CAPE COASTAL TRADING CORPORATION
2005 EQUITY INCENTIVE PLAN

SECTION 1.
DEFINITIONS
 
As used herein, the following terms shall have the meanings indicated below:
 

(a)  
“Administrator” shall mean the Board, a Committee, or one or more officers
designated by the Board or Committee, as the case may be.

 

(b)  
“Affiliate” shall mean a Parent or Subsidiary of the Company.

 

(c)  
“Award” shall mean any grant of an Option or Restricted Stock Award.

 

(d)  
“Board” shall mean the Board of Directors of the Company.

 

(e)  
“Committee” shall mean a Committee of two or more directors who shall be
appointed by and serve at the pleasure of the Board. If the Company’s securities
are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, then, to the extent necessary for compliance with Rule 16b-3, or any
successor provision, each of the members of the Committee shall be a
“non-employee director.” Solely for purposes of this Section 1(a), “non-employee
director” shall have the same meaning as set forth in Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and Regula-tions
under the Securities Exchange Act of 1934, as amended. Further, to the extent
necessary for compliance with the limitations set forth in Internal Revenue Code
Section 162(m), each of the members of the Committee shall be an “outside
director” within the meaning of Code Section 162(m) and the regulations issued
thereunder.

 

(f)  
“Common Stock” shall mean common stock, par value $.001 per share, of the
Company (subject to adjustment as described in Section 12) reserved for Options
and Restricted Stock Awards pursuant to this Plan.

 

(g)  
The “Company” shall mean Cape Coastal Trading Corporation, a Delaware
corporation.

 

(h)  
“Fair Market Value” as of any date shall mean (i) if such stock is listed on the
Nasdaq National Market, Nasdaq SmallCap Market, or an established stock
exchange, the price of such stock at the close of the regular trading session of
such market or exchange on such date, as reported by The Wall Street Journal or
a comparable reporting service, or, if no sale of such stock shall have occurred
on such date, on the next preceding day on which there was a sale of stock; (ii)
if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap
Market, or an established stock exchange, the average of the closing “bid” and
“asked” prices quoted by the OTC Bulletin Board, the National Quotation Bureau,
or any comparable reporting service on such date or, if there are no quoted
“bid” and “asked” prices on such date, on the next preceding date for which
there are such quotes; or (iii) if such stock is not publicly traded as of such
date, the per share value as determined by the Board, or the Committee, in its
sole discretion by applying principles of valuation with respect to the
Company’s Common Stock.

 
 
 

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(i)  
The “Internal Revenue Code” or “Code” shall mean the Internal Revenue Code of
1986, as amended from time to time.

 

(j)  
“Option” means an incentive stock option or nonqualified stock option granted
pursuant to the Plan.

 

(k)  
“Parent” shall mean any corporation which owns, directly or indirectly in an
unbroken chain, fifty percent (50%) or more of the total voting power of the
Company’s outstanding stock.

 

(l)  
The “Participant” means (i) an employee of the Company or any Affiliate to whom
an incentive stock option has been granted pursuant to Section 9, (ii) a
consultant or advisor to or director, employee or officer of the Company or any
Affiliate to whom a nonqualified stock option has been granted pursuant to
Section 10, or (iii) a consultant or advisor to, or director, employee or
officer of the Company or any Affiliate to whom a Restricted Stock Award has
been granted pursuant to Section 11.

 

(m)  
The “Plan” means the 2005 Equity Incentive Plan, as amended hereafter from time
to time, including the form of Option and Award Agreements as they may be
modified by the Administrator from time to time.

 

(n)  
“Restricted Stock Award” shall mean any grant of restricted shares of Common
Stock of the Company pursuant to Section 11 hereof.

 

(o)  
A “Subsidiary” shall mean any corporation of which fifty percent (50%) or more
of the total voting power of outstanding stock is owned, directly or indirectly
in an unbroken chain, by the Company.

 
SECTION 2.
PURPOSE
 
The Plan has been established to promote the interests of the Company, its
Affiliates and its stockholders by (i) attracting and retaining exceptional
employees, consultants and directors; (ii) motivating such employees,
consultants and directors by means of performance-related incentives to achieve
long-range performance goals; and (iii) enabling such employees, consultants and
directors to participate in the long-term growth and financial success of the
Company.
 
