Exhibit 10.1


MFIC CORPORATION
2006 STOCK PLAN


1.                                       Nature and Purposes of the Plan.  The Plan permits the grant of Incentive Stock
Options, Nonstatutory Stock Options, Restricted Stock and Stock Appreciation
Rights.  In addition, the Plan provides
for automatic option grants to Independent Directors.  The purposes of this 2006 Stock Plan
are:  (a) to attract and retain the best
available personnel for positions of substantial responsibility, (b) to provide
additional incentive to Employees and Consultants, and (c) to promote the
success of the Company’s business.


2.                                       Definitions. 
As used herein, the following definitions shall apply:


(a)                                  “Administrator” means the Board or the
Committee of the Board designated by the Board to administer the Plan in
accordance with Section 4 of the Plan.


(b)                                 “Applicable Laws” means the requirements
relating to the administration of stock option plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are granted
under the Plan.


(c)                                  “Award” means, individually or collectively, a
grant under the Plan of Options, SARs or Restricted Stock.


(d)                                 “Award Agreement” means the written agreement
setting forth the terms and provisions applicable to each Award granted under
the Plan.  The Award Agreement is subject
to the terms and conditions of the Plan.


(e)                                  “Cause” means (i) an act of personal dishonesty
taken by the Participant in connection with his or her responsibilities as an
employee and intended to result in substantial personal enrichment of the
Participant, (ii) Participant being convicted of or pleading nolo contendere
to a felony, (iii) a willful act by the Participant that constitutes gross
misconduct and which is injurious to the Company, (iv) following delivery to
the Participant of a written demand for performance from the Company which
describes the basis for the Company’s reasonable belief that the Participant
has not substantially performed his or her duties, continued violations by the
Participant of the Participant’s obligations to the Company that are
demonstrably willful and deliberate on the Participant’s part.


(f)                                    “Change in Control” means the occurrence of any
of the following events:


(i)                                     Any
Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company’s then outstanding voting securities; or


(ii)                                  The
consummation of the sale or disposition by the Company of all or substantially
all the Company’s assets; or









 



 


(iii)                               The
consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation.


(g)                                 “Code” means the U.S. Internal Revenue Code of
1986, as amended.


(h)                                 “Committee” means a committee, which may
consist of one or more persons whom may or may not be Board members, as is
consistent with Applicable Laws, appointed by the Board in accordance with
Section 4 of the Plan.


(i)                                     “Common Stock” means the common stock of the
Company.


(j)                                     “Company” means MFIC Corporation.


(k)                                  “Consultant” means any person, including an
advisor, engaged by the Company or a Subsidiary to render services to such
entity.


(l)                                     “Director” means a member MFIC’s Board of
Directors.


(m)                               “Disability” means total and permanent
disability as defined in Section 22(e)(3) of the Code, provided that in the
case of Awards other than Incentive Stock Options, the Administrator in its
discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.


(n)                                 “Discretionary Options” means Incentive Stock
Options and Nonstatutory Stock Options that are not issued pursuant to the
Independent Director option grant provisions of Section 11.


(o)                                 “Employee” means any person, including Officers
and Directors, employed by the Company or any Subsidiary of the Company.  A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or any
leave for which a return to employment is guaranteed under Applicable Laws, or
(ii) transfers between locations of the Company or between the Company, any
Subsidiary or any successor.  For
purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract.  If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on the 181st day of such leave any Incentive Stock Option held by the Optionee
shall cease to be treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option. 
Neither service as a Director nor payment of a director’s fee by the
Company shall be sufficient to constitute “employment” by the Company.


(p)                                 “Exchange Act” means the Securities Exchange
Act of 1934, as amended.



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(q)                                 “Fair Market Value” means, as of any date, the
value of Common Stock determined as follows:


(i)                                     If
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or The
Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system on the date of determination, as
reported in The
Wall Street Journal or such other source as the Administrator deems
reliable;


(ii)                                  If
the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the date of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or


(iii)                               in
the absence of an established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Administrator.


(r)                                    “Incentive
Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.


(s)                                  “Independent Director” means a Director who is
not an Employee.


