Exhibit 10.1

 

MERCURY COMPUTER SYSTEMS, INC.

AMENDED AND RESTATED

1997 STOCK OPTION PLAN

 

1. PURPOSE OF THE PLAN.

 

This stock option plan (the “Plan”) is intended to encourage ownership of the
stock of Mercury Computer Systems, Inc. (the “Company”) by employees and
advisors of the Company and its subsidiaries, to induce qualified personnel to
enter and remain in the employ of the Company or its subsidiaries and otherwise
to provide additional incentive for optionees to promote the success of its
business.

 

2. STOCK SUBJECT TO THE PLAN.

 

(a) The maximum number of shares of common stock, par value $0.01 per share, of
the Company (the “Common Stock”) for which options or shares of restricted stock
may be granted under this Plan shall be eight million six hundred fifty thousand
(8,650,000) shares, provided that not more than 100,000 shares shall be issued
in the form of restricted stock. The maximum number of shares of Common Stock
available for granting incentive stock options under this Plan shall be eight
million six hundred fifty thousand (8,650,000) shares. These limitations and all
other limitations on the number of shares referenced in this Plan shall be
subject to adjustment as provided in Section 12 of the Plan. Shares issued under
the Plan may be authorized but unissued shares of Common Stock, or shares of
Common Stock held in treasury by the Company.

 

(b) If an option or restricted stock award granted hereunder is forfeited,
canceled, reacquired by the Company, satisfied without the issuance of shares of
Common Stock or otherwise terminated (other than by exercise), the shares of
Common Stock subject thereto shall again be available for subsequent option or
restricted stock award grants under the Plan.

 

(c) Stock issuable upon exercise of an option granted under the Plan or the
grant of a restricted stock award may be subject to such restrictions on
transfer, repurchase rights or other restrictions as shall be determined by the
Committee.

 

3. ADMINISTRATION OF THE PLAN.

 

The Plan shall be administered by a committee (the “Committee”) consisting of
two or more members of the Company’s Board of Directors. The selection of
persons for participation in the Plan and all decisions concerning the timing,
pricing and amount of any grant or award under the Plan shall be made solely by
the Committee. The Board of Directors may from time to time appoint a member or
members of the Committee in substitution for or in addition to the member or
members then in office and may fill vacancies on the Committee however caused.
The Committee shall choose one of its members as Chairman and shall hold
meetings at such times and places as it shall deem advisable. A majority of the
members of the Committee shall constitute a quorum and any action may be taken
by a majority of those present and voting at any meeting. Any action may also be
taken without the necessity of a meeting by a written instrument signed by a
majority of the Committee. The decision of the Committee as to all questions of
interpretation and application of the Plan shall be final, binding and
conclusive on all persons. The Committee shall have the authority to adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement granted hereunder in the manner and to the extent it shall
deem expedient to carry the Plan into effect and shall be the sole and final
judge of such expediency. No Committee member shall be liable for any action or
determination made in good faith.

 

The Committee, in its discretion, may delegate to the Chief Executive Officer of
the Company all or part of the Committee’s authority and duties with respect to
the granting of awards to individuals who are not subject to the reporting and
other provisions of Section 16 of the Securities Exchange Act of 1934, as
amended, or officers. Any such delegation by the Committee shall include a
limitation as to the amount of awards that may be granted during the period of
the delegation and shall contain guidelines as to the determination of the
exercise price of any option, the price of other awards and the vesting
criteria. The Committee may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the Committee’s
delegate or delegates that were consistent with the terms of the Plan.

 

4. TYPE OF OPTIONS.

 

Options granted pursuant to the Plan shall be authorized by action of the
Committee and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee. The Plan shall be administered by the Committee in
such manner as to permit options to qualify as incentive stock options under the
Code.

