esses81007ex4_1.htm


    
      
        

      

    

     

    EXHIBIT
      4.1

    


    EARTH
      SEARCH SCIENCES, INC.

    2007
      STOCK COMPENSATION PLAN

    


    SECTION
      1. PURPOSE OF THE PLAN. The purpose of the 2007 Stock Compensation Plan
      (“Plan”) is to maintain the ability of Earth Search Sciences, Inc., a Nevada
      corporation (the “Company”) and its subsidiaries to attract and retain highly
      qualified and experienced directors, employees and consultants and to give
      such
      directors, employees and consultants a continued proprietary interest in the
      success of the Company and its subsidiaries. In addition the Plan is intended
      to
      encourage ownership of common stock, $.001 par value (“Common Stock”), of the
      Company by the directors, employees and consultants of the Company and its
      Affiliates (as defined below) and to provide increased incentive for such
      persons to render services and to exert maximum effort for the success of the
      Company's business. The Plan provides eligible employees and consultants the
      opportunity to participate in the enhancement of shareholder value by the grants
      of warrants, options, restricted common, unrestricted common and other awards
      under this Plan and to have their bonuses and/or consulting fees payable in
      warrants, restricted common, unrestricted common and other awards, or any
      combination thereof. In addition, the Company expects that the Plan will further
      strengthen the identification of the directors, employees and consultants with
      the stockholders. Certain options and warrants to be granted under this Plan
      are
      intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422
      of the Internal Revenue Code of 1986, as amended (“Code”), while other options
      and warrants granted under this Plan will be nonqualified options or warrants
      which are not intended to qualify as ISOs (“Nonqualified Options”), either or
      both as provided in the agreements evidencing the options or warrants described
      in Section 5. Employees, consultants and directors who participate or become
      eligible to participate in this Plan from time to time are referred to
      collectively herein as “Participants”. As used in this Plan, the term
“Affiliates” means any “parent corporation” of the Company and any “subsidiary
      corporation” of the Company within the meaning of Code Sections 424(e) and (f),
      respectively.

    


    SECTION
      2. ADMINISTRATION OF THE PLAN.

    


    (a)
      Committee. The Plan shall be administered by the Board of Directors of the
      Company (the “Board”) or a committee thereof designated by the Board with the
      specific authority to administer the Plan. When acting in such capacity the
      Board is herein referred to as the “Committee”. If the Company is governed by
      Rule 16b-3 promulgated by the Securities and Exchange Commission (“Commission”)
      pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”), no
      director shall serve as a member of the Committee unless he or she is a
“disinterested person” within the meaning of such Rule 16b-3.

    


    (b)
      Committee Action. The Committee shall hold its meetings at such times and places
      as it may determine. A majority of its members shall constitute a quorum, and
      all determinations of the Committee shall be made by not less than a majority
      of
      its members. Any decision or determination reduced to writing and signed by
      a
      majority of the members shall be fully as effective as if it had been made
      by a
      majority vote of its members at a meeting duly called and held. The Committee
      may designate the Secretary of the Company or other Company employees to assist the Committee in the administration
      of the Plan, and
      may grant authority to such persons to execute award agreements or other
      documents on behalf of the Committee and the Company. Any duly constituted
      committee of the Board satisfying the qualifications of this Section 2 may
      be
      appointed as the Committee.

     

     

    
      
        
        

      

      
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    (c)
      Committee Expenses. All expenses and liabilities incurred by the Committee
      in
      the administration of the Plan shall he borne by the Company. The Committee
      may
      employ attorneys, consultants, accountants or other persons.

    


    SECTION
      3. STOCK RESERVED FOR THE PLAN. Subject to adjustment as provided in
      Section 5(d)(xiii) hereof the aggregate number of shares that may be optioned,
      subject to conversion or issued under the Plan is 15,000,000 shares of Common
      Stock, warrants, options, or any combination thereof. The shares subject to
      the
      Plan shall consist of authorized but unissued shares of Common Stock and such
      number of shares shall be and is hereby reserved for sale for such purpose.
      Any
      of such shares which may remain unsold and which are not subject to issuance
      upon exercise of outstanding options or warrants at the termination of the
      Plan
      shall cease to be reserved for the purpose of the Plan, but until termination
      of
      the Plan or the termination of the last of the options or warrants granted
      under
      the Plan, whichever last occurs, the Company shall at all times reserve a
      sufficient number of shares to meet the requirements of the Plan. Should any
      option or warrant expire or be cancelled prior to its exercise in full, the
      shares theretofore subject to such option or warrant may again be made subject
      to an option or warrant under the Plan.