(t)                                    “Inside Director” means a Director who is an
Employee.


(u)                                 “Nonstatutory Stock Option” means an Option not
intended to qualify as an Incentive Stock Option.


(v)                                 “Notice of Grant” means a written or electronic
notice evidencing certain terms and conditions of an individual Award.  The Notice of Grant is part of the Award
Agreement.


(w)                               “Officer” means a person who is an officer of
the Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.


(x)                                   “Option” means a stock option granted pursuant
to the Plan.


(y)                                 “Optioned Stock” means the Common Stock subject
to an Option or SAR.


(z)                                   “Parent” means a “parent corporation,” whether
now or hereafter existing, as defined in Section 424(e) of the Code.


(aa)                            “Participant” means the holder of an
outstanding Award granted under the Plan.



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(bb)                          “Plan” means this 2006 Stock Plan, as from time
to time amended and in effect.


(cc)                            “Qualifying Board Retirement” means an
Independent Director’s termination from Board membership, including pursuant to
the Independent Director’s death or Disability, if such termination follows ten
full years of Board service or five full years of Board service and attainment
of age 62 or greater.


(dd)                          “Restricted Stock” means shares of Common Stock
or units/rights to acquire shares of Common Stock granted pursuant to Section 9
of the Plan that are subject to vesting.


(ee)                            “Rule 16b-3” means Rule 16b-3 of the Exchange
Act or any successor to Rule 16b-3, as in effect when discretion is being
exercised with respect to the Plan.


(ff)                                “Section 16(b)” means Section 16(b) of the
Exchange Act.


(gg)                          “Service Provider” means an Employee, Director
or Consultant.


(hh)                          “Share” means a share of the Common Stock, as
adjusted in accordance with Section 14 of the Plan.


(ii)                                  “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 10 is designated as
an SAR.


(jj)                                  “Subsidiary” means a “subsidiary corporation”,
whether now or hereafter existing, as defined in Section 424(f) of the Code and
also include partnerships, limited liability companies and other entities that
are at least 30% owned by the Company.


3.                                       Stock Subject to the Plan.  Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of Shares which may be issued under the
Plan is 4,000,000 Shares, less the number of (i) shares underlying
outstanding grants issued under the Company’s 1988 and 1989 Non-Employee
Director Plan as of the date of stockholder approval of the Plan and (ii)
shares issued and outstanding pursuant to the exercise of grants under the
Company’s 1988 Stock Plan and 1989 Non-Employee Director Plan as of the date of
stockholder approval of the Plan plus (iii) the number of shares
underlying outstanding but unexercised awards issued under the 1988 Stock Plan
or the 1989 Non-Employee Director Plan as of the date of stockholder approval
of the Plan that expire or terminate in accordance with their terms under the
1988 Stock Plan and the 1989 Non-Employee Director Plan.  The Shares may be authorized, but unissued,
or reacquired Common Stock.  If an Award
expires or becomes unexercisable without having been exercised in full, or,
with respect to Restricted Stock, is forfeited back to or repurchased by the
Company, the unpurchased Shares (or for Restricted Stock, the forfeited or
repurchased shares) which were subject thereto shall become available for
future grant or sale under the Plan (unless the Plan has terminated).  With respect to SARs, all shares which are
the subject of an issued SAR shall cease to be available under the Plan, except
for SARs which expire or become unexercisable without having been exercised in
full.  Shares that have actually been
issued under the Plan under any Award shall not be returned to the Plan and
shall not become available for future distribution under the Plan, except that
if Shares of Restricted Stock are repurchased by



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the Company at their original purchase price or are
forfeited to the Company, such Shares shall become available for future grant
under the Plan.  For the avoidance of
doubt, except for Awards which expire or become unexercisable without having
been exercised in full, the following Shares shall not become available for
issuance under the Plan:  (i) Shares
tendered by Participants as full or partial payment to the Company upon
exercise of Options granted under the Plan; (ii) Shares reserved for
issuance upon the grant of SARs, to the extent the number of reserved Shares
exceeds the number of Shares actually issued upon exercise of the SARs; and
(iii) Shares withheld by, or otherwise remitted to, the Company to satisfy
a Participant’s tax withholding obligations upon the lapse of restrictions on
Restricted Stock or the exercise of options or SARs granted under the Plan or
upon any other payment or issuance of Shares under the Plan.