--------------------------------------------------------------------------------

5. ELIGIBILITY.

 

Options designated as incentive stock options shall be granted only to employees
(including officers and directors who are also employees) of the Company and any
of its subsidiaries. Options designated as non-qualified options may be granted
to officers, directors, employees, consultants, and advisors of the Company or
of any of its subsidiaries. “Subsidiary” or “subsidiaries” shall be as defined
in Section 424 of the Code and the Treasury Regulations promulgated thereunder
(the “Regulations”) and shall include present and future subsidiaries.

 

The Committee shall, from time to time, at its sole discretion, select from such
eligible individuals those to whom options shall be granted and shall determine
the number of shares to be subject to each option. In determining the
eligibility of an individual to be granted an option, as well as in determining
the number of shares to be granted to any individual, the Committee in its sole
discretion shall take into account the position and responsibilities of the
individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Committee may deem relevant.

 

No option designated as an incentive stock option shall be granted to any
employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the
combined voting power of all classes of stock of the Company or a parent or a
subsidiary, unless the purchase price for the stock under such option shall be
at least 110% of its fair market value at the time such option is granted and
the option, by its terms, shall not be exercisable more than five years from the
date it is granted. In determining the stock ownership under this paragraph, the
provisions of Section 424(d) of the Code shall be controlling. In determining
the fair market value under this paragraph, the provisions of Section 7 hereof
shall apply.

 

The maximum number of shares of the Company’s Common Stock with respect to which
an option or options may be granted to any employee in any one taxable year of
the Company shall not exceed 200,000 shares, taking into account shares granted
during such taxable year under options that are terminated or repriced.

 

6. OPTION AGREEMENT.

 

(a) Each option shall be evidenced by an option agreement (the “Agreement”) duly
executed on behalf of the Company and by the optionee to whom such option is
granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Committee, provided that options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the Code. The date of grant of an option shall be as determined by the
Committee. More than one option may be granted to an individual.

 

(b) Unless the Agreement specifies otherwise, the Committee may cancel, rescind,
suspend, withhold or otherwise limit or restrict any option (whether vested or
unvested, exercised or unexercised) at any time if the optionee is not in
compliance with all applicable provisions of the Agreement and the Plan, or if
the optionee engages in any “Detrimental Activity.” For purposes of this Section
6, “Detrimental Activity” shall include: (i) the rendering of services for any
organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the
rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company’s
business, without prior written authorization from the Company, of any
confidential information or material, as defined in the Company’s Employee
Confidentiality Agreement or such other agreement regarding confidential
information and intellectual property that the optionee and the Company may
enter into (collectively, the “Confidentiality Agreement”), relating to the
business of the Company, acquired by the optionee either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Confidentiality Agreement or
otherwise, all right, title and interest in any invention or idea, patentable or
not, made or conceived by the optionee during employment by the Company,
relating in any manner to the actual or anticipated business, research or
development work of the Company or the failure or refusal to do anything
reasonably necessary to enable the Company to secure a patent where appropriate
in the United States and in other countries; (iv) activity that results in
termination of the optionee’s employment for cause; (v) a material violation of
any rules, policies, procedures or guidelines of the Company; (vi) any attempt
directly or indirectly to induce any employee of the Company to be employed or
perform services elsewhere or any attempt directly or indirectly to solicit the
trade or business of any current or prospective customer, supplier or partner of
the Company; or (vii) the optionee being convicted of, or entering a guilty plea
with respect to, a crime, whether or not connected with the Company.

--------------------------------------------------------------------------------

(c) Upon exercise, payment, or delivery pursuant to an option, the optionee
shall certify in a manner acceptable to the Company that he or she is in
compliance with the terms and conditions of the Plan. In the event an optionee
engages in any Detrimental Activity as set forth in paragraphs (b)(i)-(vii) of
this Section 6 prior to, or during the six (6) months after, any exercise,
payment, or delivery pursuant to an option, such exercise, payment, or delivery
may be rescinded by the Company within two (2) years thereafter. In the event of
any such rescission, the optionee shall pay to the Company the amount of any
gain realized or payment received as a result of the rescinded exercise,
payment, or delivery, in such manner and on such terms and conditions as may be
required, and the Company shall also be entitled to set-off against the amount
of any such gain any amount owed to the optionee by the Company, and to be
reimbursed for any attorney’s fees or other costs or expenses incurred in
enforcing this Section 6 of the Plan.

