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Exhibit 10.1
VERICHIP CORPORATION
2007 STOCK INCENTIVE PLAN
 
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants,
and to promote the long-term success of the Company’s business and to link
participants’ directly to stockholder interests through increased stock
ownership. Awards granted under the Plan may be Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Performance Units, Performance Shares, Cash Awards and Other Stock Based Awards.
 
2. Definitions. As used herein, the following definitions shall apply:
 
(a) “Administrator” means the Board or any Committee or Officer as shall be
administering the Plan, in accordance with Section 4 of the Plan.
 
(b) “Affiliate” means a Parent, a Subsidiary, an entity that is not a Parent or
Subsidiary but which has a direct or indirect ownership interest in the Company
or in which the Company has a direct or indirect ownership interest, an entity
that is a customer or supplier of the Company, an entity that renders services
to the Company, or an entity that has an ownership or business affiliation with
any entity previously described in this Section 2(b).
 
(c) “Applicable Law” means the legal requirements relating to the administration
of the Plan under applicable federal, state, local and foreign corporate, tax
and securities laws, and the rules and requirements of any stock exchange or
quotation system on which the Common Stock is listed or quoted.
 
(d) “Award” means an Option, Stock Appreciation Right, Restricted Stock Award,
Performance Unit or Performance Share, Cash Award or Other Stock Based Award
granted under the Plan.
 
(e) “Award Agreement” means the agreement, notice and/or terms or conditions by
which an Award is evidenced, documented in such form (including by electronic
communication) as may be approved by the Administrator.
 
(f) “Board” means the Board of Directors of the Company.

(g) “Cash Award” means an award payable in the form of cash.
 
(h) “Change in Control” means the happening of any of the following:
 
(i)   the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" as such term
is used in Section 13(d) and 14(d) of the Exchange Act (other than a Controlling
Stockholder (as defined below), any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding securities entitled
generally to vote in the election of the Board (other than the occurrence of any
contingency);
 
(ii)   the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation or entity, which is consummated, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving

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entity) more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or

(iii)   the effective date of a complete liquidation of the Company or the
consummation of an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets, which in both cases are approved
by the stockholders of the Company as may be required by law.
 
For purposes hereof, the term "Controlling Stockholder" means (i) Applied
Digital Solutions, Inc., (ii) any direct or indirect subsidiary of Applied
Digital Solutions, Inc. whether or not existing on the date hereof and (iii) any
direct or indirect subsidiary of Applied Digital Solutions, Inc. with which
Applied Digital Solutions, Inc. merges or consolidates (irrespective of which
entity is the surviving corporation) or to which Applied Digital Solutions, Inc.
sells all or substantially all of its assets; provided that a Controlling
Stockholder shall cease to be a Controlling Stockholder if any "person" as such
term is used in Section 13(d) and 14(d) of the Exchange Act (other than another
Controlling Stockholder) is or becomes (including, without limitation, as a
result of a merger, consolidation, tender offer or otherwise) the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of such Controlling Stockholder representing more than
50% of the combined voting power of such Controlling Stockholder's then
outstanding securities entitled generally to vote in the election of the Board
of Directors of the such Controlling Stockholder (other than upon the occurrence
of any contingency).
 
(i) “Code” means the Internal Revenue Code of 1986, as amended.
 
(j) “Committee” means a committee appointed by the Board in accordance with
Section 4 of the Plan.

(k) “Compensation Committee” means the Compensation Committee of the Board.
 
(l) “Common Stock” means the common stock, $.01 par value, of the Company.  
 
(m) “Company” means VeriChip Corporation.

(n) “Consultant” means any person, including an advisor, engaged by the Company
or an Affiliate and who is compensated for such services, including without
limitation non-Employee Directors. In addition, as used herein, "consulting
relationship" shall be deemed to include service by a non-Employee Director as
such.

(o) “Continuous Status as an Employee or Consultant” means that the employment
or consulting relationship is not interrupted or terminated by the Company or
Affiliate, as applicable. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of (i) any leave of absence approved
in writing by the Board, an Officer, or a person designated in writing by the
Board or an Officer as authorized to approve a leave of absence, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, any such leave may not exceed 90 days,
unless reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute, or (ii) transfers between
locations of the Company or between the Company, a Parent, a Subsidiary or
successor of the Company; or (iii) a change in the status of the Grantee from
Employee to Consultant or from Consultant to Employee.
 
(p) “Covered Stock” means the Common Stock subject to an Award.
 
(q) “Date of Grant” means the date on which the Administrator makes the
determination granting the Award, or such other later date as is determined by
the Administrator. Notice of the determination shall be provided to each Grantee
within a reasonable time after the Date of Grant.
 

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(r) “Date of Termination” means the date on which a Grantee’s Continuous Status
as an Employee or Consultant terminates.
 
(s) “Director” means a member of the Board or a member of the Board of Directors
of a Parent or Subsidiary.

(t) “Disability” means total and permanent disability as defined in Section
22(e)(3) of the Code.
 
(u) “Employee” means any person, including Officers and Directors, employed by
the Company or any Affiliate. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient to constitute “employment” by
the Company.
 
(v) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(w) “Fair Market Value” means the value of a share of Common Stock. If the
Common Stock is actively traded on any national securities exchange, including,
but not limited to, the NASDAQ Stock Market or the New York Stock Exchange, Fair
Market Value shall mean the closing price at which sales of Common Stock shall
have been sold on the date of determination, as reported by any such exchange
selected by the Administrator on which the shares of Common Stock are then
traded. If the shares of Common Stock are not actively traded on any such
exchange, Fair Market Value shall mean the arithmetic mean of the bid and asked
prices for the shares of Common Stock on the most recent trading date within a
reasonable period prior to the determination date as reported by such exchange.
If there are no bid and asked prices within a reasonable period or if the shares
of Common Stock are not traded on any exchange as of the determination date,
Fair Market Value shall mean the fair market value of a share of Common Stock as
determined by the Administrator taking into account such facts and circumstances
deemed to be material by the Administrator to the value of the Common Stock in
the hands of the Grantee; provided that, for purposes of granting awards other
than Incentive Stock Options, Fair Market Value of a share of Common Stock may
be determined by the Administrator by reference to the average market value
determined over a period certain or as of specified dates, to a tender offer
price for the shares of Common Stock (if settlement of an award is triggered by
such an event) or to any other reasonable measure of fair market value and
provided further that, for purposes of granting Incentive Stock Options, Fair
Market Value of a share of Common Stock shall be determined in accordance with
the valuation principles described in the regulations promulgated under Code
Section 422.
 