    


    SECTION
      4. ELIGIBILITY. The Participants shall include directors, employees,
      including officers, of the Company and its divisions and subsidiaries, and
      consultants and attorneys who provide bona fide services to the Company.
      Participants are eligible to be granted warrants, options, restricted common,
      unrestricted common and other awards under this Plan and to have their bonuses
      and/or consulting fees payable in warrants, restricted common, unrestricted
      common and other awards. A Participant who has been granted an option or warrant
      hereunder may be granted an additional option or warrant, options or warrants,
      if the Committee shall so determine.

    


    SECTION
      5. GRANT OF OPTIONS OR WARRANTS.

    


    (a)
      Committee Discretion. The Committee shall have sole and absolute discretionary
      authority (i) to determine, authorize, and designate those persons pursuant
      to
      this Plan who are to receive warrants, options, restricted common, or
      unrestricted common under the Plan, (ii) to determine the number of shares
      of
      Common Stock to be covered by such grant or such options or warrants and the
      terms thereof, (iii) to determine the type of Common Stock granted: restricted
      common, unrestricted common or a combination of restricted and unrestricted
      common , and (iv) to determine the type of option or warrant granted: ISO,
      Nonqualified Option or a combination of ISO and Nonqualified Options. The
      Committee shall thereupon grant options or warrants in accordance with such
      determinations as evidenced by a written option or warrant agreement. Subject
      to
      the express provisions of the Plan, the Committee shall have discretionary
      authority to prescribe, amend and rescind rules and regulations relating to
      the
      Plan, to interpret the Plan, to prescribe and amend the terms of the option
      or
      warrant agreements (which need not be identical) and to make all other
      determinations deemed necessary or advisable for the administration of the
      Plan.

    


    (b)
      Stockholder Approval. All ISOs granted under this Plan are subject to, and
      may
      not be exercised before, the approval of this Plan by the stockholders prior
      to
      the first anniversary date of the Board meeting held to approve the Plan, by
      the
      affirmative vote of the holders of a majority of the outstanding shares of
      the
      Company present, or represented by proxy, and entitled to vote thereat, or
      by
      written consent in accordance with the laws of the State of Nevada, provided
      that if such approval by the stockholders of the Company is not forthcoming,
      all
      options or warrants and stock awards previously granted under this Plan other
      than ISOs shall be valid in all respects.

     

    
      
        
        

      

      
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    (c)
      Limitation on Incentive Stock Options and Warrants. The aggregate fair market
      value (determined in accordance with Section 5(d)(ii) of this Plan at the time
      the option or warrant is granted) of the Common Stock with respect to which
      ISOs
      may be exercisable for the first time by any Participant during any calendar
      year under all such plans of the Company and its Affiliates shall not exceed
      $1,000,000.

    


    (d)
      Terms
      and Conditions. Each option or warrant granted under the Plan shall be evidenced
      by an agreement, in a form approved by the Committee, which shall be subject
      to
      the following express terms and conditions and to such other terms and
      conditions as the Committee may deem appropriate:

    


    (i)           Option
      or Warrant Period. The Committee shall promptly notify the Participant of the
      option or warrant grant and a written agreement shall promptly be executed
      and
      delivered by and on behalf of the Company and the Participant, provided that
      the
      option or warrant grant shall expire if a written agreement is not signed by
      said Participant (or his agent or attorney) and returned to the Company within
      60 days from date of receipt by the Participant of such agreement. The date
      of
      grant shall be the date the option or warrant is actually granted by the
      Committee, even though the written agreement may be executed and delivered
      by
      the Company and the Participant after that date. Each option or warrant
      agreement shall specify the period for which the option or warrant thereunder
      is
      granted (which in no event shall exceed ten years from the date of grant) and
      shall provide that the option or warrant shall expire at the end of such period.
      If the original term of an option or warrant is less than ten years from the
      date of grant, the option or warrant may be amended prior to its expiration,
      with the approval of the Committee and the Participant, to extend the term
      so
      that the term as amended is not more than ten years from the date of grant.
      However, in the case of an ISO granted to an individual who, at the time of
      grant, owns stock possessing more than 10 percent of the total combined voting
      power of all classes of stock of the Company or its Affiliate (“Ten Percent
      Stockholder”), such period shall not exceed five years from the date of
      grant.