 

7. OPTION PRICE.

 

The option price or prices of shares of the Company’s Common Stock for options
designated as non-qualified stock options shall be determined by the Committee,
but in no event shall the option price of a non-qualified stock option be less
than 100% of the fair market value of such Common Stock at the time the option
is granted, as determined by the Committee. The option price or prices of shares
of the Company’s Common Stock for incentive stock options shall be not less than
the fair market value of such Common Stock at the time the option is granted as
determined by the Committee in accordance with the Regulations promulgated under
Section 422 of the Code. If the shares of Common Stock are listed on any
national securities exchange, or traded on the National Association of
Securities Dealers Automated Quotation System (“Nasdaq”) National Market System,
the fair market value of a share of Common Stock on the date of grant of an
option shall be the closing price, if any, on the largest such exchange, or if
not traded on an exchange, the Nasdaq National Market System on such day, or if
the date of grant is not a business day, the business day immediately preceding
the date of the grant, or if there are no sales of shares of Common Stock on the
date of grant or on the business day immediately preceding the date of grant,
the fair market value of a share of Common Stock shall be determined by taking a
weighted average of the means between the highest and lowest sales on the
nearest date before and the nearest date after the date of grant in accordance
with Treasury Regulations Section 25.2512-2. If the shares are not then either
listed on any such exchange or quoted in NASDAQ/NM, the fair market value shall
be the mean between the average of the “Bid” and the average of the “Ask”
prices, if any, as reported in the National Daily Quotation Service for the date
of grant, or if the date of grant is not a business day the business day
immediately preceding the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Treasury Regulations Section 25.2512-2. If the
fair market value cannot be determined under the preceding two sentences, it
shall be determined in good faith by the Committee.

 

8. MANNER OF PAYMENT; MANNER OF EXERCISE.

 

(a) Options granted under the Plan may provide for the payment of the exercise
price, as determined by the Committee and set forth in the Agreement, by
delivery of (i) cash or a check payable to the order of the Company in an amount
equal to the exercise price of such options, (ii) shares of Common Stock of the
Company owned by the optionee having a fair market value equal in amount to the
exercise price of the options being exercised, (iii) any combination of (i) and
(ii), provided, however, that payment of the exercise price by delivery of
shares of Common Stock of the Company owned by such optionee may be made only if
such payment does not result in a charge to earnings for financial accounting
purposes as determined by the Committee, or (iv) payment may also be made by
delivery of a properly executed exercise notice to the Company, together with a
copy of irrevocable instruments to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. The fair market
value of any shares of the Company’s Common Stock which may be delivered upon
exercise of an option shall be determined by the Committee in accordance with
Section 7 hereof. To facilitate clause (iv) above, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms. The date
of exercise shall be the date of delivery of such exercise notice.

 

(b) To the extent that the right to purchase shares under an option has accrued
and is in effect, options may be exercised in full at one time or in part from
time to time, by giving written notice, signed by the person or persons
exercising the option, to the Company, stating the number of shares with respect
to which the option is being exercised, accompanied by payment in full for such
shares as provided in subparagraph (a) above. Upon such exercise, delivery of a
certificate for paid-up non-assessable shares shall be made at the principal
office of the Company to the person or persons exercising the option at such
time, during ordinary business hours, after 9:00 a.m. but not more than thirty
(30) days from the date of receipt of the notice by the Company, as shall be
designated in such notice, or at such time, place and manner as may be agreed
upon by the Company and the person or persons exercising the option. Upon
exercise of the option and payment as provided above, the optionee shall become
a stockholder of the Company as to the Shares acquired upon such exercise.

