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Exhibit 10.9  


 
 

DISPLAYTECH, INC.    
    
    1988 INCENTIVE STOCK OPTION PLAN    
    


        1.    Purpose of Plan.    The purpose of this 1988 Incentive Stock
Option Plan ("Plan") is to secure and retain key employees responsible for the success of Displaytech, Inc. ("Company"), to motivate such persons to exert their best efforts on behalf of the
Company and to encourage stock ownership and to provide such persons with proprietary interests in, and a greater concern for, the welfare of, and an incentive to continue service with, the Company.
Options issued pursuant to this Plan will constitute incentive stock options within the meaning of 422A of the Internal Revenue Code of 1954 (Code), as amended ("Incentive Stock Options") or other
options ("Nonstatutory Stock Options"). Incentive Stock Options and Nonstatutory Stock Options may both be granted hereunder and any option granted which for any reason does not qualify as an
Incentive Stock Option shall be a Nonstatutory Stock Option. 


        2.    Stock Subject to the Plan.    The number of shares of the
Company's no par value common stock (Common Stock) which may be optioned under the Plan is 40,000 shares. Such shares may consist, in whole or in part, of unissued shares or treasury shares. The
maximum number of shares issuable pursuant to the Plan, including shares subject to outstanding options, shall be subject to adjustment as provided in Section 6 of the Plan. No option shall be
granted under the Plan after January 1, 1998. The aggregate fair market value of the shares subject to options granted to any Optionee which become exercisable in a particular calendar year
shall not exceed $100,000. For purposes of this Plan, the fair market value of Common Stock subject to an option shall be equal to the mean between the bid and asked prices reported in the
over-the-counter market at the close of business on the date the option is granted. If no market exists, the Compensation Committee described in Section 3 shall
determine the fair market value for purposes of this Plan. If any outstanding option under the Plan for any reason expires or is terminated, the shares of Common Stock allocable to the unexercised
portion of such option may again be optioned under the Plan subject to the limitations, terms and conditions of the Plan. The Board of Directors, and the proper officers of the Company
shall from time to time take appropriate action required for delivery of Common Stock, in accordance with the options and any exercises thereof. 


        3.    Administration.    The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company, hereinafter referred to as the "Committee". The Committee shall consist of at least three members of the Board of Directors of the
Company chosen by the Board who, as of the date of any action by the Committee, are not then, and have not been during the preceding 12 months, employees of the Company. If the Committee thus
established shall consist of fewer than three members at the times of any action by the Committee, then the directors shall select enough other shareholders to serve on the Committee to have three
members and to meet any requirements of Section 422A of the Code and regulations adopted thereunder and regulations adopted under Section 16(b) of the Securities Exchange Act of 1934, as
amended, provided that if at the time of granting any option the securities of the Company are not registered under such Act, then the action of the Board of Directors of the Company may be deemed to
be the action of the Committee. The decision of a majority of those present at any meeting of the Committee where a quorum consisting of a majority Committee is present shall constitute the decision
of the Committee. The Committee is authorized and empowered to administer the Plan and, consistent with the terms of the Plan, to (a) select the employees to whom option or stock appreciation
rights are to be granted and to fix the number of shares and other terms and conditions of the options to be granted; (b) determine the date upon which options shall be granted and the terms
and conditions of the granted options in a manner consistent with the Plan, which terms need not be identical as between options or employees; (c) interpret the Plan and the options granted
under the Plan; (d) adopt, amend and rescind rules and 


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regulations
for the administration of the Plan; and (e) direct the Company to execute option agreements pursuant to the Plan. All such actions of the Committee shall be binding upon all
participants in the Plan. 


        4.    Eligibility.    The employees of the Company who shall be
eligible to receive grants of options rights under the Plan shall be those key employees, including officers or directors of the Company, who are from time to time responsible for the management,
growth and protection of the business of the Company and who shall have been selected by the Committee. Officers of the Company who are also directors shall be eligible to participate in the Plan if
they are also employees. The employees to receive options under the Plan shall be selected from time to time by the Committee, in its sole discretion, and the Committee shall determine, in its sole
discretion, the number of shares to be selected. Subject to the exception under Section 5(b)~ no employee may be granted an option if such employee, at the time the option is granted, owns
shares of Common Stock possessing more than 10% of the total combined voting power of all classes of stock in the Company. For purposes of calculating such stock ownership, the attribution rules of
stock ownership set forth in Section 425(d) of the Code as amended by the Tax Act shall apply. Accordingly, an Optionee, with respect to whom such 10% limitation is being determined, shall be
considered as owning Common Stock owned directly or indirectly by or for the optionee's brothers and sisters (whether by the whole or half-blood), spouse, ancestors and lineal descendants;
and any Common Stock owned directly or indirectly by or for a corporation, partnership, estate or trust, shall be considered as being owned proportionately by or for its shareholders, partners or
beneficiaries. 