    


    (ii)           Option
      or Warrant Price. The purchase price of each share of Common Stock subject
      to
      each option or warrant granted pursuant to the Plan shall be determined by
      the
      Committee at the time the option or warrant is granted and, in the case of
      ISOs,
      shall not be less than 100% of the fair market value of a share of Common Stock
      on the date the option or warrant is granted, as determined by the Committee.
      In
      the case of an ISO granted to a Ten Percent Stockholder, the option or warrant
      price shall not be less than 110% of the fair market value of a share of Common
      Stock on the date the option or warrant is granted. The purchase price of each
      share of Common Stock subject to a Nonqualified Option or Warrant under this
      Plan shall be determined by the Committee prior to granting the option or
      warrant. The Committee shall set the purchase price for each share subject
      to a
      Nonqualified Option or Warrant at either the fair market value of each share
      on
      the date the option or warrant is granted, or at such other price as the
      Committee in its sole discretion shall determine.

    


    At
      the
      time a determination of the fair market value of a share of Common Stock is
      required to be made hereunder, the determination of its fair market value shall
      be made by the Committee in such manner as it deems appropriate.

    


    (iii)           Exercise
      Period. The Committee may provide in the option or warrant agreement that an
      option or warrant may be exercised in whole, immediately, or is to be
      exercisable

     

     

    
      
        
        

      

      
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    in
      increments. In addition, the Committee may provide that the exercise of all
      or
      part of an option or warrant is subject to specified performance by the
      Participant.

    


    (iv)           Procedure
      for Exercise. Options or warrants shall be exercised in the manner specified
      in
      the option or warrant agreement. The notice of exercise shall specify the
      address to which the certificates for such shares are to be mailed. A
      Participant shall be deemed to be a stockholder with respect to shares covered
      by an option or warrant on the date specified in the option or warrant
      agreement. As promptly as practicable, the Company shall deliver to the
      Participant or other holder of the warrant, certificates for the number of
      shares with respect to which such option or warrant has been so exercised,
      issued in the holder's name or such other name as holder directs; provided,
      however, that such delivery shall be deemed effected for all purposes when
      a
      stock transfer agent of the Company shall have deposited such certificates
      with
      a carrier for overnight delivery, addressed to the holder at the address
      specified pursuant to this Section 6(d).

    


    (v)           Termination
      of Employment. If an executive officer to whom an option or warrant is granted
      ceases to be employed by the Company for any reason other than death or
      disability, any option or warrant which is exercisable on the date of such
      termination of employment may be exercised during a period beginning on such
      date and ending at the time set forth in the option or warrant agreement;
      provided, however, that if a Participant's employment is terminated because
      of
      the Participant's theft or embezzlement from the Company, disclosure of trade
      secrets of the Company or the commission of a willful, felonious act while
      in
      the employment of the Company (such reasons shall hereinafter be collectively
      referred to as “for cause”), then any option or warrant or unexercised portion
      thereof granted to said Participant shall expire upon such termination of
      employment. Notwithstanding the foregoing, no ISO may be exercised later than
      three months after an employee's termination of employment for any reason other
      than death or disability.

    


    (vi)           Disability
      or Death of Participant. In the event of the determination of disability or
      death of a Participant under the Plan while he or she is employed by the
      Company, the options or warrants previously granted to him may be exercised
      (to
      the extent he or she would have been entitled to do so at the date of the
      determination of disability or death) at any time and from time to time, within
      a period beginning on the date of such determination of disability or death
      and
      ending at the time set forth in the option or warrant agreement, by the former
      employee, the guardian of his estate, the executor or administrator of his
      estate or by the person or persons to whom his rights under the option or
      warrant shall pass by will or the laws of descent and distribution, but in
      no
      event may the option or warrant be exercised after its expiration under the
      terms of the option or warrant agreement. Notwithstanding the foregoing, no
      ISO
      may be exercised later than one year after the determination of disability
      or
      death. A Participant shall be deemed to be disabled if, in the opinion of a
      physician selected by the Committee, he or she is incapable of performing
      services for the Company of the kind he or she was performing at the time the
      disability occurred by reason of any medically determinable physical or mental
      impairment which can be expected to result in death or to be of long, continued
      and indefinite duration. The date of determination of disability for purposes
      hereof shall be the date of such determination by such physician.