 

9. VESTING OF OPTIONS.

 

Except as otherwise provided in an optionee’s Agreement, each option granted
under the Plan shall, subject to Section 10 and Section 12 hereof, be
exercisable with reference to the option’s Vesting Reference Date (the date
selected by the Committee) as follows: prior

--------------------------------------------------------------------------------

to the First Anniversary Date of the Vesting Reference Date—zero percent (0%);
on the First Anniversary Date of the Vesting Reference Date—twenty five percent
(25%); on the Second Anniversary Date of the Vesting Reference Date—fifty
percent (50%); on the Third Anniversary Date of the Vesting Reference
Date—seventy-five percent (75%); and on the Fourth Anniversary Date of the
Vesting Reference Date—one hundred percent (100%). Notwithstanding any other
provisions of this section, in the event of a Change of Control (as hereinafter
defined) of the Company, fifty percent (50%) of the unvested shares of each
Participant with a minimum of six months’ service will automatically be fully
Vested; in the event of a Change of Control of the Company not approved by the
Board of Directors prior to such Change of Control, all of the Shares shall be
fully Vested immediately upon such Change of Control. For purposes of the Plan,
a “Change of Control” shall be deemed to have occurred if any of the following
conditions have occurred: (1) the merger or consolidation of the Company with
another entity where the Company is not the surviving entity and where after the
merger or consolidation (i) its stockholders prior to the merger or
consolidation hold less than 50% of the voting stock of the surviving entity and
(ii) its Directors prior to the merger or consolidation are less than a majority
of the Board of the surviving entity; (2) the sale of all or substantially all
of the Company’s assets to a third party and subsequent to the transaction (i)
its stockholders hold less than 50% of the stock of said third party and (ii)
its Directors are less than a majority of the Board of said third party; (3) a
transaction or series of related transactions, including a merger of the Company
with another entity where the Company is the surviving entity, whereby 50% or
more of the voting stock of the Company is transferred to parties who are not
prior thereto stockholders or affiliates of the Company; or (4) the Continuing
Directors shall not constitute a majority of the Board of Directors of the
Company. The term “Continuing Directors” shall mean a member of the Board of
Directors of the Company who either was a member of the Board of Directors of
the Company on the date this Plan was adopted by the Board of Directors or who
subsequently became a director of the Company and whose initial appointment,
initial election or initial nomination for election by the Company’s
shareholders subsequent to such date was approved by a vote of a majority of the
Continuing Directors then on the Board of Directors of the Company.

 

To the extent that an option to purchase shares is not exercised by an optionee
when it becomes initially exercisable, it shall not expire but shall be carried
forward and shall be exercisable, on a cumulative basis, until the expiration of
the exercise period. No partial exercise may be made for less than fifty (50)
full shares of Common Stock.

 

Notwithstanding the foregoing, the Committee may in its discretion (i)
specifically provide for another time or times of exercise (but not delay a
vesting period) or (ii) accelerate the exercisability of any option subject to
such terms and conditions as the Committee deems necessary and appropriate.

 

10. TERM AND EXERCISABILITY OF OPTIONS; RELATIONSHIP TO VESTING; NON-EMPLOYEE
OPTIONS.

 

(a) TERM AND EXERCISABILITY.

 

(1) The term of each option shall be as stated in the optionee’s Agreement,
provided, however, that the term of an option shall not exceed ten (10) years
from the date of the granting thereof, subject to earlier termination as
provided in the Plan and the Agreement.

 

(2) Except as otherwise provided in the optionee’s Agreement, or this Section
10, an option granted to any employee who ceases to be an employee of the
Company or one of its subsidiaries shall terminate ninety (90) days after the
date of such optionee ceases to be an employee of the Company or one of its
subsidiaries, or on the last day of the term of the option, whichever occurs
first.