(x) “Grantee” means an individual who has been granted an Award.
 
(y) “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
 
(z) “Nonqualified Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.
 
(aa) “Officer” means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
 
(bb) “Option” means a stock option granted under the Plan.

(cc) “Other Stock Based Award” means an award that is valued in whole or in part
by reference to, or is otherwise based on, Common Stock.
 
(dd) “Parent” means a corporation, whether now or hereafter existing, in an
unbroken chain of corporations ending with the Company if each of the
corporations other than the Company holds at least 50 percent of the voting
shares of one of the other corporations in such chain.

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(ee) “Performance Based Compensation” means compensation which meets the
requirements of Section 162(m)(4)(C) of the Code.
 
(ff) “Performance Based Restricted Stock” means an Award of Restricted Stock
which meets the requirements of Section 162(m)(4)(C) of the Code, as described
in Section 8(b) of the Plan.
 
(gg) “Performance Period” means the time period during which the performance
goals established by the Administrator with respect to a Performance Unit or
Performance Share, pursuant to Section 9 of the Plan, must be met.

(hh) “Performance Share” has the meaning set forth in Section 9 of the Plan.
 
(ii) “Performance Unit” has the meaning set forth in Section 9 of the Plan.
 
(jj) “Plan” means this VeriChip Corporation 2007 Stock Incentive Plan.
 
(kk) “Restricted Stock Award” means Shares that are awarded to a Grantee
pursuant to Section 8 of the Plan.
 
(ll) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
 
(mm) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 13 of the Plan.
 
(nn) “Stock Appreciation Right” or “SAR” means the right to receive an amount
equal to the appreciation, if any, in the Fair Market Value of a Share from the
date of the grant of the right to the date of its payment, as set forth in
Section 7 of the Plan.
 
(oo) “Subsidiary” means a corporation, domestic or foreign, of which not less
than 50 percent of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
 
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the
Plan and except as otherwise provided in this Section 3, the maximum aggregate
number of Shares that may be subject to Awards under the Plan since the Plan
became effective is 1,000,000 Shares, of which 1,000,000 can be issued as
Incentive Stock Options. The Shares may be authorized, but unissued, or
reacquired Common Stock.
 
If an Award expires or becomes unexercisable without having been exercised in
full the remaining Shares that were subject to the Award shall become available
for future Awards under the Plan (unless the Plan has terminated). With respect
to Options and Stock Appreciation Rights, if the payment upon exercise of an
Option or SAR is in the form of Shares, the Shares subject to the Option or SAR
shall be counted against the available Shares as one Share for every Share
subject to the Option or SAR, regardless of the number of Shares used to settle
the SAR upon exercise. 
 
4. Administration of the Plan.
 
(a) Procedure.
 
(i) Multiple Administrative Bodies. The Plan may be administered by different
bodies with respect to different groups of Employees and Consultants, provided
however, that the administrative authority set

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forth in items (vii), (viii), (ix), (xii), (xiii), (xiv), (xv), and (xvi) of
Section 4(b) below shall be exercised only by the Compensation Committee. Except
as provided below, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board and constituted to satisfy Applicable Law.
 
(ii) Rule 16b-3. To the extent the Board or the Compensation Committee considers
it desirable for transactions relating to Awards to be eligible to qualify for
an exemption under Rule 16b-3, the transactions contemplated under the Plan
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
 
(iii) Section 162(m) of the Code. To the extent the Board or the Compensation
Committee considers it desirable for compensation delivered pursuant to Awards
to be eligible to qualify for an exemption from the limit on tax deductibility
of compensation under Section 162(m) of the Code, the transactions contemplated
under the Plan shall be structured to satisfy the requirements for exemption
under Section 162(m) of the Code.

(iv) Authorization of Officers to Grant Options. In accordance with Applicable
Law, the Board may, by a resolution adopted by the Board, authorize one or more
Officers to designate Officers and Employees (excluding the Officer so
authorized) to be Grantees of Options and determine the number of Options to be
granted to such Officers and Employees; provided, however, that the resolution
adopted by the Board so authorizing such Officer or Officers shall specify the
total number and the terms (including the exercise price, which may include a
formula by which such price may be determined) of Options such Officer or
Officers may so grant.
 
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in
the case of a Committee or an Officer, subject to the specific duties delegated
by the Board to such Committee or Officer, the Administrator shall have the
authority, in its sole and absolute discretion:
 
(i) to determine the Fair Market Value of the Common Stock, in accordance with
Section 2(w) of the Plan;
 
(ii) to select the Grantees to whom Awards will be granted under the Plan;
 
(iii) to determine whether, when, to what extent and in what types and amounts
Awards are granted under the Plan;
 
(iv) to determine the number of shares of Common Stock to be covered by each
Award granted under the Plan;
 
(v) to determine the forms of Award Agreements, which need not be the same for
each grant or for each Grantee, and which may be delivered electronically, for
use under the Plan;
 
(vi) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any Award granted under the Plan. Such terms and conditions, which
need not be the same for each grant or for each Grantee, include, but are not
limited to, the exercise price, the time or times when Options and SARs may be
exercised (which may be based on performance criteria), the extent to which
vesting is suspended during a leave of absence, any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding
any Award or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine;
 