4.                                       Administration of the Plan.


(a)                                  Procedure.


(i)                                     Multiple Administrative Bodies.  The Plan may be administered by different
Committees with respect to different groups of Service Providers as the Board
may determine to be necessary or appropriate under Applicable Laws.


(ii)                                  Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Compensation Committee of two or more “outside directors”
within the meaning of Section 162(m) of the Code.


(iii)                               Rule 16b-3. 
To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder shall be structured
to satisfy the requirements for exemption under Rule 16b-3.


(iv)                              Other Administration.  Other than as provided above, the Plan shall
be administered by (A) the Compensation Committee, or (B) a different
Committee, in either case which shall be constituted to satisfy Applicable
Laws.  Grants to Independent Directors
under Section 11 of the Plan shall be administered by the Company’s Inside
Directors.


(b)                                 Powers of the Administrator.  Subject to the provisions of the Plan the
Administrator shall have the authority, in its discretion:


(i)                                     to
determine the Fair Market Value;


(ii)                                  to
select the Service Providers to whom Awards may be granted hereunder;


(iii)                               to
determine the number of shares of Common Stock to be covered by each Award
granted hereunder;


(iv)                              to
approve forms of agreement for use under the Plan;



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(v)                                 to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of any Award granted hereunder. 
Such terms and conditions include, but are not limited to, the exercise
or purchase price, the time or times when Awards may be vested, exercised,
purchased or granted (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions or repurchase rights, and any
restriction or limitation regarding any Award or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;


(vi)                              to
construe and interpret the terms of the Plan and awards granted pursuant to the
Plan, including, but not limited to, a determination of a Participant’s date of
termination with respect to any Award granted under the Plan;


(vii)                           to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws,
satisfying foreign securities law or achieving other foreign legal compliance
objectives;


(viii)                        to modify
or amend each Award (subject to Section 16 of the Plan), including the
discretionary authority to extend the post-termination vesting or
exercisability of Awards longer than is otherwise provided for in the Plan;


(ix)                                to
allow Participants to satisfy withholding tax obligations by electing to have
the Company withhold from the Shares to be issued upon exercise of an Option or
SAR or upon the vesting or earlier tax recognition of Restricted Stock that
number of Shares having a Fair Market Value equal to the amount required to be
withheld.  The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined.  All
elections by a Participant to have Shares withheld for this purpose shall be
made in such form and under such conditions as the Administrator may deem
necessary or advisable;


(x)                                   to
authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator; and


(xi)                                to
make all other determinations deemed necessary or advisable for administering
the Plan.


(c)                                  Effect of Administrator’s Decision.  The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Participants and any
other holders of Awards.


5.                                       Eligibility.


(a)                                  Awards and Discretionary Stock Options.  Awards and Discretionary Options may be
granted to Service Providers.  Incentive
Stock Options may be granted only to Employees.


(b)                                 Automatic Independent Director Option Grants.  Automatic Option grants under Section 11
hereof shall only be made to Independent Directors.



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6.                                       Limitations.


(a)                                  Each
Option shall be designated in the Option Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. 
However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar
year (under all plans of the Company or Subsidiary as defined in Code Section
424(f)) exceeds $100,000, such Options shall be treated as Nonstatutory Stock
Options.  For purposes of this Section
6(a), Incentive Stock Options shall be taken into account in the order in which
they were granted.  The Fair Market Value
of the Shares shall be determined as of the time the Option with respect to
such Shares is granted.


(b)                                 Neither
the Plan nor any Award shall confer upon a Participant any right with respect
to continuing their relationship as a Service Provider, nor shall they
interfere in any way with the right of the Participant or the right of the Company
or Subsidiaries to terminate such relationship at any time, with or without
cause.


(c)                                  The
following limitations shall apply to grants of Options and SARs with an
exercise price equal to or exceeding 100% of Fair Market Value on the grant
date:


(i)                                     No
Service Provider shall be granted, in any fiscal year of the Company, Options
or SARs to purchase more than 250,000 Shares.