 

(3) Except as otherwise provided in the optionee’s Agreement, if such
termination of employment is because of dismissal for cause or because the
employee is in breach of any employment agreement, such option will terminate on
the date the optionee ceases to be an employee of the Company or one of its
subsidiaries, or on the last day of the term of the option, whichever occurs
first.

 

(4) Except as otherwise provided in the optionee’s Agreement, if such
termination of the employment is because the optionee has become permanently
disabled (within the meaning of Section 22(e)(3) of the Code), such option shall
terminate on the last day of the twelfth month from the date such optionee
ceases to be an employee, or on the last day of the term of the option,
whichever occurs first.

 

(5) Except as otherwise provided in the optionee’s Agreement, in the event of
the death of an optionee, any option granted to such optionee shall terminate on
the last day of the twelfth month from the date of death, or on the last day of
the term of the option, whichever occurs first.

 

(6) Except as otherwise provided in the optionee’s Agreement, if such
termination of employment is because of the retirement of the optionee on or
after attaining the minimum age, completing the minimum number of years of
service, and satisfying of all other conditions specified for retirement status
under the Company’s Retirement Policy Statement as in effect at the time of the
grant of the option, such option will terminate on the date that is five (5)
years after the date the optionee ceases to be an employee of the Company or one
of its subsidiaries, or the last day of the term of the option, whichever occurs
first.

--------------------------------------------------------------------------------

(7) Notwithstanding subparagraphs (2) through (6) above, the Committee shall
have the authority to extend the expiration date of any outstanding option in
circumstances in which it deems such action to be appropriate.

 

(b) RELATIONSHIP TO VESTING. Except as otherwise provided in the optionee’s
agreement, an option granted to an employee who ceases to be an employee of the
Company or one of its subsidiaries, whether by having become permanently
disabled, as defined in Sedition 22(e)(3) of the Code, by death, or otherwise,
shall be exercisable only to the extent that the right to purchase shares under
such option has vested and accrued on the date that such optionee ceases to be
an employee of the Company or one of its subsidiaries.

 

(c) NON-EMPLOYEE OPTIONS. The term of an option granted to a non-employee
director, a consultant, or any other person who is not an employee of the
Company or one of its subsidiaries shall be stated in the optionee’s Agreement,
provided, however, that the term of an option shall not exceed ten (10) years
from the date of the granting thereof, subject to earlier termination as
provided in the Plan and the Agreement. An option granted to a non-employee
director, a consultant, or any other person who is not an employee of the
Company or one of its subsidiaries shall be exercisable only to the extent so
provided in the optionee’s Agreement.

 

11. OPTIONS NOT TRANSFERABLE.

 

The right of any optionee to exercise any option granted to him or her shall not
be assignable or transferable by such optionee otherwise than by will or the
laws of descent and distribution, and any such option shall be exercisable
during the lifetime of such optionee only by him; provided, however, that in the
case of a non-qualified stock option, the Committee may permit transferability
of such options on such terms and conditions as determined by the Committee and
set forth in the Option Agreement. Any option granted under the Plan shall be
null and void and without effect upon the bankruptcy of the optionee to whom the
option is granted, or upon any attempted assignment or transfer, except as
herein provided, including without limitation any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, divorce, trustee process or similar process, whether legal or
equitable, upon such option.

 

11A. RESTRICTED STOCK AWARDS.

 

(a) A restricted stock award entitles the recipient to acquire, at such purchase
price as determined by the Committee, shares of Common Stock subject to such
restrictions and conditions as the Committee may determine at the time of grant.
Conditions may be based on continuing employment (or other service relationship)
and/or achievement of pre-established performance goals and objectives. The
grant of a restricted stock award is contingent on the grantee executing the
restricted stock award agreement. The terms and conditions of each such
agreement shall be determined by the Committee, and such terms and conditions
may differ among individual restricted stock awards and grantees.