(vii) to construe and interpret the terms of the Plan and Awards;
 

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(viii) to prescribe, amend and rescind rules and regulations relating to the
Plan, including, without limiting the generality of the foregoing, rules and
regulations relating to the operation and administration of the Plan to
accommodate the specific requirements of local and foreign laws and procedures;
 
(ix) to modify or amend each Award (subject to Section 15 of the Plan). However,
the Administrator may not modify or amend any outstanding Option or SAR to
reduce the exercise price of such Option or SAR, as applicable, below the
exercise price as of the Date of Grant of such Option or SAR. In addition, no
Option or SAR may be granted in exchange for, or in connection with, the
cancellation or surrender of an Option or SAR or other Award having a lower
exercise price;

(x) to authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator;
 
(xi) to determine the terms and restrictions applicable to Awards;
 
(xii) to make such adjustments or modifications to Awards granted to Grantees
who are Employees of foreign Subsidiaries as are advisable to fulfill the
purposes of the Plan or to comply with Applicable Law;

(xiii) to delegate its duties and responsibilities under the Plan with respect
to sub-plans applicable to foreign Subsidiaries, except its duties and
responsibilities with respect to Employees who are also Officers or Directors
subject to Section 16(b) of the Exchange Act;
 
(xiv) to provide any notice or other communication required or permitted by the
Plan in either written or electronic form; and
 
(xv) to correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Award Agreement, in the manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective;
and
 
(xvi) to make all other determinations deemed necessary or advisable for
administering the Plan.
 
(c) Effect of Administrator's Decision. The Administrator’s decisions,
determinations and interpretations shall be final and binding on all Grantees
and any other holders of Awards.
 
5. Eligibility and General Conditions of Awards.
 
(a) Eligibility. Awards other than Incentive Stock Options may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Award may be granted additional Awards.
 
(b) Maximum Term. Subject to the following provision, the term during which an
Award may be outstanding shall not extend more than ten years after the Date of
Grant, and shall be subject to earlier termination as specified elsewhere in the
Plan or Award Agreement.  
 
(c) Award Agreement. To the extent not set forth in the Plan, the terms and
conditions of each Award, which need not be the same for each grant or for each
Grantee, shall be set forth in an Award Agreement. The Administrator, in its
sole and absolute discretion, may require as a condition to any Award
Agreement's effectiveness that the Award Agreement be executed by the Grantee,
including by electronic signature or other electronic indication of acceptance,
and that the Grantee agree to such further terms and conditions as specified in
the Award Agreement. Except as otherwise provided in an Agreement, all
capitalized terms used in the Agreement shall have the same meaning as in the
Plan, and the Agreement shall be subject to all of the terms of the Plan.

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(d) Termination of Employment or Consulting Relationship. In the event that a
Grantee’s Continuous Status as an Employee or Consultant terminates (other than
upon the Grantee’s Retirement (defined below), death, Disability, or Termination
by Employer Not for Cause (defined below)), then, unless otherwise provided by
the Award Agreement, and subject to Section 13 of the Plan:  
 
(i) the Grantee may exercise his or her unexercised Option or SAR, but only
within such period of time as is determined by the Administrator, and only to
the extent that the Grantee was entitled to exercise it at the Date of
Termination (but in no event later than the expiration of the term of such
Option or SAR as set forth in the Award Agreement). In the case of an Incentive
Stock Option, the Administrator shall determine such period of time (in no event
to exceed three months from the Date of Termination) when the Option is granted.
If, at the Date of Termination, the Grantee is not entitled to exercise his or
her entire Option or SAR, the Shares covered by the unexercisable portion of the
Option or SAR shall revert to the Plan. If, after the Date of Termination, the
Grantee does not exercise his or her Option or SAR within the time specified by
the Administrator, the Option or SAR shall terminate, and the Shares covered by
such Option or SAR shall revert to the Plan;
 
(ii) the Grantee’s Restricted Stock Awards, to the extent forfeitable
immediately before the Date of Termination, shall thereupon automatically be
forfeited;
 
(iii) the Grantee’s Restricted Stock Awards that were not forfeitable
immediately before the Date of Termination shall promptly be settled by delivery
to the Grantee of a number of unrestricted Shares equal to the aggregate number
of the Grantee’s vested Restricted Stock Awards; and

(iv) any Performance Shares or Performance Units with respect to which the
Performance Period has not ended as of the Date of Termination shall terminate
immediately upon the Date of Termination.
 
(e) Disability of Grantee. In the event that a Grantee’s Continuous Status as an
Employee or Consultant terminates as a result of the Grantee’s Disability, then,
unless otherwise provided by the Award Agreement, such termination shall have no
effect on the Grantee's outstanding Awards. The Grantee's Awards shall continue
to vest and remain outstanding and exercisable until they expire by their terms.
In the case of an Incentive Stock Option, any option not exercised within 12
months of the date of termination of the Grantee’s Continuous Status as an
Employee or Consultant due to Disability will be treated as a Nonqualified Stock
Option.
 
(f) Death of Grantee. In the event of the death of a Grantee, then, unless
otherwise provided by the Award Agreement, such termination shall have no effect
on Grantee's outstanding Awards. The Grantee's Awards shall continue to vest and
remain outstanding and exercisable until they expire by their terms. In the case
of an Incentive Stock Option, any option not exercised within 12 months of the
date of termination of Grantee’s Continuous Status as an Employee or Consultant
due to death will be treated as a Nonqualified Stock Option.

