCK ISSUANCE TERMS
 
            Shares of Common Stock may be issued under the Stock Issuance
Program, either as vested or unvested shares, through direct and immediate
issuances without any intervening options. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards or
restricted stock units which entitle the recipients to receive the shares
underlying those awards or units upon the attainment of designated performance
goals, the satisfaction of specified Service requirements or upon the expiration
of a designated time period following the vesting of those awards or units. Each
such award shall be evidenced by one or more documents which comply with the
terms specified below.
 
            A. PURCHASE PRICE.
 
                  1. The issue price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair Market
Value per share of Common Stock on the issuance date.
 
                  2. Shares of Common Stock may be issued under the Stock
Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
 
                        (i) cash or check made payable to the Corporation, or
 
                        (ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
 
            B. VESTING/ISSUANCE PROVISIONS.
 
                  1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon the attainment of specified
performance objectives. The elements of the vesting schedule applicable to any
unvested shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards or restricted stock units which entitle
the recipients to receive the shares underlying those awards or units upon the
attainment of designated performance goals or the satisfaction of specified
Service requirements or upon the expiration of a designated time period
following the vesting of those awards or units, including (without limitation) a
deferred distribution date following the termination of the Participant's
Service.
 
                  2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any
 
                                       13
<PAGE>
stock dividend, stock split, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
 
                  3. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares. The Participant
shall not have any stockholder rights with respect to the shares of Common Stock
subject to a restricted stock unit or share right award until that award vests
and the shares of Common Stock are actually issued thereunder. However,
dividend-equivalent units may be paid or credited, either in cash or in actual
or phantom shares of Common Stock, on outstanding restricted stock unit or share
right awards, subject to such terms and conditions as the Plan Administrator may
deem appropriate.
 
                  4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock, or should the performance
objectives not be attained with respect to one or more such unvested shares of
Common Stock, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the lower of (i) the cash
consideration paid for the surrendered shares or (ii) the Fair Market Value of
those shares at the time of cancellation. If the shares were purchased with
purchase-money indebtedness, the Corporation shall, in lieu of a cash payment,
cancel an portion of the unpaid principal balance of any outstanding
purchase-money note of the Participant by an amount equal to the lower of (i)
the cash consideration paid for the surrendered shares or (ii) the Fair Market
Value of those shares at the time of cancellation.
 
                  5. The Plan Administrator may waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting of
the Participant's interest in the shares of Common Stock as to which the waiver
applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
 
                  6. Outstanding share right awards or restricted stock units
under the Stock Issuance Program shall automatically terminate, and no shares of
Common Stock shall actually be issued in satisfaction of those awards or units,
if the performance goals or Service requirements established for such awards or
units are not attained or satisfied. The Plan Administrator, however, shall have
the discretionary authority to issue vested shares of Common Stock under one or
more outstanding share right awards or restricted stock units as to which the
designated performance goals or Service requirements have not been attained or
satisfied.
 
                                       14
<PAGE>
      II.   CHANGE IN CONTROL/HOSTILE TAKE-OVER
 
            A. All of the Corporation's outstanding repurchase rights shall
terminate automatically, and all the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control, except to the extent (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
 
            B. If any restricted stock unit or share right award is not assumed
or otherwise continued in effect or replaced with a cash incentive program of
the successor corporation which preserves the Fair Market Value of the
underlying shares of Common Stock at the time of a Change in Control and
provides for the subsequent payout of that value in accordance with the same
vesting schedule applicable to those shares, then such unit or award shall vest,
and the shares of Common Stock subject to that unit or award shall be issued as
fully-vested shares, immediately prior to the consummation of the Change in
Control.
 
            C. Each outstanding restricted stock unit or share right award
assumed in connection with a Change in Control or otherwise continued in effect
shall be adjusted immediately after the consummation of that Change in Control
so as to apply to the number and class of securities into which the shares of
Common Stock subject to the award immediately prior to the Change in Control
would have been converted in consummation of such Change in Control had those
shares actually been outstanding at that time, and appropriate adjustments shall
also be made to the consideration (if any) payable per share thereunder,
provided the aggregate amount of such consideration shall remain the same. To
the extent the actual holders of the Corporation's outstanding Common Stock
receive cash consideration for their Common Stock in consummation of the Change
in Control, the successor corporation may, in connection with the assumption or
continuation of the outstanding restricted stock units or share right awards,
substitute one or more shares of its own common stock with a fair market value
equivalent to the cash consideration paid per share of Common Stock in such
Change in Control transaction. If any such restricted stock unit or share right
award is not so assumed or otherwise continued in effect, then such unit or
award shall vest, and the shares of Common Stock subject to that unit or award
shall be issued as fully-vested shares, immediately prior to the consummation of
the Change in Control.
 