It is the intention of the Company to carry out the Plan through the granting of
Options which will qualify as “incentive stock options” under the provisions of
Section 422 of the Internal Revenue Code, or any successor provision, pursuant
to Section 9 of this Plan, through the granting of Options that are nonqualified
stock options pursuant to Section 10 of this Plan, and through the granting of
Restricted Stock Awards pursuant to Section 11 of this Plan. With respect to
incentive stock option options, adoption of this Plan shall be and is expressly
subject to the condition of approval by the shareholders of the Company within
twelve (12) months before or after the adoption of the Plan by the Board of
Directors. Any incentive stock options granted after adoption of the Plan by the
Board of Directors shall be treated as nonqualified stock options if shareholder
approval is not obtained within such 12-month period.
 
 
 

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SECTION 3.
EFFECTIVE DATE OF PLAN
 
The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.
 
SECTION 4.
ADMINISTRATION
 
The Plan shall be administered by the Board, by a Committee which may be
appointed by the Board from time to time or by one or more officers designated
by the Board or Committee (collectively referred to as the “Administrator”).
Except as otherwise provided herein, the Administrator shall have all of the
powers vested in it under the provisions of the Plan, including but not limited
to exclusive authority (where applicable and within the limitations described in
the Plan) to determine, in its sole discretion, whether an Award shall be
granted; the individuals to whom, and the time or times at which, Awards shall
be granted; the number of shares subject to each such Award; the option price;
and any other terms and conditions of each Award. The Administrator shall have
full power and authority to administer and interpret the Plan, to make and amend
rules, regulations and guidelines for administering the Plan, to prescribe the
form and condi-tions of the respective agreements evidencing each Award (which
may vary from Participant to Participant) and to make all other determinations
necessary or advisable for the administration of the Plan. The Administrator’s
interpretation of the Plan, and all actions taken and determinations made by the
Administrator pursuant to the power vested in it hereunder, shall be conclusive
and binding on all parties concerned.
 
No member of the Board or the Committee shall be liable for any action taken or
determination made in good faith in connection with the administration of the
Plan. In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
 
SECTION 5.
PARTICIPANTS
 
The Administrator shall from time to time, at its discretion and without
approval of the shareholders, designate those employees of the Company or any
Affiliate to whom incentive stock options shall be granted pursuant to Section 9
of the Plan; those employees, officers, directors, consultants and advisors of
the Company or of any Affiliate to whom nonqualified stock options shall be
granted pursuant to Section 10 of the Plan; and those employees, officers,
directors, consultants and advisors of the Company or any Affiliate to whom
Restricted Stock Awards shall be granted pursuant to Section 11 of the Plan;
provided, however, that consultants or advisors shall not be eligible to receive
Awards hereunder unless such consultant or advisor renders bona fide services to
the Company or Affiliate and such services are not in connection with the offer
or sale of securities in a capital raising transaction and do not directly or
indirectly promote or maintain a market for the Company’s securities. The
Administrator may grant additional Awards under this Plan to some or all
Participants then holding Awards or may grant Awards solely or partially to new
Participants. In designating Participants, the Administrator shall also
determine the number of shares of Common Stock subject to each Award. The
Administrator from time to time designate individuals as being ineligible to
participate in the Plan.
 
 
 

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SECTION 6.
STOCK
 
The Common Stock to be issued under this Plan shall consist of authorized but
unissued shares of Common Stock. Two million five hundred thousand (2,500,000)
shares of Common Stock shall be reserved and available for Awards under the
Plan; provided, however, that the total number of shares of Common Stock
reserved for Awards under this Plan shall be subject to adjustment as provided
in Section 12 of the Plan; and provided, further, that all shares of Common
Stock reserved and available under the Plan shall constitute the maximum
aggregate number of shares of Common Stock that may be issued through incentive
stock options. In the event that (i) any outstanding Option or Restricted Stock
Award under the Plan expires for any reason, (ii) any portion of an outstanding
Option is terminated prior to exercise, or (iii) any portion of a Restricted
Stock Award expires is terminated prior to the lapsing of any risks of
forfeiture on such Award, the shares of Stock allocable to the unexercised
portion of such Option or to the forfeited portion of such Restricted Stock
Award shall continue to be reserved for Options and Restricted Stock Awards
under the Plan and may be optioned or awarded hereunder.
 