 

(b) Upon execution of a written instrument setting forth the restricted stock
award and payment of any applicable purchase price, a grantee shall have the
rights of a stockholder with respect to the voting of the restricted stock,
subject to such conditions contained in the written instrument evidencing the
restricted stock award. Unless the Committee shall otherwise determine,
certificates evidencing the restricted stock shall remain in the possession of
the Company until such restricted stock is vested as provided in Section 11A(d)
below, and the grantee shall be required, as a condition of the grant, to
deliver to the Company a stock power endorsed in blank.

 

(c) Restricted stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or in
the restricted stock award agreement. If a grantee’s employment (or other
service relationship) with the Company and its subsidiaries terminates for any
reason, the Company shall have the right to repurchase restricted stock that has
not vested at the time of termination at its original purchase price, from the
grantee or the grantee’s legal representative.

 

(d) The Committee at the time of grant shall specify the date or dates and/or
the attainment of pre-established performance goals, objectives and other
conditions on which the non-transferability of the restricted stock and the
Company’s right of repurchase or forfeiture shall lapse. Subject to the power of
the Committee to accelerate vesting upon a Change of Control, the vesting period
for restricted stock shall be at least three years, except that in the case of
restricted stock that becomes transferable and no longer subject to risk of
forfeiture upon the attainment of pre-established goals, objectives and other
conditions, the vesting period shall be at least one year. Subsequent to such
date or dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be restricted stock and shall be deemed “vested.” Except
as may otherwise be provided by the Committee either in the restricted stock
award agreement or, subject to Section 19 below, in writing after the restricted
stock award agreement is issued, a grantee’s rights in any shares of restricted
stock that have not vested shall automatically terminate upon the grantee’s
termination of employment (or other service relationship) with the Company and
its subsidiaries and such shares shall be subject to the Company’s right of
repurchase as provided in Section 11A(c) above.

--------------------------------------------------------------------------------

(e) The restricted stock award agreement may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the restricted
stock.

 

(f) Any reference to “option” or “optionee” in sections 3, 12, 13, 14, 15, 16,
17, 18 and 19 shall be deemed to include references to “restricted stock” and
“restricted stock holder” respectively, and such sections shall be interpreted
to apply equally to restricted stock awards.

 

12. RECAPITALIZATIONS, REORGANIZATIONS AND THE LIKE.

 

(a) In the event that the outstanding shares of the Common Stock of the Company
are changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.

 

(b) In addition, unless otherwise determined by the Committee in its sole
discretion, in the case of any Change of Control of the Company, the
purchaser(s) of the Company’s assets or stock may, in his, her or its
discretion, deliver to the optionee the same kind of consideration that is
delivered to the stockholders of the Company as a result of such sale,
conveyance or Change of Control, or the Committee may cancel all outstanding
options in exchange for consideration in cash or in kind, which consideration in
both cases shall be equal in value to the value of those shares of stock or
other securities the optionee would have received had the option been exercised
(to the extent then exercisable) and no disposition of the shares acquired upon
such exercise been made prior to such Change of Control, less the option price
therefor. Upon receipt of consideration by the optionee, his or her option shall
immediately terminate and be of no further force and effect. The value of the
stock or other securities the optionee would have received if the option had
been exercised shall be determined in good faith by the Committee, and in the
case of shares of the Common Stock of the Company, in accordance with the
provisions of Section 7 hereof. The Committee shall also have the power and
right to accelerate the exercisability of any options, notwithstanding any
limitations in this Plan or in the Agreement upon such Change of Control. Upon
such acceleration, any options or portion thereof originally designated as
incentive stock options that no longer qualify as incentive stock options under
Section 422 of the Code as a result of such acceleration shall be redesignated
as non-qualified stock options.

 

(c) Upon dissolution or liquidation of the Company, all options granted under
this Plan shall terminate, but each optionee (if at such time in the employ of
or otherwise associated with the Company or any of its subsidiaries) shall have
the right, immediately prior to such dissolution or liquidation, to exercise his
or her option to the extent then exercisable.