            D. The Plan Administrator shall have the discretionary authority to
structure one or more unvested stock issuances or one or more restricted stock
unit or other share right awards under the Stock Issuance Program so that the
shares of Common Stock subject to those issuances or awards shall automatically
vest (or vest and become issuable) in whole or in part immediately upon the
occurrence of a Change in Control or upon the subsequent termination of the
Participant's Service by reason of an Involuntary Termination within a
designated period following the effective date of that Change in Control
transaction.
 
            E. The Plan Administrator shall also have the discretionary
authority to structure one or more unvested stock issuances or one or more
restricted stock unit or other share right awards under the Stock Issuance
Program so that the shares of Common Stock subject to
 
                                       15
<PAGE>
those issuances or awards shall automatically vest (or vest and become issuable)
in whole or in part immediately upon the occurrence of a Hostile Take-Over or
upon the subsequent termination of the Participant's Service by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of that Hostile Take-Over.
 
      III.  SHARE ESCROW/LEGENDS
 
            Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
 
 
 
                                       16
<PAGE>
                                  ARTICLE FOUR
 
                             AUTOMATIC GRANT PROGRAM
 
      I.    OPTION TERMS
 
            A. GRANT DATES. Options shall be made on the dates specified below:
 
                  1. Each individual who is serving as a non-employee Board
member on the Underwriting Date shall automatically be granted on such date a
Non-Statutory Option to purchase Ten Thousand Four Hundred Sixteen (10,416)
shares of Common Stock of the Corporation.
 
                  2. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase Ten Thousand Four Hundred Sixteen (10,416)
shares of Common Stock, provided that individual has not previously been in the
employ of the Corporation (or any Parent or Subsidiary).
 
                  3. On the date of each Annual Shareholders Meeting beginning
with the 2006 Annual Shareholder Meeting, each individual who is to continue to
serve as a non-employee Board member shall automatically be granted a
Non-Statutory Option to purchase Two Thousand Eighty-Three (2,083) shares of
Common Stock.
 
            B. EXERCISE PRICE.
 
                  1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
 
                  2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Grant Program. Except to
the extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
 
            C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
 
            D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any unvested shares
purchased under the initial Ten Thousand Four Hundred Sixteen (10,416)-share
option shall be subject to repurchase by the Corporation, at the exercise price
paid per share, upon the Optionee's cessation of Board service prior to vesting
in those shares. Each initial Ten Thousand Four Hundred Sixteen (10,416)-share
option shall vest, and the Corporation's repurchase right shall lapse, in a
series of twelve (12) successive equal quarterly installments over the
Optionee's period of continued service as a Board member, with the first such
installment to vest upon the Optionee's completion of three (3) months of Board
service measured from the option grant date. Each annual Two Thousand
Eighty-Three (2,083)-share option shall vest, and the Corporation's repurchase
right shall lapse, in a series of four (4) successive equal quarterly
installments over
 
                                       17
<PAGE>
the Optionee's continued service as a Board member, with the first such
installment to vest upon the Optionee's completion of three (3) months of Board
service measured from the option grant date.
 
            E. CESSATION OF BOARD SERVICE. The following provisions shall govern
the exercise of any options outstanding at the time of the Optionee's cessation
of Board service:
 
                        (i) Any option outstanding at the time of the Optionee's
cessation of Board service for any reason shall remain exercisable for a twelve
(12)-month period following the date of such cessation of Board service, but in
no event shall such option be exercisable after the expiration of the option
term.
 
                        (ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by his or her
Beneficiary.
 
                        (iii) Following the Optionee's cessation of Board
service, the option may not be exercised in the aggregate for more than the
number of shares for which the option was exercisable on the date of such
cessation of Board service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the option
has not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be outstanding for
any and all shares for which the option is not otherwise at that time
exercisable.
 