SECTION 7.
DURATION OF PLAN
 
Incentive stock options may be granted pursuant to the Plan from time to time
during a period of ten (10) years from the effective date as defined in Section
3. Nonqualified stock options and Restricted Stock Awards may be granted
pursuant to the Plan from time to time after the effective date of the Plan and
until the Plan is discontinued or terminated by the Board. Any incentive stock
option granted during such ten-year period and any nonqualified stock option or
Restricted Stock Award granted prior to the termination of the Plan by the Board
shall remain in full force and effect until the expiration of the option or
award as specified in the written stock option or restricted stock award
agreement and shall remain subject to the terms and conditions of this Plan.
 
SECTION 8.
PAYMENT
 
Participants may pay for shares of Common Stock upon exercise of Options granted
pursuant to this Plan with (i) cash, (ii) personal check, (iii) certified check,
(iv) mature, previously-owned shares of the Common Stock valued at such Common
Stock’s then Fair Market Value, (v) broker-assisted exercise, or (vi) such other
form of payment as may be authorized by the Administrator; provided, however,
that Optionee shall not be permitted to pay the option price in the form of a
broker-assisted exercise or in the form of mature, previously-acquired shares of
Common Stock until after the effective date of an initial public offering of the
Common Stock; and provided, further, that Optionee shall not be permitted to pay
the option price in the form of a broker-assisted exercise or in the form of
mature, previously-acquired shares of Common Stock if payment in such form will
cause the Company to recognize a compensation expense under generally accepted
accounting principles. The Administrator may, in its sole discretion, limit the
forms of payment available to the Participant and may exercise such discretion
any time prior to the termination of the option granted to the Participant or
upon any exercise of the option by the Participant.
 
 
 

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For purposes of this Section 8, “mature, previously-acquired shares of Common
Stock” shall include shares of Common Stock that were acquired by the
Participant through an open-market purchase, or have been owned by the
Participant for a minimum of six months at the time of exercise or for such
other period of time as may be required by generally accepted accounting
principles. “Broker-assisted exercise” means a written notice pursuant to which
the Participant, upon exercise of a stock option, irrevocably instructs a broker
or dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of such option and/or any
related withholding tax obligations and to remit such sums to the Company, and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
 
With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.
 
 SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
 
Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written incentive stock option agreement (the “Option
Agreement”). The Option Agreement shall be in such form as may be approved from
time to time by the Administrator and may vary from Participant to Participant;
provided, however, that each Participant and each Option Agreement shall comply
with and be subject to the following terms and con-ditions:
 
(a) Number of Shares and Option Price. The Option Agreement shall state the
total number of shares covered by the incentive stock option. Except as
permitted by Code Section 424(d), or any successor provision, the option price
per share shall not be less than one hundred percent (100%) of the per share
Fair Market Value of the Common Stock on the date the Administrator grants the
option; provided, however, that if a Participant owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of its Parent or any Subsidiary, the option price per share of an
incentive stock option granted to such Participant shall not be less than one
hundred ten percent (110%) of the per share Fair Market Value of the Common
Stock on the date of the grant of the option. The Administrator shall have full
authority and discretion in establishing the option price and shall be fully
protected in so doing.
 
(b) Term and Exercisability of Incentive Stock Option. The term during which any
incentive stock option granted under the Plan may be exercised shall be
established in each case by the Administrator. Except as permitted by Code
Section 424(d), or any successor provision, in no event shall any incentive
stock option be exercisable during a term of more than ten (10) years after the
date on which it is granted; provided, however, that if a Participant owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its Parent or any Subsidiary, the
incentive stock option granted to such Participant shall be exercisable during a
term of not more than five (5) years after the date on which it is granted.
 