    


    (vii)           Assignability.
      An option or warrant shall not be assignable or otherwise transferable, in
      whole
      or in part, by a Participant except that an option or warrant may
      be

     

     

    
      
        
        

      

      
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    transferable
      to a member of the Participant's immediate family or to a trust in which the
      Participant and members of his immediate family are the only
      beneficiaries.

    


    (viii)           Incentive
      Stock Options. Each option or warrant agreement may contain such terms and
      provisions as the Committee may determine to be necessary or desirable in order
      to qualify an option or warrant designated as an incentive stock
      option.

    


    (ix)           Restricted
      Stock Awards. Awards of restricted stock under this Plan shall be subject to
      all
      the applicable provisions of this Plan, including the following terms and
      conditions, and to such other terms and conditions not inconsistent therewith,
      as the Committee shall determine:

    


    (A)
      Awards of restricted stock may be in addition to or in lieu of option or warrant
      grants. Awards may be conditioned on the attainment of particular performance
      goals based on criteria established by the Committee at the time of each award
      of restricted stock. During a period set forth in the agreement (the
“Restriction Period”) as may be established by the Committee, the recipient
      shall not be permitted to sell, transfer, pledge, or otherwise encumber the
      shares of restricted stock; except that such shares may be used, if the
      agreement permits, to pay the option or warrant price pursuant to any option
      or
      warrant granted under this Plan, provided an equal number of shares delivered
      to
      the Participant shall carry the same restrictions as the shares so used. Shares
      of restricted stock shall become free of all restrictions if during the
      Restriction Period, (i) the recipient dies, (ii) the recipient's directorship,
      employment, or consultancy terminates by reason of permanent disability, as
      determined by the Committee, (iii) the recipient retires after attaining three
      years of continuous service with the Company and/or a division or subsidiary,
      or
      (iv) if provided in the agreement, there is a “change in control” of the Company
      (as defined in such agreement). The Committee may require medical evidence
      of
      permanent disability, including medical examinations by physicians selected
      by
      it. Unless and to the extent otherwise provided in the agreement, shares of
      restricted stock shall be forfeited and revert to the Company upon the
      recipient's termination of directorship, employment or consultancy during the
      Restriction Period for any reason other than death, permanent disability, as
      determined by the Committee, retirement after attaining five years of continuous
      service with the Company and/or a subsidiary or division, or, to the extent
      provided in the agreement, a “change in control” of the Company (as defined in
      such agreement), except to the extent the Committee, in its sole discretion,
      finds that such forfeiture might not be in the best interests of the Company
      and, therefore, waives all or part of the application of this provision to
      the
      restricted stock held by such recipient. Certificates for restricted stock
      shall
      be registered in the name of the recipient but shall be imprinted with the
      appropriate legend and returned to the Company by the recipient, together with
      a
      stock power endorsed in blank by the recipient. The recipient shall be entitled
      to vote shares of restricted stock and shall be entitled to all dividends paid
      thereon, except that dividends paid in Common Stock or other property shall
      also
      be subject to the same restrictions.

    


    (B)
      Restricted Stock shall become free of the foregoing restrictions upon expiration
      of the applicable Restriction Period and the Company shall then deliver to
      the
      recipient Common Stock certificates evidencing such stock. Restricted stock
      and
      any Common Stock received upon the expiration of the

     

    
      
        
        

      

      
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    restriction
      period shall be subject to such other transfer restrictions and/or legend
      requirements as are specified in the applicable agreement.

    


    (x)           Bonuses
      and Past Salaries and Fees Payable in Unrestricted Stock.

    


    (A)
      In
      lieu of cash bonuses otherwise payable under the Company's or applicable
      division's or subsidiary's compensation practices to employees and consultants
      eligible to participate in this Plan, the Committee, in its sole discretion,
      may
      determine that such bonuses shall be payable in unrestricted Common Stock or
      partly in unrestricted Common Stock and partly in cash. Such bonuses shall
      be in
      consideration of services previously performed and as an incentive toward future
      services and shall consist of shares of unrestricted Common Stock subject to
      such terms as the Committee may determine in its sole discretion. The number
      of
      shares of unrestricted Common Stock payable in lieu of a bonus otherwise payable
      shall be determined by dividing such bonus amount by the fair market value
      of
      one share of Common Stock on the date the bonus is payable, with fair market
      value determined as of such date in accordance with Section
      5(d)(ii).