                        (iv) However, should the Optionee cease to serve as a
Board member by reason of death or Permanent Disability, then all shares at the
time subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of Board
service, be exercised for all or any portion of those shares as fully-vested
shares of Common Stock.
 
      II.   CHANGE IN CONTROL/HOSTILE TAKE-OVER
 
            A. In the event of any Change in Control or Hostile Take-Over, the
shares of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option may,
immediately prior to the effective date of such Change in Control or Hostile
Take-Over, became fully exercisable for all of the shares of Common Stock at the
time subject to such option and maybe exercised for all or any of those shares
as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the Change
in Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
 
            B. All outstanding repurchase rights shall automatically terminate
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Change in Control or Hostile
Take-Over.
 
                                       18
<PAGE>
            C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding options. The Optionee shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Option Surrender Value of the shares of Common Stock at the time subject to
each surrendered option (whether or not the option is otherwise at the time
exercisable for those shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days following
the surrender of the option to the Corporation.
 
            D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments shall also be made to the exercise
price payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same. To the extent
the actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Change in Control.
 
      III.  ALTERNATIVE AWARDS
 
            The Primary Committee shall have full power and authority to award,
in lieu of one or more initial or annual Automatic Grants under this Article
Five, unvested shares of Common Stock or restricted stock units which in each
instance have an aggregate Fair Market Value substantially equal to the fair
value (as determined for financial reporting purposes in accordance with
Financial Accounting Standard 123R or any successor standard) of the Automatic
Grant which such award replaces. Any such alternative award shall be made at the
same time the Automatic Grant which it replaces would have been made, and the
vesting provisions (including vesting acceleration) applicable to such award
shall be substantially the same as in effect for the Automatic Grant so
replaced.
 
      IV.   REMAINING TERMS
 
            The remaining terms of each option granted under the Automatic Grant
Program shall be the same as the terms in effect for options made under the
Discretionary Grant Program.
 
 
 
                                       19
<PAGE>
                                  ARTICLE FIVE
 
                                  MISCELLANEOUS
 
      I.    NO IMPAIRMENT OF AUTHORITY
 
            Outstanding awards shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
 
      II.   TAX WITHHOLDING
 
            A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights or the issuance or
vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable income and employment tax withholding requirements.
 
            B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options, stock appreciation rights, restricted stock
units or any other share right awards pursuant to which vested shares of Common
Stock are to be issued under the Plan (other than the option grants and other
stock-based awards made under the Automatic Grant Program) and any or all
Participants to whom vested or unvested shares of Common Stock are issued in a
direct issuance under the Stock Issuance Program with the right to use shares of
Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their options
or stock appreciation rights, the issuance to them of vested shares or the
subsequent vesting of unvested shares issued to them. Such right may be provided
to any such holder in either or both of the following formats:
 
            Stock Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or stock appreciation right or upon the issuance of
fully-vested shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
 
            Stock Delivery: The election to deliver to the Corporation, at the
time the Non-Statutory Option or stock appreciation right is exercised, the
vested shares are issued or the unvested shares subsequently vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the exercise, share issuance or share vesting triggering the
Withholding Taxes) with an aggregate Fair Market Value equal to the percentage
of the Withholding Taxes (not to exceed one hundred percent (100%)) designated
by the holder. The shares of Common Stock so delivered shall not be added to the
shares of Common Stock authorized for issuance under the Plan.
 
      III.  EFFECTIVE DATE AND TERM OF THE PLAN
 
            A. The Plan became effective immediately upon the Plan Effective
Date. Options may be granted under the Discretionary Grant Program at any time
on or after the Plan Effective Date. However, no options granted under the Plan
may be exercised, and no shares
 
                                       20
<PAGE>
shall be issued under the Plan, until the Plan is approved by the Corporation's
shareholders. If such shareholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
 