 
 

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The Option Agreement shall state when the incentive stock option becomes
exercisable and shall also state the maximum term during which the option may be
exercised. In the event an incentive stock option is exercisable immediately,
the manner of exercise of the option in the event it is not exercised in full
immediately shall be specified in the Option Agreement. The Administrator may
acceler-ate the exercisability of any incentive stock option granted hereunder
which is not immediately exercisable as of the date of grant.
 
(c) Nontransferability. No incentive stock option shall be transferable, in
whole or in part, by the Participant other than by will or by the laws of
descent and distribution. During the Participant’s lifetime, the incentive stock
option may be exercised only by the Participant. If the Participant shall
attempt any transfer of any incentive stock option granted under the Plan during
the Participant’s lifetime, such transfer shall be void and the incentive stock
option, to the extent not fully exercised, shall terminate.
 
(d) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares
covered by an Option until the date of the issuance of a stock certificate
evidencing such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is actually issued (except as otherwise provided in Section 12 of
the Plan).
 
(e) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s exercise of an incentive stock option or a
“disqualifying disposition” of shares acquired through the exercise of an
incentive stock option as defined in Code Section 421(b). In the event the
Participant is required under the Option Agreement to pay the Company, or make
arrangements satisfactory to the Company respecting payment of, such withholding
and employment-related taxes, the Administrator may, in its discretion and
pursuant to such rules as it may adopt, permit the Participant to satisfy such
obligation, in whole or in part, by electing to have the Company withhold shares
of Option Stock otherwise issuable to the Participant as a result of the
exercise of the incentive stock option having a Fair Market Value equal to the
minimum required tax withholding, based on the minimum statutory withholding
rates for federal and state tax purposes, including payroll taxes, that are
applicable to the supplemental income resulting from such exercise. In no event
may the Company or any Affiliate withhold shares having a Fair Market Value in
excess of such statutory minimum required tax withholding. The Participant’s
election to have shares withheld for this purpose shall be made on or before the
date the incentive stock option is exercised or, if later, the date that the
amount of tax to be withheld is determined under applicable tax law. Such
election shall be approved by the Board and otherwise comply with such rules as
the Board may adopt to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the
Securities Exchange Act of 1934, if applicable.
 
 
 

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(f) Other Provisions. The Option Agreement authorized under this Section 9 shall
contain such other provisions as the Administrator shall deem advisable. Any
such Option Agreement shall contain such limitations and restrictions upon the
exercise of the Option as shall be necessary to ensure that such Option will be
considered an “incentive stock option” as defined in Section 422 of the Internal
Revenue Code or to conform to any change therein.
 
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
 
Each nonqualified stock option granted pursuant to this Section 10 shall be
evidenced by a written nonqualified stock option agreement (the “Option
Agreement”). The Option Agreement shall be in such form as may be approved from
time to time by the Administrator and may vary from Participant to Participant;
provided, however, that each Participant and each Option Agreement shall comply
with and be subject to the following terms and conditions:
 
(a) Number of Shares and Option Price. The Option Agreement shall state the
total number of shares covered by the nonqualified stock option. Unless
otherwise determined by the Administrator, the option price per share shall be
one hundred percent (100%) of the per share Fair Market Value of the Common
Stock on the date the Administrator grants the option.
 
(b) Term and Exercisability of Nonqualified Stock Option. The term during which
any nonqualified stock option granted under the Plan may be exercised shall be
established in each case by the Administrator. The Option Agreement shall state
when the nonqualified stock option becomes exercisable and shall also state the
maximum term during which the option may be exercised. In the event a
nonqualified stock option is exercisable immediately, the manner of exercise of
the option in the event it is not exercised in full immediately shall be
specified in the Option Agreement. The Administrator may acceler-ate the
exercisability of any nonqualified stock option granted hereunder which is not
immediately exercisable as of the date of grant.
 