(g) Retirement of Grantee. Except as otherwise provided in Section 5(g)(i)
below, in the event that a Grantee’s Continuous Status as an Employee or
Consultant terminates after the Grantee’s attainment of age 65 (hereinafter,
"Retirement"), then, unless otherwise provided by the Award Agreement, such
termination shall have no effect on Grantee's outstanding Awards. The Grantee's
Awards shall continue to vest and remain outstanding and exercisable until they
expire by their terms. In the case of an Incentive Stock Option, any option not
exercised within 3 months of the termination of Grantee’s Continuous Status as
an Employee or Consultant due to Retirement will be treated as a Nonqualified
Stock Option.

(h) Termination by Employer Not for Cause. In the event that a Grantee’s
Continuous Status as an Employee or Consultant is terminated by the Employer
without Cause (hereinafter, "Termination by Employer Not for Cause"), then,
unless otherwise provided by the Award Agreement, such termination shall have no
effect on Grantee's outstanding Awards. Grantee's Awards shall continue to vest
and remain

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outstanding and exercisable until they expire by their terms. In the case of an
Incentive Stock Option, any option not exercised within 3 months of the date of
will be treated as a Nonqualified Stock Option. In the case of a Grantee who is
a Director, the Grantee's service as a Director shall be deemed to have been
terminated without Cause if the Participant ceases to serve in such a position
solely due to the failure to be reelected or reappointed, as the case may be,
and such failure is not a result of an act or omission which would constitute
Cause.
 
(i) Termination for Cause. Notwithstanding anything herein to the contrary, if a
Grantee is an Employee of the Company and is “Terminated for Cause”, as defined
herein below, or violates any of the terms of their employment after they have
become vested in any of their rights herein, the Grantee’s full interest in such
rights shall terminate on the date of such termination of employment and all
rights thereunder shall cease. Whether a Participant’s employment is Terminated
for Cause shall be determined by the Board. Cause shall mean gross negligence,
willful misconduct, flagrant or repeated violations of the Company’s policies,
rules or ethics, a material breach by the Grantee of any employment agreement
between the Grantee and the Company, intoxication, substance abuse, sexual or
other unlawful harassment, disclosure of confidential or proprietary
information, engaging in a business competitive with the Company, or dishonest,
illegal or immoral conduct.

(j) Nontransferability of Awards.
 
(i) Except as provided in Section 5(j)(iii) below, each Award, and each right
under any Award, shall be exercisable only by the Grantee during the Grantee’s
lifetime, or, if permissible under Applicable Law, by the Grantee’s guardian or
legal representative.
 
(ii) Except as provided in Section 5(j)(iii) below, no Award (prior to the time,
if applicable, Shares are issued in respect of such Award), and no right under
any Award, may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Grantee otherwise than by will or by the laws of
descent and distribution (or in the case of Restricted Stock Awards, to the
Company) and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any Subsidiary; provided, that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
 
(iii) To the extent and in the manner permitted by Applicable Law, and to the
extent and in the manner permitted by the Administrator, and subject to such
terms and conditions as may be prescribed by the Administrator, a Grantee may
transfer an Award to:
 
(A) a 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 of the Grantee (including
adoptive relationships);
 
(B) any person sharing the employee’s household (other than a tenant or
employee);
 
(C) a trust in which persons described in (A) and (B) have more than 50 percent
of the beneficial interest;
 
(D) a foundation in which persons described in (A) or (B) or the Grantee control
the management of assets; or
 
(E) any other entity in which the persons described in (A) or (B) or the Grantee
own more than 50 percent of the voting interests;
 
provided such transfer is not for value. The following shall not be considered
transfers for value: a transfer under a domestic relations order in settlement
of marital property rights, and a transfer to an entity in which

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more than 50 percent of the voting interests are owned by persons described in
(A) above or the Grantee, in exchange for an interest in such entity.

6. Stock Options.
 
(a) Limitations.
 
(i) Each Option shall be designated in the Award Agreement as either an
Incentive Stock Option or a Nonqualified Stock Option. Any Option designated as
an Incentive Stock Option:
 
(A) shall not have an aggregate Fair Market Value (determined for each Incentive
Stock Option at the Date of Grant) of Shares with respect to which Incentive
Stock Options are exercisable for the first time by the Grantee during any
calendar year (under the Plan and any other employee stock option plan of the
Company or any Parent or Subsidiary (“Other Plans”)), determined in accordance
with the provisions of Section 422 of the Code, that exceeds $100,000 (the
“$100,000 Limit”);
 
(B) shall, if the aggregate Fair Market Value of Shares (determined on the Date
of Grant) with respect to the portion of such grant that is exercisable for the
first time during any calendar year (“Current Grant”) and all Incentive Stock
Options previously granted under the Plan and any Other Plans that are
exercisable for the first time during a calendar year (“Prior Grants”) would
exceed the $100,000 Limit, be exercisable as follows:
 
(1) The portion of the Current Grant that would, when added to any Prior Grants,
be exercisable with respect to Shares that would have an aggregate Fair Market
Value (determined as of the respective Date of Grant for such Options) in excess
of the $100,000 Limit shall, notwithstanding the terms of the Current Grant, be
exercisable for the first time by the Grantee in the first subsequent calendar
year or years in which it could be exercisable for the first time by the Grantee
when added to all Prior Grants without exceeding the $100,000 Limit; and
 
(2) If, viewed as of the date of the Current Grant, any portion of a Current
Grant could not be exercised under the preceding provisions of this Section
6(a)(i)(B) during any calendar year commencing with the calendar year in which
it is first exercisable through and including the last calendar year in which it
may by its terms be exercised, such portion of the Current Grant shall not be an
Incentive Stock Option, but shall be exercisable as a separate Option at such
date or dates as are provided in the Current Grant.
 
(ii) No Employee shall be granted, in any fiscal year of the Company, Options to
purchase more than 300,000 Shares. The limitation described in this Section
6(a)(ii) shall be adjusted proportionately in connection with any change in the
Company’s capitalization as described in Section 13 of the Plan. If an Option is
canceled in the same fiscal year of the Company in which it was granted (other
than in connection with a transaction described in Section 13 of the Plan), the
canceled Option will be counted against the limitation described in this Section
6(a)(ii).
 