            B. The Plan was amended and restated by the Board on July 26, 2005
(the "2005 Restatement"), subject to shareholder approval, to (i) increase the
number of shares of Common Stock reserved for issuance under the Plan by an
additional Two Million Two Hundred Ninety-One Thousand Six Hundred Sixty-Six
(2,291,666) shares, (ii) limit the number of shares by which the reserve may
increase annually to one percent (1%) up to a maximum of Two Hundred Seventy
Thousand Eight Hundred Thirty-Three (270,833) shares, (iii) increase the number
of shares for which any one individual may receive awards in any one year to
Eight Hundred Thirty-Three Thousand Three Hundred Thirty-Three (833,333) shares,
(iv) allow for the grant of stock appreciation rights and other stock based
awards, (v) eliminate the Salary Investment and Director Fee Option Grant
Programs, (vi) amend the Automatic Option Grant Program, (vii) extend the term
of the Plan and (viii) effect several technical revisions to facilitate plan
administration.
 
            C. The Plan shall terminate upon the earliest of (i) July 25, 2015,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options, stock appreciation rights, restricted stock units and other
share right awards in connection with a Change in Control. Upon such plan
termination, all option grants, stock appreciation rights, unvested stock
issuances, restricted stock units and other share right awards shall thereafter
continue to have force and effect in accordance with the provisions of the
documents evidencing such grants, issuances or awards.
 
      IV.   AMENDMENT OF THE PLAN
 
            A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options, stock appreciation rights, unvested stock issuances or other
stock-based awards at the time outstanding under the Plan unless the Optionee or
the Participant consents to such amendment or modification. In addition,
amendments to the Plan will be subject to stockholder approval to the extent
required under applicable law or regulation or pursuant to the listing standards
of the stock exchange (or the Nasdaq National Market) on which the Common Stock
is at the time primarily traded.
 
            B. Options and stock appreciation rights may be granted under the
Discretionary Grant Program and stock-based awards may be made under the Stock
Issuance Program that in each instance involve shares of Common Stock in excess
of the number of shares then available for issuance under the Plan, provided no
shares shall actually be issued pursuant to those grants or awards until the
number of shares of Common Stock available for issuance under the Plan is
sufficiently increased by stockholder approval of an amendment of the Plan
authorizing such increase. If stockholder approval is required and is not
obtained within twelve (12) months after the date the first excess grant or
award made against such contingent increase, then any options, stock
appreciation rights or other stock-based awards granted on the basis of such
excess shares shall terminate and cease to be outstanding.
 
 
                                       21
<PAGE>
      V.    USE OF PROCEEDS
 
            Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
 
      VI.   REGULATORY APPROVALS
 
            A. The implementation of the Plan, the granting of any stock option,
stock appreciation right or other stock-based award under the Plan and the
issuance of any shares of Common Stock (i) upon the exercise or vesting of any
granted option, stock appreciation right or other stock-based award or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the stock options granted under it and the
shares of Common Stock issued pursuant to it.
 
            B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
 
      VII.  NO EMPLOYMENT/SERVICE RIGHTS
 
            Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
 
 
 
                                       22
<PAGE>
                                    APPENDIX
 
            The following definitions shall be in effect under the Plan:
 
            A. AUTOMATIC GRANT PROGRAM shall mean the Automatic Grant Program in
effect under the Plan.
 
            B. BENEFICIARY shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such person's
rights under any outstanding awards held by him or her at the time of death. In
the absence of such designation or procedure, the Beneficiary shall be the
personal representative of the estate of the Optionee or Participant or the
person or persons to whom the award is transferred by will or the laws of
inheritance.
 
            C. BOARD shall mean the Corporation's Board of Directors.
 
            D. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through any of the following transactions:
 
                  (i) a merger, consolidation or reorganization approved by the
      Corporation's shareholders, unless securities representing more than fifty
      percent (50%) of the total combined voting power of the voting securities
      of the successor corporation are immediately thereafter beneficially
      owned, directly or indirectly and in substantially the same proportion, by
      the persons who beneficially owned the Corporation's outstanding voting
      securities immediately prior to such transaction,
 
                  (ii) any shareholder-approved transfer or other disposition of
      all or substantially all of the Corporation's assets, or
 
                  (iii) the acquisition, directly or indirectly by any person or
      related group of persons (other than the Corporation or a person that
      directly or indirectly controls, is controlled by, or is under common
      control with, the Corporation), of beneficial ownership (within the
      meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than
      fifty percent (50%) of the total combined voting power of the
      Corporation's outstanding securities pursuant to a tender or exchange
      offer made directly to the Corporation's shareholders which the Board
      recommends such shareholders accept.
 