(c) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from future wages of the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s exercise of a nonqualified stock option. In
the event the Participant is required under the Option Agreement to pay the
Company or Affiliate, or make arrangements satisfactory to the Company or
Affiliate respecting payment of, such withholding and employment-related taxes,
the Administrator may, in its discretion and pursuant to such rules as it may
adopt, permit the Participant to satisfy such obligation, in whole or in part,
by delivering shares of the Common Stock or by electing to have the Company or
Affiliate withhold shares of Common Stock otherwise issuable to the Participant
as a result of the exercise of the nonqualified stock option having a Fair
Market Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from
such exercise. In no event may the Company or any Affiliate withhold shares
having a Fair Market Value in excess of such statutory minimum required tax
withholding. The Participant’s election to have shares withheld for this purpose
shall be made on or before the date the nonqualified stock option is exercised
or, if later, the date that the amount of tax to be withheld is determined under
applicable tax law. Such election shall be approved by the Administrator and
otherwise comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of 1934, if
applicable.
 
 
 

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(d) Transferability. The Administrator may, in its sole discretion, permit the
Participant to transfer any or all nonqualified stock options to any member of
the Participant’s “immediate family” as such term is defined in Rule 16a-1(e)
promulgated under the Securities Exchange Act of 1934, or any successor
provision, or to one or more trusts whose beneficiaries are members of such
Participant’s “immediate family” or partnerships in which such family members
are the only partners; provided, however, that the Participant cannot receive
any consideration for the transfer and such transferred nonqualified stock
option shall continue to be subject to the same terms and conditions as were
applicable to such nonqualified stock option immediately prior to its transfer.
 
(e) No Rights as Shareholder. A Participant (or the Participant’s successor or
successors) shall have no rights as a shareholder with respect to any shares
covered by a nonqualified stock option until the date of the issuance of a stock
certificate evidencing such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued (except as otherwise provided in
Section 11 of the Plan).
 
(f) Other Provisions. The Option Agreement authorized under this Section 10
shall contain such other provisions as the Administrator shall deem advisable.
 
SECTION 11.
RESTRICTED STOCK AWARDS
 
Each Restricted Stock Award granted pursuant to this Section 11 shall be
evidenced by a written restricted stock agreement (the “Restricted Stock
Agreement”). The Restricted Stock Agreement shall be in such form as may be
approved from time to time by the Administrator and may vary from Participant to
Participant; provided, however, that each Participant and each Restricted Stock
Agreement shall comply with and be subject to the following terms and
conditions:
 
(a) Number of Shares. The Restricted Stock Agreement shall state the total
number of shares of Common Stock covered by the Restricted Stock Award.
 
(b) Risks of Forfeiture. The Restricted Stock Agreement shall set forth the
risks of forfeiture, if any, which shall apply to the shares of Common Stock
covered by the Restricted Stock Award, and shall specify the manner in which
such risks of forfeiture shall lapse. The Administrator may, in its sole
discretion, modify the manner in which such risks of forfeiture shall lapse but
only with respect to those shares of Common Stock which are restricted as of the
effective date of the modification.
 
 
 

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(c) Issuance of Restricted Shares. The Company shall cause to be issued a stock
certificate representing such shares of Common Stock in the Participant’s name,
and shall deliver such certificate to the Participant; provided, however, that
the Company shall place a legend on such certificate describing the risks of
forfeiture and other transfer restrictions set forth in the Participant’s
Restricted Stock Agreement and providing for the cancellation and return of such
certificate if the shares of Common Stock subject to the Restricted Stock Award
are forfeited.
 
(d) Rights as Shareholder. Until the risks of forfeiture have lapsed or the
shares subject to such Restricted Stock Award have been forfeited, the
Participant shall be entitled to vote the shares of Common Stock represented by
such stock certificates and shall receive all dividends attributable to such
shares, but the Participant shall not have any other rights as a shareholder
with respect to such shares.
 