(ii)                                  In
connection with his or her initial service, a Service Provider may be granted
Options to purchase up to an additional 250,000 Shares which shall not count
against the limit set forth in subsection (i) above.


(iii)                               The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 14(a).


(iv)                              If
an Option is cancelled in the same fiscal year of the Company in which it was
granted (other than in connection with a transaction described in Section
14(c)), the cancelled Option will be counted against the limits set forth in
subsections (i) and (ii) above.


7.                                       Term of Plan. 
The Plan shall become effective upon the date of stockholder approval of
the Plan in 2006.  It shall continue in
effect for a term of ten (10) years from the date upon which the Board approved
the Plan subject to obtaining stockholder approval, namely April 19, 2006.


8.                                       Stock Options.


(a)                                  Term of Option.  The term of each Option shall be stated in
the Option Agreement and shall be (i) for Service Providers other than
non-employee Directors, no more than ten (10) years from the date of grant, or
(ii) for non-employee Directors, no more than five (5) years from the date of
grant.  Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
subsidiary that qualifies under Code Section 424(f), the term of the Incentive



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Stock Option
shall be five (5) years from the date of grant or such shorter term as may be
provided in the Option Agreement.


(b)                                 Option Exercise Price, Waiting Period and Consideration.


(i)                                     Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the Administrator,
subject to the following:


(1)                                  In
the case of an Incentive Stock Option


a)                                      granted
to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Code Section 424(f) subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.


b)                                     granted
to any Employee other than an Employee described in paragraph a) immediately
above, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.


(2)                                  In
the case of a Nonstatutory Stock Option, the per Share exercise price shall be
determined by the Administrator, with a minimum exercise price equal to par
value.


(ii)                                  Waiting Period and Exercise Dates.  At the time an Option is granted, the
Administrator shall fix the period within which the Option may become vested or
be exercised and shall determine any conditions which must be satisfied before
the Option may vest or be exercised.


(iii)                               Form of Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  In the case of an Incentive
Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration, subject to Applicable
Laws, may consist entirely of:


(1)                                  cash;


(2)                                  check;


(3)                                  other
Shares which (A) in the case of Shares acquired upon exercise of an option,
have been owned by the Optionee for more than six months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised;


(4)                                  consideration
received by the Company under a broker-assisted cashless exercise program
acceptable to the Company, in its sole discretion;


(5)                                  any
combination of the foregoing methods of payment; or



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(6)                                  such
other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws.


(iv)                              Exercise of Option; Rights as a Stockholder.  Any Option granted hereunder shall be
exercisable according to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth in the Option
Agreement.


An Option shall be deemed exercised when the Company
receives:  (i) written or electronic
notice of exercise (in accordance with the Option Agreement) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. 
Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse.  Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 14 of the Plan.


Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.  An Option may not be
exercised for a fraction of a Share.


(c)                                  Termination of Relationship as a Service Provider.  If an Optionee ceases to be a Service
Provider, other than upon the Optionee’s death or Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent that the Option is vested and exercisable on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement).  In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months following
the Optionee’s termination.  If, on the
date of termination, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall revert to the
Plan.  If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.


Notwithstanding the above, in the event of an Optionee’s
change in status from Consultant, Employee or Director to Employee, Consultant
or Director (e.g., an Inside Director becoming an Independent Director), an
Optionee’s status as a Service Provider shall continue notwithstanding the
change in status.  However, in such
event, an Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option three months and one day following such change of
status.


(d)                                 Disability of Optionee.  If an Optionee ceases to be a Service
Provider as a result of the Optionee’s Disability, the Optionee may exercise
his or her Option within such



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period of time
as is specified in the Option Agreement to the extent the Option is vested and
exercisable on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement).  In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee’s termination.  If, on the date of termination, the Optionee
is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.


(e)                                  Death of Optionee.  If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee’s estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested and exercisable on the date of
death.  In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for twelve
(12) months following the Optionee’s termination.  If, at the time of death, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan.  The Option may be exercised by the executor
or administrator of the Optionee’s estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee’s will or the laws of
descent or distribution.  If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.