(b) Term of Option. The term of each Option shall be stated in the Award
Agreement; provided, however, that the term shall be 10 years from the date of
grant or such shorter term as may be provided in the Award Agreement. Moreover,
in the case of an Incentive Stock Option granted to a Grantee who, at the time
the Incentive Stock Option is granted, owns stock representing more than 10
percent of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Incentive Stock Option shall be five years from
the date of grant or such shorter term as may be provided in the Award
Agreement.
 
(c) Option Exercise Price and Consideration.
 

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(i) Exercise Price. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Administrator and,
except as otherwise provided in this Section 6(c)(i), shall be no less than 100
percent of the Fair Market Value per Share on the Date of Grant.
 
(A) In the case of an Incentive Stock Option granted to an Employee who on the
Date of Grant owns stock representing more than 10 percent of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110 percent of the Fair Market Value
per Share on the Date of Grant.
 
(B) Any Option that is (1) granted to a Grantee in connection with the
acquisition (“Acquisition”), however effected, by the Company of another
corporation or entity (“Acquired Entity”) or the assets thereof, (2) associated
with an option to purchase shares of stock or other equity interest of the
Acquired Entity or an affiliate thereof (“Acquired Entity Option”) held by such
Grantee immediately prior to such Acquisition, and (3) intended to preserve for
the Grantee the economic value of all or a portion of such Acquired Entity
Option, may be granted with such exercise price as the Administrator determines
to be necessary to achieve such preservation of economic value.
 
(d) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any conditions that must be satisfied before the Option may be
exercised. An Option shall be exercisable only to the extent that it is vested
according to the terms of the Award Agreement.
 
(e) Form of Consideration. The Administrator shall determine the acceptable form
of consideration for exercising an Option, including the method of payment. In
the case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. The acceptable form of
consideration may consist of any combination of the following: cash; pursuant to
procedures approved by the Administrator, through the sale of the Shares
acquired on exercise of the Option through a broker-dealer to whom the Grantee
has submitted an irrevocable notice of exercise and irrevocable instructions to
deliver promptly to the Company the amount of sale or loan proceeds sufficient
to pay the exercise price, together with, if requested by the Company, the
amount of federal, state, local or foreign withholding taxes payable by the
Grantee by reason of such exercise (a "cashless exercise") or; subject to the
approval of the Administrator:
 
(i) by the surrender of all or part of an Award (including the Award being
exercised);

(ii) by the tender to the Company of Shares owned by the Grantee and registered
in his name having a Fair Market Value equal to the amount due to the Company;

(iii) in other property, rights and credits deemed acceptable by the
Administrator, including the Participant’s promissory note; or
 
(iv) such other consideration and method of payment for the issuance of Shares
to the extent permitted by Applicable Law and deemed acceptable by the
Administrator.
 
(f) Exercise of Option.
 
(i) Procedure for Exercise; Rights as a Shareholder.
 
(A) Any Option granted hereunder shall be exercisable according to the terms of
the Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Award Agreement.
 
(B) An Option may not be exercised for a fraction of a Share.
 

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(C) An Option shall be deemed exercised when the Company receives:
 
(1) written or electronic notice of exercise (in accordance with the Award
Agreement and any action taken by the Administrator pursuant to Section 4(b) of
the Plan or otherwise) from the person entitled to exercise the Option, and

(2) full payment for the Shares with respect to which the Option is exercised.
 
(D) Shares issued upon exercise of an Option shall be issued in the name of the
Grantee or, if requested by the Grantee, in the name of the Grantee and his or
her spouse. Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.
 
(E) Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
 
7. Stock Appreciation Rights.
 
(a) Grant of SARs. Subject to the terms and conditions of the Plan, the
Administrator may grant SARs in tandem with an Option or alone and unrelated to
an Option. Tandem SARs shall expire no later than the expiration of the
underlying Option. In no event shall the term of a SAR exceed ten years from the
Date of Grant.

(b) Exercise of SARs. SARs shall be exercised by the delivery of a written or
electronic notice of exercise (in accordance with the Award Agreement and any
action taken by the Administrator pursuant to Section 4(b) of the Plan or
otherwise), setting forth the number of Shares over which the SAR is to be
exercised. Tandem SARs may be exercised:
 
(i) with respect to all or part of the Shares subject to the related Option upon
the surrender of the right to exercise the equivalent portion of the related
Option;
 
(ii) only with respect to the Shares for which its related Option is then
exercisable; and
 
(iii) only when the Fair Market Value of the Shares subject to the Option
exceeds the exercise price of the Option.
 
The value of the payment with respect to the tandem SAR may be no more than 100
percent of the difference between the exercise price of the underlying Option
and the Fair Market Value of the Shares subject to the underlying Option at the
time the tandem SAR is exercised.
 
(c) Payment of SAR Benefit. Upon exercise of a SAR, the Grantee shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
 
(i) the excess of the Fair Market Value of a Share on the date of exercise over
the SAR exercise price; by
 
(ii) the number of Shares with respect to which the SAR is exercised;
 

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provided, that the Administrator may provide in the Award Agreement that the
benefit payable on exercise of a SAR shall not exceed such percentage of the
Fair Market Value of a Share on the Date of Grant, or any other limitation, as
the Administrator shall specify. The payment upon exercise of a SAR shall be in
Shares that have an aggregate Fair Market Value (as of the date of exercise of
the SAR) equal to the amount of the payment.
 
(d) No Employee shall be granted, in any fiscal year, SARs with respect to more
than 300,000 Shares. The limitation described in this Section 7(d) shall be
adjusted proportionately in connection with any change in the Company’s
capitalization as described in Section 13 of the Plan. If a SAR is canceled in
the same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13 of the Plan), the canceled
SAR will be counted against the limitation described in this Section 7(d).
 