        5.    Terms and Conditions of Options.    All options granted under
this Plan shall be subject to the terms and conditions of this Plan, including the following: 



        (a)    Option Price.    Subject to the provisions of
Section 5(b), the option price per share shall be determined by the Committee but shall not be less than l00% of the fair market value of such shares at the time the option is granted. 


        (b)    More than 10% Shareholder.    If an employee owns more than 10%
of the fair market value of Common Stock as determined under Section 4, at the time an option is granted under the Plan, the Committee may issue an option to such person at 110% of the fair
market value of Common Stock determined by using the mean between the bid and asked prices in the over-the-counter market at the close of the market on the date such option was
granted or if there is no public trading market, 110% of the fair market value of the Common Stock as determined by the Committee. Any option granted to an employee who own more than 10% of Common
Stock shall not be exercisable after the expiration of five years from the date such option is granted. 


        (c)    Limitations on Grant of Options.    Subject to the limitations
under Section 5(b) of this Plan, no Incentive Option shall be granted which may be exercised more than 10 years after the date it was granted. When used herein, the term "Incentive Stock
Option" shall be as defined in Section 422A of the Code as amended by the Tax Act. 


        (d)    Limitations on Exercise of Option.    No optionee granted an
option under the Plan may exercise such option unless at all times during the period beginning on the date of the granting of the option and ending on the day three months before the date of such
exercise such optionee was employed by the Company or a corporation or subsidiary thereof issuing or assuming the option in a transaction set forth under Section 6 of this Plan. 



        (e)    Payment for Shares.    Payment in full, in cash, shall be made
for all shares pursuant to the exercise of an option, provided that the Committee may permit payment to be made with shares of the Company's Common Stock owned by optionee to be valued at the fair
market value at the date of exercise. All options shall be exercised for 100 shares, or a multiple thereof, or for the full number of shares for which the option is the exercisable. No optionee shall
have the right to 



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dividends
or other rights of a stockholder with respect to share subject to an option until the optionee has given written notice of exercise of the optionee's option and paid in full for such shares. 


        (f)    Manner of Exercise.    Any option granted pursuant to this Plan
may be exercised at such time or times as set forth in the option, by the delivery of written notice to any officer of the Company, other than the optionee, together with payment in full, in cash, for
the number of shares to be purchased pursuant to such exercise. Such notice (i) shall state the election to exercise the option, (ii) shall state the number of shares in respect of which
the option is being exercised, (iii) shall state the optionee's address, (iv) shall state the optionee's social security number, (v) shall contain such representations and
agreements concerning optionee's investment intent with respect to such shares of Common Stock as shall be satisfactory to the Company's counsel, (vi) shall state that the certificate
evidencing the shares may be stamped with a restrictive legend and the shares evidenced by such certificate will constitute "restricted securities" as defined in Rule 144 promulgated under the
Securities Act of 1933 and (vii) shall be signed by optionee. 


        (g)    Limitation on Transfer of Shares.    All shares of Common Stock
acquired by an optionee upon exercise of a Stock option granted under the Plan shall be deemed to be "restricted securities" as defined in Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Act") and the certificate evidencing such shares shall contain a legend as follows: 




"The
securities represented by this certificate may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act of 1933 (the
"Act") or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the Company." 





        (h)    Other Representation or Warranties.    As a further condition
to exercise of any Incentive Stock Option granted under the Plan, the Company may require each optionee to make any representation and warranty to the Company as may be required by any applicable law
or regulation. 