9.                                       Restricted Stock.


(a)                                  Grant of Restricted Stock.  Subject to the terms and conditions of the
Plan, Restricted Stock may be granted to Service Providers at any time and from
time to time as shall be determined by the Administrator, in its sole
discretion.  The Administrator shall have
complete discretion to determine (i) the number of Shares subject to a
Restricted Stock award granted to any Participant, (ii) whether the form of the
award shall be Shares or units/rights to acquire Shares, and (iii) the
conditions that must be satisfied, including performance-based milestones, upon
which is conditioned the grant or vesting of Restricted Stock.  For Restricted Stock granted in the form of
units/rights to acquire Shares, each such unit/right shall be the equivalent of
one Share of Common Stock for purposes of determining the number of Shares
subject to an Award.  Until the Shares
are issued, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the units/rights to acquire Shares.


(b)                                 Exercise Price and other Terms.  The Administrator, subject to the provisions
of the Plan, shall have complete discretion to determine the terms and
conditions of Restricted Stock granted under the Plan.  Restricted Stock grants shall be subject to
the terms, conditions, and restrictions determined by the Administrator at the
time the stock is awarded, which may include such performance-based milestones
as are determined appropriate by the Administrator.  The Administrator may require the recipient
to sign a Restricted Stock Agreement as a condition of the award. Any certificates
representing the shares of Stock awarded shall bear such legends as shall be
determined by the Administrator.



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(c)                                  Restricted Stock Award Agreement.  Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the purchase price and such
other terms and conditions as the Administrator, in its sole discretion, shall
determine; provided; however, that if the Restricted Stock grant has a purchase
price, such purchase price must be paid no more than ten (10) years following
the date of grant.


10.                                 Stock Appreciation Rights.


(a)                                  Grant of SARs. 
Subject to the terms and conditions of the Plan, SARs may be granted to
Service Providers at any time and from time to time as shall be determined by
the Administrator, in its sole discretion. 
The Administrator shall have complete discretion to determine the number
of SARs granted to any Participant.


(b)                                 Exercise Price and other Terms.  The Administrator, subject to the provisions
of the Plan, shall have complete discretion to determine the terms and
conditions of SARs granted under the Plan; provided, however, that no SAR may
have a term of more than ten (10) years from the date of grant.


(c)                                  Payment of SAR Amount.  Upon exercise of a SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:


(i)                                     The
difference between the Fair Market Value of a Share on the date of exercise
over the exercise price; times


(ii)                                  The
number of Shares with respect to which the SAR is exercised.


(d)                                 Payment upon Exercise of SAR.  At the discretion of the Administrator,
payment for a SAR may be in cash, Shares or a combination thereof.


(e)                                  Cash Settlements and Plan Share Allocation.  Cash payments of Stock Appreciation Rights as
well as Common Stock issued upon exercise of Stock Appreciation Rights shall be
applied against the maximum number of shares of Common Stock that may be issued
pursuant to the Plan.  The number of
shares to be applied against such maximum number of shares in such
circumstances shall be the number of shares equal to the amount of the cash
payment divided by the Fair Market Value of a share of Common Stock on the date
the Stock Appreciation Right is granted.


(f)                                    SAR Agreement. 
Each SAR grant shall be evidenced by an Award Agreement that shall
specify the exercise price, the term of the SAR, the conditions of exercise,
and such other terms and conditions as the Administrator, in its sole
discretion, shall determine.


(g)                                 Expiration of SARs.  A SAR granted under the Plan shall expire
upon the date determined by the Administrator, in its sole discretion, and set
forth in the Award Agreement.