 

(d) No fraction of a share shall be purchasable or deliverable upon the exercise
of any option, but in the event any adjustment hereunder of the number of shares
covered by the option shall cause such number to include a fraction of a share,
such fraction shall be adjusted to the nearest smaller whole number of shares.

 

13. NO SPECIAL EMPLOYMENT RIGHTS.

 

Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
or her employment by the Company (or any subsidiary thereof) or interfere in any
way with the right of the Company (or any subsidiary thereof), subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
option holder from the rate in existence at the time of the grant of an option.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of employment shall be determined by the
Committee at the time.

 

14. WITHHOLDING.

 

The Company’s obligation to deliver shares upon the exercise of any option
granted under the Plan and any payments or transfers under Section 12 hereof
shall be subject to the option holder’s satisfaction of all applicable Federal,
state and local income, excise, employment and any other tax withholding
requirements.

--------------------------------------------------------------------------------

15. RESTRICTIONS ON ISSUE OF SHARES.

 

(a) Notwithstanding the provisions of Section 8, the Company may delay the
issuance of shares covered by the exercise of an option and the delivery of a
certificate for such shares until one of the following conditions shall be
satisfied:

 

(1) The shares with respect to which such option has been exercised are at the
time of the issue of such shares effectively registered or qualified under
applicable Federal and state securities acts now in force or as hereafter
amended; or

 

(2) Counsel for the Company shall have given an opinion, which opinion shall not
be unreasonably conditioned or withheld, that such shares are exempt from
registration and qualification under applicable Federal and state securities
acts now in force or as hereafter amended.

 

(b) It is intended that all exercises of options shall be effective, and the
Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.

 

16. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.

 

Unless the shares to be issued upon exercise of an option granted under the Plan
have been effectively registered under the Securities Act of 1933, as now in
force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued. In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
and controlling persons from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.

 

17. MODIFICATION OF OUTSTANDING OPTIONS.

 

The Committee may authorize the amendment of any outstanding option with the
consent of the optionee when and subject to such conditions as are deemed to be
in the best interests of the Company and in accordance with the purposes of this
Plan.

 

18. APPROVAL OF STOCKHOLDERS.

 

The Plan shall be subject to approval by the vote of stockholders holding at
least a majority of the voting stock of the Company present, or represented, and
entitled to vote at a duly held stockholders’ meeting, or by written consent of
the stockholders as provided for under applicable state law, within twelve (12)
months after the adoption of the Plan by the Board of Directors and shall take
effect as of the date of adoption by the Board of Directors upon such approval.
The Committee may grant options under the Plan prior to such approval, but any
such option shall become effective as of the date of grant only upon such
approval and, accordingly, no such option may be exercisable prior to such
approval.

 

19. TERMINATION AND AMENDMENT.

 

Unless sooner terminated as herein provided, the Plan shall terminate ten (10)
years from the date upon which the Plan was duly adopted by the Board of
Directors of the Company. The Board of Directors may at any time terminate the
Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 19, the Board of
Directors may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 18, increase the maximum number of
shares for which options may be granted, change the designation of the class of
persons eligible to receive options under the Plan, exercise its discretion to
reduce the exercise price of outstanding options or effect repricing through
cancellation and re-grants except to the extent permitted by Section 12, or make
any other change in the Plan which requires stockholder approval under
applicable law or regulations.

--------------------------------------------------------------------------------

20. RESERVATION OF STOCK.

 

The Company shall at all times during the term of the Plan reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.

 

21. LIMITATION OF RIGHTS IN THE OPTION SHARES.

 

An optionee shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised with respect thereto and, in addition, a certificate
shall have been issued theretofore and delivered to the optionee.

 

22. NOTICES.

 

Any communication or notice required or permitted to be given under the Plan
shall be in writing, and mailed by registered or certified mail or delivered by
hand, if to the Company, to its principal place of business, attention:
President, and, if to an optionee, to the address as appearing on the records of
the Company.