(e) Withholding Taxes. The Company or its Affiliate shall be entitled to
withhold and deduct from future wages of the Participant all legally required
amounts necessary to satisfy any and all withholding and employment-related
taxes attributable to the Participant’s Restricted Stock Award. In the event the
Participant is required under the Restricted Stock Agreement to pay the Company
or its Affiliate, or make arrangements satisfactory to the Company or its
Affiliate respecting payment of, such withholding and employment-related taxes,
the Administrator may, in its discretion and pursuant to such rules as it may
adopt, permit the Participant to satisfy such obligations, in whole or in part,
by delivering shares of Common Stock, including shares of Common Stock received
pursuant to a Restricted Stock Award on which the risks of forfeiture have
lapsed. Such shares shall have a Fair Market Value equal to the minimum required
tax withholding, based on the minimum statutory withholding rates for federal
and state tax purposes, including payroll taxes, that are applicable to the
supplemental income resulting from the lapsing of the risks of forfeiture on
such Restricted Stock. In no event may the Participant deliver shares having a
Fair Market Value in excess of such statutory minimum required tax withholding.
The Participant’s election to deliver shares of Common Stock for this purpose
shall be made on or before the date that the amount of tax to be withheld is
determined under applicable tax law. Such election shall be approved by the
Administrator and otherwise comply with such rules as the Administrator may
adopt to assure compliance with Rule 16b-3, or any successor provision, as then
in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, if applicable.
 
(f) Nontransferability. No Restricted Stock Award shall be transferable, in
whole or in part, by the Participant, other than by will or by the laws of
descent and distribution, prior to the date the risks of forfeiture described in
the Restricted Stock Agreement have lapsed. If the Participant shall attempt any
transfer of any Restricted Stock Award granted under the Plan prior to such
date, such transfer shall be void and the Restricted Stock Award shall
terminate.
 
 
 

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(g) Other Provisions. The Restricted Stock Agreement authorized under this
Section 11 shall contain such other provisions as the Administrator shall deem
advisable.
 

SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE OR LIQUIDATION
 
In the event of an increase or decrease in the number of 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, the Board may, in its sole discretion, adjust the
number of shares of Common Stock reserved under Section 6 hereof, the number of
shares of Common Stock covered by each outstanding Award, and, if applicable,
the price per share thereof to reflect such change. Additional shares which may
become covered by the Award pursuant to such adjustment shall be subject to the
same restrictions as are applicable to the shares with respect to which the
adjustment relates.
 
Unless otherwise provided in the Option or Restricted Stock Agreement, in the
event of an acquisition of the Company through the sale of substantially all of
the Company’s assets and the consequent discontinuance of its business or
through a merger, consolidation, exchange, reorganization, reclassification,
extraordinary dividend, divestiture or liquidation of the Company (collectively
referred to as a “transaction”), the Board may provide for one or more of the
following:
 

(a) the equitable acceleration of the exercisability of any outstanding Options
and the lapsing of the risks of forfeiture on any Restricted Stock Awards;
 
(b) the complete termination of this Plan, the cancellation of outstanding
Options not exercised prior to a date specified by the Board (which date shall
give Participants a reasonable period of time in which to exercise the Options
prior to the effectiveness of such transaction), and the cancellation of any
Restricted Stock Awards for which the risks of forfeiture have not lapsed;
 
(c)  that Participants holding outstanding Options shall receive, with respect
to each share of Common Stock subject to such Options, as of the effective date
of any such transaction, cash in an amount equal to the excess of the Fair
Market Value of such Common Stock on the date immediately preceding the
effective date of such transaction over the option price per share of such
Options; provided that the Board may, in lieu of such cash payment, distribute
to such Participants shares of Common Stock of the Company or shares of stock of
any corporation succeeding the Company by reason of such transaction, such
shares having a value equal to the cash payment herein;
 
(d)  that Participants holding outstanding Restricted Stock Awards shall
receive, with respect to each share of Common Stock subject to such Awards, as
of the effective date of any such transaction, cash in an amount equal to the
Fair Market Value of such Common Stock on the date immediately preceding the
effective date of such transaction; provided that the Board may, in lieu of such
cash payment, distribute to such Participants shares of Common Stock of the
Company or shares of stock of any corporation succeeding the Company by reason
of such transaction, such shares having a value equal to the cash payment
herein;
 
 
 

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(e) the continuance of the Plan with respect to the exercise of Options which
were outstanding as of the date of adoption by the Board of such plan for such
transaction and provide to Participants holding such Options the right to
exercise their respective Options as to an economically equivalent number of
shares of stock of the corporation succeeding the Company by reason of such
transaction; and
 
(f) the continuance of the Plan with respect to Restricted Stock Awards for
which the risks of forfeiture have not lapsed as of the date of adoption by the
Board of such plan for such transaction and provide to Participants holding such
Awards the right to receive an economically equivalent number of shares of stock
of the corporation succeeding the Company by reason of such transaction.
 