            E. CODE shall mean the Internal Revenue Code of 1986, as amended.
 
            F. COMMON STOCK shall mean the Corporation's common stock.
 
            G. CORPORATION shall mean Penson Worldwide, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Penson Worldwide, Inc. which shall by appropriate
action adopt the Plan.
 
 
 
                                      A-1
<PAGE>
            H. DISCRETIONARY GRANT PROGRAM shall mean the discretionary grant
program in effect under Article Two of the Plan pursuant to which stock options
and stock appreciation rights may be granted to one or more eligible
individuals.
 
            I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
 
            J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
 
            K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
 
                  (i) If the Common Stock is at the time traded on the Nasdaq
      National Market, then the Fair Market Value shall be the closing selling
      price per share of Common Stock on the date in question, as such price is
      reported on the Nasdaq National Market or any successor system and in The
      Wall Street Journal. If there is no closing selling price for the Common
      Stock on the date in question, then the Fair Market Value shall be the
      closing selling price on the last preceding date for which such quotation
      exists.
 
                  (ii) If the Common Stock is at the time listed on any Stock
      Exchange, then the Fair Market Value shall be the closing selling price
      per share of Common Stock on the date in question on the Stock Exchange
      determined by the Plan Administrator to be the primary market for the
      Common Stock, as such price is officially quoted in the composite tape of
      transactions on such exchange and reported in The Wall Street Journal. If
      there is no closing selling price for the Common Stock on the date in
      question, then the Fair Market Value shall be the closing selling price on
      the last preceding date for which such quotation exists.
 
                  (iii) For purposes of any option grants made on the
      Underwriting Date, the Fair Market Value shall be deemed to be equal to
      the price per share at which the Common Stock is to be sold in the initial
      public offering pursuant to the Underwriting Agreement.
 
                  (iv) For purposes of any options made prior to the
      Underwriting Date, the Fair Market Value shall be determined by the Plan
      Administrator, after taking into account such factors as it deems
      appropriate.
 
            L. FAMILY MEMBER means, with respect to a particular Optionee or
Participant, any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law.
 
 
                                      A-2
<PAGE>
            M. HOSTILE TAKE-OVER shall mean:
 
                  (i) the acquisition, directly or indirectly, by any person or
      related group of persons (other than the Corporation or a person that
      directly or indirectly controls, is controlled by, or is under common
      control with, the Corporation) of beneficial ownership (within the meaning
      of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
      percent (50%) of the total combined voting power of the Corporation's
      outstanding securities pursuant to a tender or exchange offer made
      directly to the Corporation's shareholders which the Board does not
      recommend such shareholders to accept, or
 
                  (ii) a change in the composition of the Board over a period of
      thirty-six (36) consecutive months or less such that a majority of the
      Board members ceases, by reason of one or more contested elections for
      Board membership, to be comprised of individuals who either (A) have been
      Board members continuously since the beginning of such period or (B) have
      been elected or nominated for election as Board members during such period
      by at least a majority of the Board members described in clause (A) who
      were still in office at the time the Board approved such election or
      nomination.
 
            N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
 
            O. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:
 
                  (i) such individual's involuntary dismissal or discharge by
      the Corporation for reasons other than Misconduct, or
 
                  (ii) such individual's voluntary resignation following (A) a
      change in his or her position with the Corporation or Parent or Subsidiary
      employing the individual which materially reduces his or her duties and
      responsibilities or the level of management to which he or she reports,
      (B) a reduction in his or her level of compensation (including base
      salary, fringe benefits and target bonus under any corporate-performance
      based bonus or incentive programs) by more than fifteen percent (15%) or
      (C) a relocation of such individual's place of employment by more than
      fifty (50) miles, provided and only if such change, reduction or
      relocation is effected by the Corporation without the individual's
      consent.
 
            P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such
person, whether by omission or commission, which adversely affects the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. This shall not limit the grounds for the dismissal or discharge of any
person in the Service of the Corporation (or any Parent or Subsidiary) for any
other acts or omissions, but such other acts or omissions shall not be deemed,
for purposes of the Plan, to constitute grounds for termination for Misconduct.
 