(h)                                 Termination of Relationship as a Service Provider.  If a Participant ceases to be a Service
Provider, other than upon the Participant’s death or Disability, the
Participant may exercise his or her Stock Appreciation Right within such period
of time as is specified in the 



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Stock
Appreciation Right Agreement to the extent that the Stock Appreciation Right is
vested and exercisable on the date of termination (but in no event later than
the expiration of the term of such Stock Appreciation Right as set forth in the
Stock Appreciation Right Agreement).  In
the absence of a specified time in the Stock Appreciation Right Agreement, the
Stock Appreciation Right shall remain exercisable for three (3) months
following the Participant’s termination. 
If, on the date of termination, the Participant is not vested as to his
or her entire Stock Appreciation Right, the Shares covered by the unvested
portion of the Stock Appreciation Right shall revert to the Plan.  If, after termination, the Participant does
not exercise his or her Stock Appreciation Right within the time specified by
the Administrator, the Stock Appreciation Right shall terminate, and the Shares
covered by such Stock Appreciation Right shall revert to the Plan.  Notwithstanding the above, in the event of a
Participant’s change in status from Consultant, Employee or Director to
Employee, Consultant or Director (e.g., an Inside Director becoming an
Independent Director), a Participant’s status as a Service Provider shall
continue notwithstanding the change in status.


(i)                                     Disability of Participant.  If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Stock Appreciation Right within such period of time as is
specified in the Stock Appreciation Right Agreement to the extent the Stock
Appreciation Right is vested and exercisable on the date of termination (but in
no event later than the expiration of the term of such Stock Appreciation Right
as set forth in the Stock Appreciation Right Agreement).  In the absence of a specified time in the
Stock Appreciation Right Agreement, the Stock Appreciation Right shall remain
exercisable for twelve (12) months following the Participant’s
termination.  If, on the date of
termination, the Participant is not vested as to his or her entire Stock
Appreciation Right, the Shares covered by the unvested portion of the Stock
Appreciation Right shall revert to the Plan. 
If, after termination, the Participant does not exercise his or her
Stock Appreciation Right within the time specified herein, the Stock
Appreciation Right shall terminate, and the Shares covered by such Stock
Appreciation Right shall revert to the Plan.


(j)                                     Death of Participant.  If a Participant dies while a Service
Provider, the Stock Appreciation Right may be exercised within such period of
time as is specified in the Stock Appreciation Right Agreement (but in no event
later than the expiration of the term of such Stock Appreciation Right as set
forth in the Notice of Grant), by the Participant’s estate or by a person who
acquires the right to exercise the Stock Appreciation Right by bequest or
inheritance, but only to the extent that the Stock Appreciation Right is vested
and exercisable on the date of death.  In
the absence of a specified time in the Stock Appreciation Right Agreement, the
Stock Appreciation Right shall remain exercisable for twelve (12) months
following the Participant’s termination. 
If, at the time of death, the Participant is not vested as to his or her
entire Stock Appreciation Right, the Shares covered by the unvested portion of
the Stock Appreciation Right shall immediately revert to the Plan.  The Stock Appreciation Right may be exercised
by the executor or administrator of the Participant’s estate or, if none, by
the person(s) entitled to exercise the Stock Appreciation Right under the
Participant’s will or the laws of descent or distribution.  If the Stock Appreciation Right is not so
exercised within the time specified herein, the Stock Appreciation Right shall
terminate, and the Shares covered by such Stock Appreciation Right shall revert
to the Plan.



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11.                                 Option Grants to Independent Directors.  All grants of Options to Independent
Directors pursuant to this Section shall be shall be made strictly in
accordance with the following provisions:


(a)                                  Nonstatutory Stock Options.  All Options granted pursuant to this Section
shall be Nonstatutory Stock Options and, except as otherwise provided herein,
shall be subject to the other terms and conditions of the Plan.


(b)                                 Administration.  Option grants under this Section 11 shall be
administered by a committee consisting of the Company’s Inside Directors;
provided, however, that such committee shall not have any discretion to select
which Independent Directors shall be granted Options under this Section 11.


(c)                                  Initial Grant. 
Each person who first becomes an Independent Director following the
effective date of this Plan shall be automatically granted on the date on which
he or she first becomes an Independent Director, whether through election by
the stockholders of the Company or appointment by the Board to fill a vacancy,
an Option to purchase 25,000 shares of Common Stock (the “Initial Grant”);
provided, however, that an Inside Director who ceases to be an Inside Director
and thereby becomes an Independent Director shall not receive an Initial
Grant.  Subject to accelerated vesting
upon certain Change of Control transactions as specified in Section 14(c)(iii),
the Initial Grant shall vest as to 25% of the shares subject thereto on the
date that is six (6) months and one (1) day after the date of grant with an
additional 25% vesting on each of the first three anniversaries of the date of
grant, so as to be 100% vested on the third anniversary of the date of grant,
subject to the Optionee remaining a director through such vesting dates.