The Board may restrict the rights of or the applicability of this Section 12 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code or any other applicable law or regulation.
The grant of an Award pursuant to the Plan shall not limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
 
SECTION 13.
SECURITIES LAW COMPLIANCE AND
RESTRICTIONS ON TRANSFER
 
No shares of Common Stock shall be issued pursuant to the Plan unless and until
there has been compliance, in the opinion of Company’s counsel, with all
applicable legal requirements, including without limitation, those relating to
securities laws and stock exchange listing requirements. As a condition to the
issuance of Common Stock to Participant, the Administrator may require
Participant to (i) represent that the shares of Common Stock are being acquired
for investment and not resale and to make such other representations as the
Administrator shall deem necessary or appropriate to qualify the issuance of the
shares of Common Stock as exempt from the Securities Act of 1933 and any other
applicable securities laws, and (ii) represent that Participant shall not
dispose of the shares of Common Stock in violation of the Securities Act of 1933
or any other applicable securities laws or any company policies then in effect.
 
As a further condition to the grant of any stock option or the issuance of
Common Stock to Participant, Participant agrees to the following:
 
(a) In the event the Company advises Participant that it plans an underwritten
public offering of its Common Stock in compliance with the Securities Act of
1933, as amended, and the underwriter(s) seek to impose restrictions under which
certain shareholders may not sell or contract to sell or grant any option to buy
or otherwise dispose of part or all of their stock purchase rights of the Common
Stock underlying Awards, Participant will not, for a period not to exceed 180
days from the prospectus, sell or contract to sell or grant an option to buy or
otherwise dispose of any Award granted to Participant pursuant to the Plan or
any of the underlying shares of Common Stock without the prior written consent
of the underwriter(s) or its representative(s).
 
 
 

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(b) In the event the Company makes any public offering of its securities and
determines in its sole discretion that it is necessary to reduce the number of
issued but unexercised stock purchase rights so as to comply with any state’s
securities or Blue Sky law limitations with respect thereto, the Board of
Directors of the Company shall have the right (i) to accelerate the
exercisability of any Option and the date on which such Option must be
exercised, provided that the Company gives Participant prior written notice of
such acceleration, and (ii) to cancel any Options or portions thereof which
Participant does not exercise prior to or contemporaneously with such public
offering.
 
(c) In the event of a transaction (as defined in Section 12 of the Plan),
Participant will comply with Rule 145 of the Securities Act of 1933 and any
other restrictions imposed under other applicable legal or accounting principles
if Participant is an “affiliate” (as defined in such applicable legal and
accounting principles) at the time of the transaction, and Participant will
execute any documents necessary to ensure compliance with such rules.
 
The Company reserves the right to place a legend on any stock certificate issued
upon the exercise of an Option or upon the grant of a Restricted Stock Award
pursuant to the Plan to assure compliance with this Section 13.
 
SECTION 14.
AMENDMENT OF THE PLAN
 
The Board may from time to time, insofar as permitted by law, suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 12, shall
impair the terms and conditions of any Award which is outstanding on the date of
such revision or amendment to the material detriment of the Participant without
the consent of the Participant. Notwithstanding the foregoing, no such revision
or amendment shall (i) materially increase the number of shares subject to the
Plan except as provided in Section 12 hereof, (ii) change the desig-nation of
the class of employees eligible to receive Awards, (iii) decrease the price at
which Options may be granted, or (iv) materially increase the benefits accruing
to Participants under the Plan, without the approval of the shareholders of the
Company if such approval is required for compliance with the requirements of any
applicable law or regulation. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause incentive
stock options to fail to meet the requirements of Section 422 of the Internal
Revenue Code.
 

 
 

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SECTION 15.
NO OBLIGATION TO EXERCISE OPTION
 
The granting of an Option shall impose no obligation upon the Participant to
exercise such Option. Further, the granting of any Award hereunder shall not
impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ for any period.