 
                                      A-3
<PAGE>
            Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
 
            R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
 
            S. OPTION SURRENDER VALUE shall mean the Fair Market Value per share
of Common Stock or the date the option is surrendered to the Corporation or, in
the event of a Hostile Take-Over, effected through a tender offer, the highest
reported price per share of Common Stock pain by the tender offeror in effecting
such Hostile Take-Over, if greater. However, if the surrendered option is an
Incentive Option, the Option Surrender Value shall not exceed the Fair Market
Value per share.
 
            T. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Grant or Automatic Grant Program.
 
            U. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
 
            V. PARTICIPANT shall mean any person who is issued shares of Common
Stock or restricted stock units or other stock-based awards under the Stock
Issuance Program.
 
            W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
 
            X. PLAN shall mean the Corporation's 2000 Stock Incentive Plan, as
set forth in this document.
 
            Y. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Grant and Stock Issuance Programs with respect to
one or more classes of eligible persons, to the extent such entity is carrying
out its administrative functions under those programs with respect to the
persons under its jurisdiction. However, the Primary Committee shall have the
plenary authority to make all factual determinations and to construe and
interpret any and all ambiguities under the Plan to the extent such authority is
not otherwise expressly delegated to any other Plan Administrator.
 
            Z. PLAN EFFECTIVE DATE shall mean July 26, 2005, the date on which
the Plan was adopted by the Board.
 
 
                                      A-4
<PAGE>
            AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Grant and Stock Issuance Programs with respect to Section 16
Insiders.
 
            BB. SECONDARY COMMITTEE shall mean a committee of one (1) or more
Board members appointed by the Board to administer the Discretionary Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
 
            CC. SECTION 12 REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
 
            DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
 
            EE. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option, stock appreciation right, stock issuance or
other stock-based award thereunder. For purposes of the Plan, an Optionee or
Participant shall be deemed to cease Service immediately upon the occurrence of
either of the following events: (i) the Optionee or Participant no longer
performs services in any of the foregoing capacities for the Corporation or any
Parent or Subsidiary or (ii) the entity for which the Optionee or Participant is
performing such services ceases to remain a Parent or Subsidiary of the
Corporation, even though the Optionee or Participant may subsequently continue
to perform services for that entity.
 
            FF. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
 
            GG. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
 
            HH. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
 
            II. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or, if applicable, (ii) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over through the acquisition of such Common Stock.
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the clause (i) price per share.
 
            JJ. 10% SHAREHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
 
                                      A-5
<PAGE>
            KK. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
 
            LL. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
 
            MM. WITHHOLDING TAXES shall mean the applicable income and
employment withholding taxes to which the holder of an option or stock
appreciation right or shares of Common Stock under the Plan may become subject
in connection with the grant or exercise of those options or stock appreciation
rights or the issuance or vesting of those shares.
 
 
 
                                      A-6
<PAGE>
                               CALIFORNIA ADDENDUM
                                       TO
                 AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
 
            This Addendum is hereby incorporated into, and is hereby made a part
of, the Penson Worldwide, Inc. 2000 Stock Incentive Plan (the "Plan") with
respect to the grant of options under the Discretionary Grant Program and the
issuance of shares of Common Stock and awards under the Stock Issuance Program
to California residents. The provisions of this Addendum shall be in lieu of (or
in addition to) the corresponding provisions of the Plan and such provisions
shall apply until such time as the Common Stock is registered under Section
12(g) of the 1934 Act.
 
            All capitalized terms in this Addendum, to the extent not otherwise
defined herein, shall have the meanings assigned to them in the Plan.
 
      I. OPTION TERMS UNDER DISCRETIONARY GRANT PROGRAM.
 
            A. EXERCISE PRICE. The exercise price per share shall be fixed by
the Plan Administrator in accordance with the following provisions:
 
                  (i) The exercise price per share applicable to each option
shall be not less than 85% of the Fair Market Value per share of Common Stock on
the date the option is granted.
 
                  (ii) If the person to whom the option is granted is a 10%
Shareholder, then the exercise price per share shall not be less than 110% of
the Fair Market Value per share of Common Stock on the date the option is
granted.
 