    


    (B)
      In
      lieu of salaries and fees otherwise payable by the Company to employees,
      attorneys and consultants eligible to participate in this Plan that were
      incurred for services rendered during, prior or after the year of 2007, the
      Committee, in its sole discretion, may determine that such unpaid salaries
      and
      fees shall be payable in unrestricted Common Stock or partly in unrestricted
      Common Stock and partly in cash. Such awards shall be in consideration of
      services previously performed and as an incentive toward future services and
      shall consist of shares of unrestricted Common Stock subject to such terms
      as
      the Committee may determine in its sole discretion. The number of shares of
      unrestricted Common Stock payable in lieu of salaries and fees otherwise payable
      shall be determined by dividing each calendar month's of unpaid salary or fee
      amount by the average trading value of the Common Stock for the calendar month
      during which the subject services were provided.

    


    (xi)           No
      Rights as Stockholder. No Participant shall have any rights as a stockholder
      with respect to shares covered by an option or warrant until the option or
      warrant is exercised as provided in clause (d) above.

    


    (xii)           Extraordinary
      Corporate Transactions. The existence of outstanding options or warrants shall
      not affect in any way the right or power of the Company or its stockholders
      to
      make or authorize any or all adjustments, recapitalizations, reorganizations,
      exchanges, or other changes in the Company's capital structure or its business,
      or any merger or consolidation of the Company, or any issuance of Common Stock
      or other securities or subscription rights thereto, or any issuance of bonds,
      debentures, preferred or prior preference stock ahead of or affecting the Common
      Stock or the rights thereof, or the dissolution or liquidation of the Company,
      or any sale or transfer of all or any part of its assets or business, or any
      other corporate act or proceeding, whether of a similar character or otherwise.
      If the Company recapitalizes or otherwise changes its capital structure, or
      merges, consolidates, sells all of its assets or dissolves (each of the
      foregoing a “Fundamental Change”), then thereafter upon any exercise of an
      option or warrant theretofore granted the Participant shall be entitled to
      purchase under such option or warrant, in lieu of the number of shares of Common
      Stock as to which option or warrant shall then be exercisable, the number and
      class of shares of stock and securities to which

     

     

    
      
        
        

      

      
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    the
      Participant would have been entitled pursuant to the terms of the Fundamental
      Change if, immediately prior to such Fundamental Change, the Participant had
      been the holder of record of the number of shares of Common Stock as to which
      such option or warrant is then exercisable. If (i) the Company shall not be
      the
      surviving entity in any merger or consolidation (or survives only as a
      subsidiary of another entity), (ii) the Company sells all or substantially
      all
      of its assets to any other person or entity (other than a wholly owned
      subsidiary), (iii) any person or entity (including a “group” as contemplated by
      Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control
      of
      (including, without limitation, power to vote) more than 50% of the outstanding
      shares of Common Stock, (iv) the Company is to be dissolved and liquidated,
      or
      (v) as a result of or in connection with a contested election of directors,
      the
      persons who were directors of the Company before such election shall cease
      to
      constitute a majority of the Board (each such event in clauses (i) through
      (v)
      above is referred to herein as a “Corporate Change”), the Committee, in its sole
      discretion, may accelerate the time at which all or a portion of a Participant's
      option or warrants may be exercised for a limited period of time before or
      after
      a specified date. (xiii) Changes in Company's Capital Structure. If the
      outstanding shares of Common Stock or other securities of the Company, or both,
      for which the option or warrant is then exercisable at any time be changed
      or
      exchanged by declaration of a stock dividend, stock split, combination of
      shares, recapitalization, or reorganization, the number and kind of shares
      of
      Common Stock or other securities which are subject to the Plan or subject to
      any
      options or warrants theretofore granted, and the option or warrant prices,
      shall
      be adjusted only as provided in the option or warrant.