8. Restricted Stock Awards. Subject to the terms of the Plan, the Administrator
may grant Restricted Stock Awards to any Eligible Recipient, in such amount and
upon such terms and conditions as shall be determined by the Administrator.
 
(a) Administrator Action. The Administrator acting in its sole and absolute
discretion shall have the right to grant Restricted Stock to Eligible Recipients
under the Plan from time to time. Each Restricted Stock Award shall be evidenced
by a Restricted Stock Agreement, and each Restricted Stock Agreement shall set
forth the conditions, if any, which will need to be timely satisfied before the
grant will be effective and the conditions, if any, under which the Grantee’s
interest in the related Stock will be forfeited. The Administrator may make
grants of Performance-Based Restricted Stock and grants of Restricted Stock that
are not Performance-Based Restricted Stock; provided, however, that only the
Compensation Committee may serve as the Administrator with respect to grants of
Performance-Based Restricted Stock.
 
(b) Performance-Based Restricted Stock.
 
(i) Effective Date. A grant of Performance-Based Restricted Stock shall be
effective as of the date the Compensation Committee certifies that the
applicable conditions described in Section 8(b)(iii) of the Plan have been
timely satisfied.

(ii) Share Limitation. No more than 300,000 shares of Performance-Based
Restricted Stock may be granted to an Eligible Recipient in any calendar year.

(iii) Grant Conditions. The Compensation Committee, acting in its sole and
absolute discretion, may select from time to time Eligible Recipients to receive
grants of Performance-Based Restricted Stock in such amounts as the Compensation
Committee may, in its sole and absolute discretion, determine, subject to any
limitations provided in the Plan. The Compensation Committee shall make each
grant subject to the attainment of certain performance targets. The Compensation
Committee shall determine the performance targets which will be applied with
respect to each grant of Performance-Based Restricted Stock at the time of
grant, but in no event later than 90 days after the commencement of the period
of service to which the performance targets relate. The performance criteria
applicable to Performance-Based Restricted Stock grants will be one or more of
the following criteria: (1) stock price; (2) average annual growth in earnings
per share; (3) increase in shareholder value; (4) earnings per share; (5) net
income; (6) return on assets; (7) return on shareholders’ equity; (8) increase
in cash flow; (9) operating profit or operating margins; (10) revenue growth of
the Company; and (11) operating expenses. Each performance target applicable to
a Cash Award intended to be Performance Based Compensation and the deadline for
satisfying each such target shall be stated in the Agreement between the Company
and the Employee. The Compensation Committee must certify in writing that each
such target has been satisfied before the Performance Based Compensation award
is paid.
 
The related Restricted Stock Agreement shall set forth the applicable
performance criteria and the deadline for satisfying the performance criteria.

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(iv) Forfeiture Conditions. The Compensation Committee may make each
Performance-Based Restricted Stock grant (if, when and to the extent that the
grant becomes effective) subject to one, or more than one, objective employment,
performance or other forfeiture condition which the Compensation Committee
acting in its sole and absolute discretion deems appropriate under the
circumstances for Eligible Recipients generally or for a Grantee in particular,
and the related Restricted Stock Agreement shall set forth each such condition
and the deadline for satisfying each such forfeiture condition. A Grantee’s
nonforfeitable interest in the Shares related to a Performance-Based Restricted
Stock grant shall depend on the extent to which each such condition is timely
satisfied. A Stock certificate shall be issued (subject to the conditions, if
any, described in this Section 8(b)) to, or for the benefit of, the Grantee with
respect to the number of shares for which a grant has become effective as soon
as practicable after the date the grant becomes effective.
 
(c) Restricted Stock Other Than Performance-Based Restricted Stock.
 
(i) Effective Date. A Restricted Stock grant which is not a grant of
Performance-Based Restricted Stock shall be effective (a) as of the date set by
the Administrator when the grant is made or, if the grant is made subject to
one, or more than one, condition, (b) as of the date the Administrator
determines that such conditions have been timely satisfied.
 
(ii) Grant Conditions. The Administrator acting in its sole and absolute
discretion may make the grant of Restricted Stock which is not Performance-Based
Restricted Stock to a Grantee subject to the satisfaction of one, or more than
one, objective employment, performance or other grant condition which the
Administrator deems appropriate under the circumstances for Eligible Recipients
generally or for a Grantee in particular, and the related Restricted Stock
Agreement shall set forth each such condition and the deadline for satisfying
each such grant condition.
 
(iii) Forfeiture Conditions. The Administrator may make each grant of Restricted
Stock which is not a grant of Performance-Based Restricted Stock (if, when and
to the extent that the grant becomes effective) subject to one, or more than
one, objective employment, performance or other forfeiture condition which the
Administrator acting in its sole and absolute discretion deems appropriate under
the circumstances for Eligible Recipients generally or for a Grantee in
particular, and the related Restricted Stock Agreement shall set forth each such
condition and the deadline for satisfying each such forfeiture condition. A
Grantee’s nonforfeitable interest in the Shares related to a grant of Restricted
Stock which is not a grant of Performance-Based Restricted Stock shall depend on
the extent to which each such condition is timely satisfied. A Stock certificate
shall be issued (subject to the conditions, if any, described in this Section
8(c)) to, or for the benefit of, the Grantee with respect to the number of
shares for which a grant has become effective as soon as practicable after the
date the grant becomes effective.
 