            B. VESTING SCHEDULE. The Plan Administrator may not impose a vesting
schedule upon any option grant or shares of Common Stock subject to that option
which is more restrictive than 20% per year vesting, with the initial vesting to
occur not later than one year after the option grant date. However, such
limitation shall not be applicable to any option grants made to individuals who
are officers of the Corporation, non-employee Board members or independent
contractors.
 
            C. CESSATION OF SERVICE. The following provisions shall govern the
exercise of any options outstanding at the time of the Optionee's cessation of
Service or death.
 
                  (i) Should the Optionee cease to remain in Service for any
reason other than death, Disability or Misconduct, then the Optionee shall have
a period of three (3) months following the date of such cessation of Service
during which to exercise each outstanding option held by such Optionee.
 
                  (ii) Should Optionee's Service terminate by reason of
Disability, then the Optionee shall have a period of twelve (12) months
following the date of such cessation of Service during which to exercise each
outstanding option held by such Optionee. "Disability" shall mean the inability
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan
<PAGE>
Administrator on the basis of such medical evidence as the Plan Administrator
deems warranted under the circumstances.
 
                  (iii) If the Optionee dies while holding an outstanding
option, then the personal representative of his or her estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will or the
laws of inheritance or the Optionee's designated beneficiary or beneficiaries of
that option shall have a twelve (12)-month period following the date of the
Optionee's death to exercise such option.
 
                  (iv) During the applicable post-Service exercise period, the
option may not be exercised for more than the number of vested shares for which
the option is at the time exercisable. No additional shares shall vest under the
option following the Optionee's cessation of Service, except to the extent (if
any) specifically authorized by the Plan Administrator in its sole discretion
pursuant to an express written agreement with the Optionee. Upon the expiration
of the applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for any
shares for which the option has not been exercised.
 
                  (v) Should the Optionee's Service be terminated for Misconduct
or should the Optionee engage in Misconduct while his or her options are
outstanding, then all such options shall terminate immediately and cease to be
outstanding.
 
            D. TRANSFERABILITY. During the lifetime of the Optionee, Incentive
Options shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of inheritance following the
Optionee's death. Non-Statutory Options shall be subject to the same
restrictions, except that a Non-Statutory Option may, to the extent permitted by
the Plan Administrator, be assigned in whole or in part during the Optionee's
lifetime to one or more members of the Optionee's family or to a trust
established exclusively for the Optionee and/or one or more such family members
or to Optionee's former spouse, to the extent such assignment is in connection
with the Optionee's estate plan or pursuant to a domestic relations order. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate. Notwithstanding the foregoing, the Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding
options under the Plan, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee's death.
 
      II. STOCK ISSUANCE PROGRAM.
 
            A. PURCHASE PRICE. The issue price per share shall be fixed by the
Plan Administrator in accordance with the following provisions:
 
 
                                       2
<PAGE>
                  (i) The issue price per share applicable for each share issued
shall not be less than 85% of the Fair Market Value of the Common Stock on the
issuance date.
 
                  (ii) If the person to whom the share is issued is a 10%
Shareholder, the issue price per share shall not be less than 100% of the Fair
Market Value of the Common Stock at the issuance date.
 
            B. VESTING SCHEDULE. The Plan Administrator may not impose a vesting
schedule upon any issuance of Common Stock or other stock-based award made under
the Stock Issuance Program which is more restrictive than 20% per year vesting,
with the initial vesting to occur not later than one year measured from the date
of such issuance or award. However, such limitation shall not be applicable to
any Common Stock Issuances made to individuals who are officers of the
Corporation, non-employee Board members or independent contractors.
 
      III. FINANCIAL INFORMATION. The Corporation shall deliver a balance sheet
and an income statement at least annually to each Optionee and Participant,
unless such individual is a key Employee whose duties in connection with the
Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
 
      IV. SHARE RESERVE. The maximum number of shares of Common Stock that may
be issued over the term of the Plan together with the total number of shares of
Common Stock provided for under any stock bonus or similar plan of the
Corporation shall not exceed 30% of the then outstanding shares (on an
as-converted basis) of the Corporation unless a percentage higher than 30% is
approved by at least two-thirds of the outstanding shares of the Corporation
entitled to vote on such matter.
 
 
 
                                       3