        (i)    Holding Period of Option.    No shares of Common Stock acquired
upon exercise of an Incentive Stock Option granted under this Plan shall be sold or otherwise disposed of, within the meaning of Section 425(c) of the Code, at any time within two years from
the date of the grant of an option under this Plan or within one year of the issuance by the Company of such shares of Common Stock to such optionee pursuant to this Plan. However, an optionee who has
acquired shares of Common Stock upon exercise of an Incentive Stock Option granted under this plan, who transfers such shares to a trustee, receiver, or other similar fiduciary in any proceeding under
Title 11 of the United States Bankruptcy Law or any other similar insolvency proceeding at a time when such optionee is insolvent shall not have been deemed to have made a transfer or disposition for
purposes of this subsection, nor shall one who acquires the shares from the Company with another person in joint tenancy be deemed to have made a transfer or disposition. 



        (j)    Death of Optionee.    If an optionee dies, any option
previously granted to the optionee shall be exercisable by the personal representative or administrator of the deceased optionee's estate, or by any trustee, heir, legatee or beneficiary who shall
have acquired the option directly from the optionee by will or by the laws of descent and distribution at any time within one year after his death, but not more than ten years (five years if
Section 5(b) is applicable) after the date of granting of the option, provided the deceased optionee was entitled to exercise such option at the time of his death. 



        (k)    Retirement.    If an optionee's employment with the Company
terminates by reason of retirement, any option previously granted to him shall be exercisable as determined in the sole discretion of the Committee only within three months after the date of such
termination, but not 



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more
than ten years (five years if Section 5(b) is applicable) after the date of granting of the option, and then only to the extent to which it was exercisable at the time of such termination
by retirement; provided, however, that if the optionee dies within three months after termination by retirement, any unexercised incentive stock option, to the extent to which it was exercisable at
the time of his death, shall thereafter be exercisable for one year after the date of his death, but not more than ten years after the date of granting of the option. 


        (l)    Disability.    If an optionee becomes disabled within the
meaning of Section 105(d) (4) of the Code, and at the time of such disability the optionee is entitled to exercise such option, the optionee shall have the right to exercise such option
within one year after such disability provided that the optionee exercises within ten years after the date of grant thereof (or five years if Section 5(b) is applicable), and then only to the
extent to which it was exercisable at the time of such disability. 


        (m)    Optionee's Termination.    If an optionee's employment by the
Company is terminated for any reason other than death, retirement or disability, any option previously granted to the optionee which was exercisable at the time of termination shall terminate three
months after the date upon which the optionee's employment terminates or at such earlier time as provided in the terms of the optionee's option. 



        (n)    Leave of Absence.    For the purposes of this Plan (i) a
leave of absence, duly authorized in writing by the Company for military service or sickness, or for any other purpose approved by the Company, if the period of such leave does not exceed
90 days and (ii) a leave of absence in excess of 90 days, duly authorized in writing by the Company provided the optioneee's right to re-employment is guaranteed
either by statute or by contract, shall not be deemed a termination of employment. 


        (o)    Nontransferability of Options.    No option granted under this
Plan will be transferable by the optionee otherwise than by will or the laws of descent and distribution. During the lifetime of the optionee, the option will be exercisable only by optionee. 




        6.    Recapitalization or Merger.    If the outstanding shares of
Common Stock which are eligible for the granting of options hereunder, or subject to options theretofore granted | shall at any time be changed or exchanged by declaration of a stock
dividend, split-up, subdivision or combination of shares, recapitalization, merger, consolidation or other corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan or subject to any
options previously granted, and the option prices, shall be appropriately and equitably adjusted, so as to maintain the proportionate number of shares without changing the aggregate option price. In
the event of a dissolution or liquidation of the Company, or a merger, consolidation, sale of all or substantially all of its assets, or other corporate reorganization in which the Company is not the
surviving corporation and the holder of Common Stock receives securities of another corporation, any outstanding options hereunder shall terminate as of the effective date of such event; provided that
immediately prior to such event each optionee shall have the right to exercise any unexpired option in whole or in part. The Company shall afford each person who holds an option under this Plan with
at least 30 days advance written notice of such event. However, no option shall be exercised more than ten years (five years if Section 5(b) is applicable) after the granting thereof.
The existence of this Plan, or of any options hereunder, shall not in any way prevent any transaction described in this section, nor shall anything contained in this Plan prevent the substitution of a
new option by a surviving corporation. 