(d)                                 Annual Grant. 
On the first business day after January 1 of each calendar year, each
Independent Director shall be automatically granted an Option to purchase 7,500
(the “Annual Grants”).  Subject to
accelerated vesting upon certain Change of Control transactions as specified in
Section 14(c)(iii), Annual Grants shall vest as to 25% of the shares subject
thereto on the date that is six (6) months and one (1) day after the date of
grant with an additional 25% vesting on each of the first three anniversaries
of the date of grant, so as to be 100% vested on the third anniversary of the
date of grant, subject to the Optionee remaining a director through such
vesting dates.


(e)                                  Other Option Terms.  The other terms of each option granted
pursuant to this Section 11 shall be as follows:


(i)                                     The
option term shall be five (5) years.


(ii)                                  The
exercise price per Share shall be no less than 100% of the Fair Market Value
per Share on the date of grant.


(iii)                               In
the event an Optionee’s service as a Director terminates more than six (6)
months following the commencement of service as an Independent Director, then
the Option shall immediately accelerate as to one year’s additional vesting or,
with respect to an Annual Grant, as to the number of shares that would have
vested on the day prior to the next regularly scheduled meeting of the
stockholders.  The Option shall remain
exercisable, to the



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extent vested
and exercisable on the date of termination of Board service, for one year
following such termination date (but in no event longer than the original term
of the Option); provided, however, that in the event of a Qualifying Board
Retirement, the Option shall vest as to 100% of the Shares and shall remain
exercisable for three years following such termination (but in no event longer
than the original term of the Option); provided, further that in the event of
the termination of service as an Independent Director due to the death or
Disability of the Optionee while an Independent Director, the Option shall
immediately accelerate as to one year’s additional vesting or, with respect to
an Annual Grant, as to the number of shares that would have vested on the day
prior to the next regularly scheduled meeting of the stockholders (or more, in
any event, if the cessation of Board Service would have been a Qualifying
Retirement) even if such termination of service is within six (6) months
following the commencement of service as an Independent Director.


(iv)                              The
permissible forms of consideration for exercising the option shall be the same
as for discretionary options as specified in Section 8(b)(iii) hereof.


(v)                                 The
provisions of Section 8(b)(iv) hereof relating to stockholder rights shall also
apply to options granted under this Section 11.


(vi)                              The
options granted under this Section 11 shall be subject to the other terms and
conditions set forth in the form of option agreement selected by the committee
of Inside Directors, in their sole discretion.


12.                                 Leaves of Absence.  Unless the Administrator provides otherwise
or as otherwise required by Applicable Laws, vesting of Awards granted
hereunder shall cease commencing on the 91st day of any unpaid leave of absence
and shall only recommence upon return to active service.


13.                                 Non-Transferability of Awards.  An Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant.


14.                                 Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation or Change of Control.


(a)                                  Changes in Capitalization.  Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Award, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Award, as well as the price per share of Common Stock covered by each
such outstanding Award and the 162(m) annual share issuance limits under
Section 6(c) shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”  



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Such
adjustment shall be made by the Compensation Committee, whose determination in
that respect shall be final, binding and conclusive.  Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Award.


(b)                                 Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable prior to the effective date of such proposed
transaction.  The Administrator in its
discretion may provide for a Participant to have the right to exercise his or her
Award until ten (10) days prior to such transaction as to all of the stock
covered thereby, including Shares as to which the Award would not otherwise be
vested or exercisable.  In addition, the
Administrator may provide that any Company repurchase option or forfeiture
applicable to any Shares covered by an Award shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated.  To the extent
it has not been previously exercised, an Award will terminate immediately prior
to the consummation of such proposed action.


(c)                                  Change of Control.