(d) Dividends and Voting Rights. Each Restricted Stock Agreement shall state
whether the Grantee shall have a right to receive any cash dividends which are
paid with respect to his or her Restricted Stock after the date his or her
Restricted Stock grant has become effective and before the first day that the
Grantee’s interest in such stock is forfeited completely or becomes completely
nonforfeitable. If a Restricted Stock Agreement provides that a Grantee has no
right to receive a cash dividend when paid, such agreement shall set forth the
conditions, if any, under which the Grantee will be eligible to receive one, or
more than one, payment in the future to compensate the Grantee for the fact that
he or she had no right to receive any cash dividends on his or her Restricted
Stock when such dividends were paid. If a Restricted Stock Agreement calls for
any such payments to be made, the Company shall make such payments from the
Company’s general assets, and the Grantee shall be no more than a general and
unsecured creditor of the Company with respect to such payments. If a stock
dividend is declared on such a Share after the grant is effective but before the
Grantee’s interest in such Stock has been forfeited or has become
nonforfeitable, such stock dividend shall be treated as part of the grant of the
related Restricted Stock, and a Grantee’s interest in such stock dividend shall
be forfeited or shall become nonforfeitable at the same time as the Share with
respect to which the stock dividend was paid is forfeited or becomes
nonforfeitable. If a dividend is paid other than in cash or stock, the
disposition of such dividend shall be made in accordance

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with such rules as the Administrator shall adopt with respect to each such
dividend. A Grantee shall have the right to vote the Shares related to his or
her Restricted Stock grant after the grant is effective with respect to such
Shares but before his or her interest in such Shares has been forfeited or has
become nonforfeitable.
 
(e) Satisfaction of Forfeiture Conditions. A Share shall cease to be Restricted
Stock at such time as a Grantee’s interest in such Share becomes nonforfeitable
under the Plan, and the certificate representing such share shall be reissued as
soon as practicable thereafter without any further restrictions related to
Section 8(b) or Section 8(c) and shall be transferred to the Grantee.
 
9. Performance Units and Performance Shares.
 
(a) Grant of Performance Units and Performance Shares. Subject to the terms of
the Plan, the Administrator may grant Performance Units or Performance Shares to
any Eligible Recipient in such amounts and upon such terms as the Administrator
shall determine.
 
(b) Value/Performance Goals. Each Performance Unit shall have an initial value
that is established by the Administrator on the Date of Grant. Each Performance
Share shall have an initial value equal to the Fair Market Value of a Share on
the Date of Grant. The Administrator shall set performance goals that, depending
upon the extent to which they are met, will determine the number or value of
Performance Units or Performance Shares that will be paid to the Grantee.
 
(c) Payment of Performance Units and Performance Shares.
 
(i) Subject to the terms of the Plan, after the applicable Performance Period
has ended, the holder of Performance Units or Performance Shares shall be
entitled to receive a payment based on the number and value of Performance Units
or Performance Shares earned by the Grantee over the Performance Period, to the
extent the corresponding performance goals have been achieved.
 
(ii) If a Grantee is promoted, demoted or transferred to a different business
unit of the Company during a Performance Period, then, to the extent the
Administrator determines appropriate, the Administrator may adjust, change or
eliminate the performance goals or the applicable Performance Period as it deems
appropriate in order to make them appropriate and comparable to the initial
performance goals or Performance Period.

(d) Form and Timing of Payment of Performance Units and Performance Shares.
Payment of earned Performance Units or Performance Shares shall be made in a
lump sum following the close of the applicable Performance Period. The
Administrator may pay earned Performance Units or Performance Shares in cash or
in Shares (or in a combination thereof) that have an aggregate Fair Market Value
equal to the value of the earned Performance Units or Performance Shares at the
close of the applicable Performance Period. Such Shares may be granted subject
to any restrictions deemed appropriate by the Administrator. The form of payout
of such Awards shall be set forth in the Award Agreement pertaining to the grant
of the Award.
 
10. Cash Awards. The Administrator may grant Cash Awards at such times and in
such amounts as it deems appropriate.
 
(a) Annual Limits. Notwithstanding the foregoing, the amount of any Cash Award
in any Fiscal Year to any Grantee shall not exceed the greater of $100,000 or
100% of his cash compensation (excluding any Cash Award under the Plan) for such
Fiscal Year.
 
(b) Restrictions. Cash Awards may be subject or not subject to conditions (such
as an investment requirement), restricted or nonrestricted, vested or subject to
forfeiture and may be payable currently or in the future or both. The
Administrator may make grants of Cash Awards that are intended to be Performance

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Based Compensation and grants of Cash Awards that are not intended to be
Performance Based Compensation; provided, however, that only the Compensation
Committee may serve as the Administrator with respect to grants of Cash Awards
that are intended to be Performance-Based Compensation
 
The Compensation Committee shall determine the performance targets which will be
applied with respect to each grant of Cash Awards that are intended to be
Performance Based Compensation at the time of grant, but in no event later than
90 days after the beginning of the period of service to which the performance
targets relate. The performance criteria applicable to Performance Based
Compensation awards will be one or more of the following: (1) stock price;
(2) average annual growth in earnings per share; (3) increase in shareholder
value; (4) earnings per share; (5) net income; (6) return on assets; (7) return
on shareholders’ equity; (8) increase in cash flow; (9) operating profit or
operating margins; (10) revenue growth of the Company; and (11) operating
expenses. Each performance target applicable to a Cash Award intended to be
Performance Based Compensation and the deadline for satisfying each such target
shall be stated in the Agreement between the Company and the Employee. The
Compensation Committee must certify in writing that each such target has been
satisfied before the Performance Based Compensation award is paid.

11. Other Stock Based Awards. The Administrator shall have the right to grant
Other Stock Based Awards which may include, without limitation, the grant of
Shares based on certain conditions, the payment of cash based on the performance
of the Common Stock, and the grant of securities convertible into Shares.