        7.    Use of Proceeds.    Proceeds from the sale of stock pursuant to
options granted under this Plan shall constitute general funds of the Company. 


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        8.    Reservation of Issuance of Shares.    The Company shall at all
times during the duration of this Plan reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of all options granted pursuant to this Plan,
and shall pay all original issue and transfer taxes with respect to the issuance of shares pursuant to the exercise of such options, and shall pay all of the fees and expenses necessarily incurred in
connection with the exercise of such options and the issuance of such shares. 


        9.    Amendments.    The Board of Directors may amend, alter, or
discontinue this Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any optionee under any options previously granted, without the optionee's consent,
or which, without the approval of the stockholders, would: 



          (i)  except
as is provided in Section 6 of this Plan, increase the total number of shares reserved for the purposes of the plan; 


         (ii)  decrease
the option price to less than 100% of the fair market value (or 110% if section 5(b) is applicable) on the date of the granting of the option; 


        (iii)  change
the persons (or class of persons) eligible to receive options under the Plan; or 



        (iv)  increase
the aggregate fair market value of options which may be granted under this Plan to any person and which become exercisable in any year to an amount in excess
of $100,000. 




        10.    Indemnification.    In addition to such other rights of
indemnification as they may have as directors, the members of the Committee shall be indemnified by the Company against reasonable expenses, including attorney's fees actually incurred in connection
with the defenses of any action, suit or proceeding, or in connection with any appeal therefrom, to which they or any of them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of judgment in any
action, suit or proceeding, except in relation to matters as to which is shall be adjudged in such action, suit or proceeding, that such member of the Board of Directors is liable for gross
negligence, fraud or willful misconduct in the performance of the director's duties so long as within 60 days after institution of any such action, suit or proceeding, the director shall in
writing offer the Company the opportunity, at its own expense, to handle and defend such action, suit or proceeding. 


        11.    Approval of Shareholders.    The Plan shall take effect upon
approval by the holders of a majority of the shares of the Company's Common Stock present at a meeting attended by a quorum of shareholders, which approval must occur within twelve months after the
date the Plan is adopted by the Board of Directors. 


        12.    Miscellaneous.    Unless the context requires otherwise, words
denoting the singular may be construed as denoting the plural, and words of the plural may be construed as denoting the singular, and words of one gender may be construed as denoting such other gender
as is appropriate. Paragraph 


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headings
are not to be considered part of this Plan and are included solely for convenience and are not intended to be full or accurate descriptions of the contents thereof. 


Adopted
Effective October 11, 1988. 



	 	 	DISPLAYTECH, INC.

a Colorado Corporation
	

SEAL	
 	

By	
 	

 
	 	 	 	 	
 L. Stuart III, President
	

Attest:	
 	

 	
 	

 
	

Secretary	
 	

 	
 	

 




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AMENDMENT NO. 1
  TO THE
  DISPLAYTECH, INC.
  1988 INCENTIVE STOCK OPTION PLAN    
    



        By action taken by the Board of Directors of Displaytech, Inc. (the "Company"), at a meeting held on December 31, 1994 and reconvened on January 3,
1995, and upon approval of the shareholders of the Company at a special meeting held on February 14, 1995, the Displaytech, Inc. 1988 Incentive Stock Option Plan was amended to increase
the number of shares which may be optioned under the Plan from 40,000 shares to 740,000 shares. 







 
 

AMENDMENT NO. 2
  TO THE
  DISPLAYTECH, INC.
  1988 INCENTIVE STOCK OPTION PLAN    
    


        The following amendment to the Displaytech, Inc. 1988 Incentive Stock Option Plan (the "Plan") was adopted by the Board of Directors of
Displaytech, Inc. by unanimous written consent dated December 31, 1997: 



The
fourth sentence of Section 2 of the Plan which reads, "No option shall be granted under the Plan after January 1, 1998" shall be amended to read, "No option shall be granted under the Plan after
October 11, 1998". 












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DISPLAYTECH, INC. 1988 INCENTIVE STOCK OPTION PLAN


AMENDMENT NO. 1 TO THE DISPLAYTECH, INC. 1988 INCENTIVE STOCK OPTION PLAN

AMENDMENT NO. 2 TO THE DISPLAYTECH, INC. 1988 INCENTIVE STOCK OPTION PLAN