    


    (xiv)           Acceleration
      of Options and Warrants. Except as hereinbefore expressly provided, (i) the
      issuance by the Company of shares of stock or any class of securities
      convertible into shares of stock of any class, for cash, property, labor or
      services, upon direct sale, upon the exercise of rights or warrants to subscribe
      therefor, or upon conversion of shares or obligations of the Company convertible
      into such shares or other securities, (ii) the payment of a dividend in property
      other than Common Stock or (iii) the occurrence of any similar transaction,
      and
      in any case whether or not for fair value, shall not affect, and no adjustment
      by reason thereof shall be made with respect to, the number of shares of Common
      Stock subject to options or warrants theretofore granted or the purchase price
      per share, unless the Committee shall determine, in its sole discretion, that
      an
      adjustment is necessary to provide equitable treatment to Participant.
      Notwithstanding anything to the contrary contained in this Plan, the Committee
      may, in its sole discretion, accelerate the time at which any option or warrant
      may be exercised, including, but not limited to, upon the occurrence of the
      events specified in this Section 5, and is authorized at any time (with the
      consent of the Participant) to purchase options or warrants pursuant to Section
      6.

    


    SECTION
      6. RELINQUISHMENT OF OPTIONS OR WARRANTS.

    


    (a)
      The
      Committee, in granting options or warrants hereunder, shall have discretion
      to
      determine whether or not options or warrants shall include a right of
      relinquishment as hereinafter provided by this Section 6. The Committee shall
      also have discretion to determine whether an option or warrant agreement
      evidencing an option or warrant initially granted by the Committee without
      a
      right of relinquishment shall be amended or supplemented to include such a
      right
      of relinquishment. Neither the Committee nor the Company shall be under any
      obligation or incur any liability to any person by reason of the Committee's
      refusal to grant or include a right of relinquishment in any option or warrant
      granted hereunder or in any option or warrant agreement

     

     

    
      
        
        

      

      
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    evidencing
      the same. Subject to the Committee's determination in any case that the grant
      by
      it of a right of relinquishment is consistent with Section 1 hereof, any option
      or warrant granted under this Plan, and the option or warrant agreement
      evidencing such option or warrant, may provide:

    


    (i)           That
      the Participant, or his or her heirs or other legal representatives to the
      extent entitled to exercise the option or warrant under the terms thereof,
      in
      lieu of purchasing the entire number of shares subject to purchase thereunder,
      shall have the right to relinquish all or any part of the then unexercised
      portion of the option or warrant (to the extent then exercisable) for a number
      of shares of Common Stock to be determined in accordance with the following
      provisions of this clause (i):

    


    (A)
      The
      written notice of exercise of such right of relinquishment shall state the
      percentage of the total number of shares of Common Stock issuable pursuant
      to
      such relinquishment (as defined below) that the Participant elects to
      receive;

    


    (B)
      The
      number of shares of Common Stock, if any, issuable pursuant to such
      relinquishment shall be the number of such shares, rounded to the next greater
      number of full shares, as shall be equal to the quotient obtained by dividing
      (i) the Appreciated Value by (ii) the purchase price for each of such shares
      specified in such option or warrant;

    


    (C)
      For
      the purpose of this clause (C), “Appreciated Value” means the excess, if any, of
      (x) the total current market value of the shares of Common Stock covered by
      the
      option or warrant or the portion thereof to be relinquished over (y) the total
      purchase price for such shares specified in such option or warrant;

    


    (ii)           That
      such right of relinquishment may be exercised only upon receipt by the Company
      of a written notice of such relinquishment which shall be dated the date of
      election to make such relinquishment; and that, for the purposes of this Plan,
      such date of election shall be deemed to be the date when such notice is sent
      by
      registered or certified mail, or when receipt is acknowledged by the Company,
      if
      mailed by other than registered or certified mail or if delivered by hand or
      by
      any telegraphic communications equipment of the sender or otherwise delivered;
      provided, that, in the event the method just described for determining such
      date
      of election shall not be or remain consistent with the provisions of Section
      16(b) of the Exchange Act or the rules and regulations adopted by the Commission
      thereunder, as presently existing or as may be hereafter amended, which
      regulations exempt from the operation of Section 16(b) of the Exchange Act
      in
      whole or in part any such relinquishment transaction, then such date of election
      shall be determined by such other method consistent with Section 16(b) of the
      Exchange Act or the rules and regulations thereunder as the Committee shall
      in
      its discretion select and apply;

    


    (iii)           That
      the “current market value” of a share of Common Stock on a particular date shall
      be deemed to be its fair market value on that date as determined in accordance
      with Paragraph 5(d)(ii); and

    


    (iv)           That
      the option or warrant, or any portion thereof, may be relinquished only to
      the
      extent that (A) it is exercisable on the date written notice of relinquishment
      is received by the Company, and (B) the holder of such option or warrant pays,
      or makes provision satisfactory to the Company for the payment of, any taxes
      which the Company is obligated to collect with respect to such
      relinquishment.