12. Tax Withholding. The Company shall deduct from all cash distributions under
the Plan any taxes required to be withheld by federal, state, local or foreign
government. Whenever the Company proposes or is required to issue or transfer
Shares under the Plan, the Company shall have the right to require the recipient
to remit to the Company an amount sufficient to satisfy any federal, state,
local and foreign withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. A Grantee may pay the withholding
tax in cash, or, if the applicable Award Agreement provides, a Grantee may elect
to have the number of Shares he is to receive reduced by the smallest number of
whole Shares that, when multiplied by the Fair Market Value of the Shares
determined as of the Tax Date (defined below), is sufficient to satisfy federal,
state, local and foreign, if any, withholding taxes arising from exercise or
payment of a grant under the Plan (a “Withholding Election”). A Grantee may make
a Withholding Election only if the Withholding Election is made on or prior to
the date on which the amount of tax required to be withheld is determined (the
“Tax Date”) by executing and delivering to the Company a properly completed
notice of Withholding Election as prescribed by the Administrator. The
Administrator may in its sole and absolute discretion disapprove and give no
effect to the Withholding Election.
 
13. Adjustments Upon Changes in Capitalization or Change in Control.
 
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Covered Shares, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Awards have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Award, as well as the price per
share of Covered Stock, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Covered Stock.
 
(b) Change in Control. In the event of a Change in Control, then the following
provisions shall apply:

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(i) all outstanding Options shall become fully exercisable, except to the extent
that the right to exercise the Option is subject to restrictions established in
connection with a SAR that is issued in tandem with the Option;
 
(ii) all outstanding SARs shall become immediately payable, except to the extent
that the right to exercise the SAR is subject to restrictions established in
connection with an Option that is issued in tandem with the SAR;
 
(iii) all Shares of Restricted Stock shall become fully vested;
 
(iv) all Performance Shares and Performance Units shall be deemed to be fully
earned and shall be paid out in such manner as determined by the Compensation
Committee; and
 
(v) all Cash Awards, Other Stock Based Awards and other Awards shall become
fully vested and/or earned and paid out in such manner as determined by the
Compensation Committee.

In addition to the provisions of Section 13(b) above and to the extent not
inconsistent therewith the Compensation Committee, in its sole discretion, may:
(1) provide for the purchase of any Award for an amount of cash equal to the
amount which could have been attained upon the exercise or realization of such
Award had such Award been currently exercisable or payable; (2) make such
adjustment to the Awards then outstanding as the Compensation Committee deems
appropriate to reflect such transaction or change; and/or (3) cause the Awards
then outstanding to be assumed, or new Awards substituted therefore, by the
surviving corporation in such change.
 
14. Term of Plan. The Plan shall become effective upon its approval by the
shareholders of the Company. Such shareholder approval shall be obtained in the
manner and to the degree required under applicable federal and state law. The
Plan shall continue in effect until the tenth anniversary of adoption of the
Plan by the Board, unless terminated earlier under Section 15 of the Plan.
 
15. Amendment and Termination of the Plan.
 
(a) Amendment and Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.
 
(b) Shareholder Approval. The Company shall obtain shareholder approval of any
Plan amendment to the extent necessary and desirable to comply with Rule 16b-3
or with Section 422 or Section 162(m) of the Code (or any successor rule or
statute) or other Applicable Law. Such shareholder approval, if required, shall
be obtained in such a manner and to such a degree as is required by the
Applicable Law.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Grantee, unless mutually
agreed otherwise between the Grantee and the Administrator, which agreement must
be in writing and signed by the Grantee and the Company.
 
16. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to an Award unless the
exercise, if applicable, of such Award and the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, Applicable Law, and the requirements of
any stock exchange or quotation system upon which the Shares may then be listed
or quoted, and any insider trading policy adopted by the Company, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

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(b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
 
17. Liability of Company.
 
(a) Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
 
(b) Grants Exceeding Allotted Shares. If the Covered Stock covered by an Award
exceeds, as of the date of grant, the number of Shares that may be issued under
the Plan without additional shareholder approval, such Award shall be void with
respect to such excess Covered Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15 of the Plan.
 
18. Reservation of Shares. The Company, during the term of the Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
 
19. Rights of Employees. Neither the Plan nor any Award shall confer upon a
Grantee any right with respect to continuing the Grantee’s employment
relationship with the Company, nor shall they interfere in any way with the
Grantee’s right or the Company’s right to terminate such employment relationship
at any time, with or without cause.
 
20. Sub-plans for Foreign Subsidiaries. The Board may adopt sub-plans applicable
to particular foreign Subsidiaries. All Awards granted under such sub-plans
shall be treated as grants under the Plan. The rules of such sub-plans may take
precedence over other provisions of the Plan, with the exception of Section 3,
but unless otherwise superseded by the terms of such sub-plan, the provisions of
the Plan shall govern the operation of such sub-plan.
 
21. Construction. The Plan shall be construed under the laws of the State of
Delaware, to the extent not preempted by federal law, without reference to the
principles of conflict of laws.

22. Certain Limitations on Awards to Ensure Compliance with Code Section 409A.
For purposes of this Plan, references to an award term or event (including any
authority or right of the Company or a Grantee) being "permitted" under Code
Section 409A mean, for a 409A Award (meaning an Award that constitutes a
deferral of compensation under Code Section 409A and regulations thereunder),
that the term or event will not cause the Grantee to be liable for payment of
interest or a tax penalty under Code Section 409A and, for a Non-409A Award
(meaning all Awards other than 409A Awards), that the term or event will not
cause the Award to be treated as subject to Code Section 409A. Other provisions
of the Plan notwithstanding, the terms of any 409A Award and any Non-409A Award,
including any authority of the Company and rights of the Grantee with respect to
the Award, shall be limited to those terms permitted under Code Section 409A,
and any terms not permitted under Code Section 409A shall be automatically
modified and limited to the extent necessary to conform with Code Section 409A.
For this purpose, other provisions of the Plan notwithstanding, the Company
shall have no authority to accelerate distributions relating to 409A Awards in
excess of the authority permitted under Code Section 409A, and any distribution
subject to Code Section 409A(a)(2)(A)(i) (separation from service) to a "key
employee" as defined under Code Section 409A(a)(2)(B)(i), shall not occur
earlier than the earliest time permitted under Code Section 409A(a)(2)(B)(i).