     

    
      
        
        

      

      
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    (b)
      The
      Committee shall have sole discretion to consent to or disapprove, and neither
      the Committee nor the Company shall be under any liability by reason of the
      Committee's disapproval of, any election by a holder of options or warrants
      to
      relinquish such options or warrants in whole or in part as provided in Paragraph
      6(a), except that no such consent to or approval of a relinquishment shall
      be
      required under the following circumstances. Each Participant who is subject
      to
      the short-swing profits recapture provisions of Section 16(b) of the Exchange
      Act (“Covered Participant”) shall not be entitled to receive shares of Common
      Stock when options or warrants are relinquished during any window period
      commencing on the third business day following the Company's release of a
      quarterly or annual summary statement of sales and earnings and ending on the
      twelfth business day following such release (“Window Period”). A Covered
      Participant shall be entitled to receive shares of Common Stock upon the
      relinquishment of options or warrants outside a Window Period.

    


    (c)
      The
      Committee, in granting options or warrants hereunder, shall have discretion
      to
      determine the terms upon which such options or warrants shall be relinquishable,
      subject to the applicable provisions of this Plan, and including such provisions
      as are deemed advisable to permit the exemption from the operation from Section
      16(b) of the Exchange Act of any such relinquishment transaction, and options
      or
      warrants outstanding, and option agreements evidencing such options, may be
      amended, if necessary, to permit such exemption. If options or warrants are
      relinquished, such option or warrant shall be deemed to have been exercised
      to
      the extent of the number of shares of Common Stock covered by the option or
      warrant or part thereof which is relinquished, and no further options or
      warrants may be granted covering such shares of Common Stock.

    


    (d)
      Any
      options or warrants or any right to relinquish the same to the Company as
      contemplated by this Paragraph 6 shall be assignable by the Participant,
      provided the transaction complies with any applicable securities
      laws.

    


    (e)
      Except as provided in Section 6(f) below, no right of relinquishment may be
      exercised within the first six months after the initial award of any option
      or
      warrant containing, or the amendment or supplementation of any existing option
      or warrant agreement adding, the right of relinquishment.

    


    (f)
      No
      right of relinquishment may be exercised after the initial award of any option
      or warrant containing, or the amendment or supplementation of any existing
      option or warrant agreement adding the right of relinquishment, unless such
      right of relinquishment is effective upon the Participant's death, disability
      or
      termination of his relationship with the Company for a reason other than “for
      cause.”

    


    SECTION
      7. AMENDMENTS OR TERMINATION. The Board may amend, alter or discontinue
      the Plan, but no amendment or alteration shall be made which would impair the
      rights of any Participant, without his consent, under any option or warrant
      theretofore granted.

    


    SECTION
      8. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and
      exercise of options or warrants thereunder, and the obligation of the Company
      to
      sell and deliver shares under such options or warrants, shall be subject to
      all
      applicable federal and state laws, rules and regulations and to such approvals
      by any governmental or regulatory agency as may be required. The Company shall
      not be required to issue or deliver any certificates for shares of Common Stock
      prior to the completion of any registration or qualification of such shares
      under any federal or state law or issuance of any ruling or regulation of any
      government

     

     

    
      
        
        

      

      
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    body
      which the Company shall, in its sole discretion, determine to be necessary
      or
      advisable. Any adjustments provided for in subparagraphs 5(d)(xii), (xiii)
      and
      (xiv) shall be subject to any shareholder action required by the corporate
      law
      of the state of incorporation of the Company.

    


    SECTION
      9. PURCHASE FOR INVESTMENT. Unless the options, warrants, and shares of
      Common Stock covered by this Plan have been registered under the Securities
      Act
      of 1933, as amended, or the Company has determined that such registration is
      unnecessary, each person acquiring or exercising an option or warrant under
      this
      Plan may be required by the Company to give a representation in writing that
      he
      or she is acquiring such option or warrant or such shares for his own account
      for investment and not with a view to, or for sale in connection with, the
      distribution of any part thereof.

    


    SECTION
      10. TAXES.

    


    (a)
      The
      Company may make such provisions as it may deem appropriate for the withholding
      of any taxes which it determines is required in connection with any options
      or
      warrants granted under this Plan.

    


    (b)
      Notwithstanding the terms of Paragraph 10(a), any Participant may pay all or
      any
      portion of the taxes required to be withheld by the Company or paid by him
      or
      her in connection with the exercise of a nonqualified option or warrant by
      electing to have the Company withhold shares of Common Stock, or by delivering
      previously owned shares of Common Stock, having a fair market value, determined
      in accordance with Paragraph 5(d)(ii), equal to the amount required to be
      withheld or paid. A Participant must make the foregoing election on or before
      the date that the amount of tax to be withheld is determined (“Tax Date”). All
      such elections are irrevocable and subject to disapproval by the Committee.
      Elections by Covered Participants are subject to the following additional
      restrictions: (i) such election may not be made within six months of the grant
      of an option or warrant, provided that this limitation shall not apply in the
      event of death or disability, and (ii) such election must be made either six
      months or more prior to the Tax Date or in a Window Period. Where the Tax Date
      in respect of an option or warrant is deferred until six months after exercise
      and the Covered Participant elects share withholding, the full amount of shares
      of Common Stock will be issued or transferred to him upon exercise of the option
      or warrant, but he or she shall be unconditionally obligated to tender back
      to
      the Company the number of shares necessary to discharge the Company's
      withholding obligation or his estimated tax obligation on the Tax
      Date.

    


    SECTION
      11. REPLACEMENT OF OPTIONS AND WARRANTS. The Committee from time to
      time may permit a Participant under the Plan to surrender for cancellation
      any
      unexercised outstanding option or warrant and receive from the Company in
      exchange an option or warrant for such number of shares of Common Stock as
      may
      be designated by the Committee. The Committee may, with the consent of the
      holder of any outstanding option or warrant, amend such option or warrant,
      including reducing the exercise price of any option or warrant to not less
      than
      the fair market value of the Common Stock at the time of the amendment and
      extending the exercise term of any warrant or option.

    


    SECTION
      12. NO RIGHT TO COMPANY EMPLOYMENT. Nothing in this Plan or as a result
      of any option or warrant granted pursuant to this Plan shall confer on any
      individual any right to continue in the employ of the Company or interfere
      in
      any way with the right of the Company to terminate an individual's employment
      at
      any time. The option or warrant agreements may contain such provisions as the
      Committee may approve with reference to the effect of approved leaves of
      absence.

    
 

    
      
        
        

      

      
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    SECTION
      13. LIABILITY OF COMPANY. The Company and any Affiliate which is in
      existence or hereafter comes into existence shall not be liable to a Participant
      or other persons as to:

    


    (a)
      The
      Non-Issuance of Shares. The non-issuance or sale of shares as to which the
      Company has been unable to obtain from any regulatory body having jurisdiction
      the authority deemed by the Company's counsel to be necessary to the lawful
      issuance and sale of any shares hereunder; and

    


    (b)
      Tax
      Consequences. Any tax consequence expected, but not realized, by any Participant
      or other person due to the exercise of any option or warrant granted
      hereunder.

    


    SECTION
      14. EFFECTIVENESS AND EXPIRATION OF PLAN. The Plan shall be effective
      on the date the Board adopts the Plan. The Plan shall expire ten years after
      the
      date the Board approves the Plan and thereafter no option or warrant shall
      be
      granted pursuant to the Plan.

    


    SECTION
      15. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption by the Board nor
      the submission of the Plan to the stockholders of the Company for approval
      shall
      be construed as creating any limitations on the power of the Board to adopt
      such
      other incentive arrangements as it may deem desirable, including without
      limitation, the granting of restricted stock or stock options or warrants
      otherwise than under the Plan, and such arrangements may be either generally
      applicable or applicable only in specific cases.

    


    SECTION
      16. GOVERNING LAW. This Plan and any agreements hereunder shall be
      interpreted and construed in accordance with the laws of the state of
      incorporation of the Company and applicable federal law.

    


    SECTION
      17. CASHLESS EXERCISE. The Committee also may allow cashless exercises
      as permitted under Federal Reserve Board's Regulation T, subject to applicable
      securities law restrictions, or by any other means which the Committee
      determines to be consistent with the Plan's purpose and applicable law. The
      proceeds from such a payment shall be added to the general funds of the Company
      and shall be used for general corporate purposes.

     

    11