(i)                                     SARs and Discretionary Options.  In the event of a Change of Control, each
outstanding SAR and Discretionary Option shall be assumed or an equivalent
option substituted by the successor corporation or a subsidiary of the
successor corporation.  In the event that
the successor corporation refuses to assume or substitute for the SAR and
Discretionary Option, the Participant shall fully vest in and have the right,
to exercise the SAR or Discretionary Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or
exercisable.  If an SAR or Discretionary
Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a Change of Control, the Administrator shall
notify the Participant in writing or electronically that the SAR or
Discretionary Option shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the SAR or Discretionary
Option shall terminate upon the expiration of such period.  For the purposes of this paragraph, the SAR
or Discretionary Option shall be considered assumed if, following the Change of
Control, the SAR or option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the SAR or Discretionary Option immediately
prior to the Change of Control, the consideration (whether stock, cash, or
other securities or property) received in the Change of Control by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a, choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares), provided,
however, that if such consideration received in the Change of Control is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the SAR or Discretionary
Option, for each Share of Optioned Stock subject to the SAR or Discretionary
Option, to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders
of Common Stock in the Change of Control.


(ii)                                  Restricted Stock.  In the event of a Change of Control, each
outstanding Restricted Stock award shall be assumed or an equivalent award
substituted by the successor corporation or a Parent or subsidiary of the
successor corporation.  In the event that
the 



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successor
corporation refuses to assume or substitute for the Restricted Stock, the
Participant shall fully vest in the Restricted Stock, including Shares as to
which it would not otherwise be vested. 
For the purposes of this paragraph, the Restricted Stock shall be
considered assumed if, following the Change of Control, the Restricted Stock
confers the right to receive, for each Share and each unit/right to acquire a
Share that is subject to the Restricted Stock award immediately prior to the
Change of Control, the consideration (whether stock, cash, or other securities
or property) received in the Change of Control by holders of Common Stock for
each Share and each unit/right to acquire a Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares), provided, however, that if such consideration received in the Change
of Control is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received, for each Share and each unit/right
to acquire a Share subject to the Restricted Stock award, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the Change
of Control.


(iii)                               Automatic Independent Director Options.  In the event of a Change of Control in which
the Independent Directors are terminated or asked to resign either upon the
Change of Control or within one year following the Change of Control, their
Options granted under Section 11 hereof shall vest 100% immediately prior to
such Change in Control.  In the event of
a Change of Control in which the Independent Directors are not terminated or
asked to resign, their Options granted under Section 11 hereof shall be treated
the same as Discretionary Options hereunder.


(iv)                              Certain Terminations Within Twelve Months Following a
Change of Control.  In the
event that, within twelve (12) months following a Change of Control a
Participant’s employment with the Company or a Subsidiary is terminated
involuntarily by his or her employer other than for Cause, then such
Participant’s Awards shall have their vesting accelerated as to fifty percent
(50%) of the Shares that are unvested as of the date of such termination of
employment.


15.                                 Award Date of Grant.  The date of grant of an Award shall be, for
all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the
Administrator.  Notice of the
determination shall be provided to each Participant within a reasonable time
after the date of such grant.


16.                                 Amendment and Termination of the Plan.


(a)                                  Amendment and Termination; No Repricing.  The Committee may at any time amend, alter,
suspend or terminate the Plan, provided that the Board may not amend the Plan
to permit the repricing, including by way of exchange, or acquisition for cash
or other consideration of any Award without receiving prior stockholder
approval.


(b)                                 Stockholder Approval.  The Company shall obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.



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(c)                                  Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the
Company.  Termination of the Plan shall
not affect the Administrator’s ability to exercise the powers granted to it
hereunder with respect to Awards granted under the Plan prior to the date of
such termination.


17.                                 Conditions Upon Issuance of Shares.


(a)                                  Legal Compliance.  Shares shall not be issued pursuant to the
exercise or vesting of an Award unless the exercise or vesting of such Award
and the issuance and delivery of such Shares shall comply with Applicable Laws
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.


(b)                                 Investment Representations.  As a condition to the exercise of an Award,
the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a
representation is required.


18.                                 Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.


19.                                 Reservation of Shares.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.


20.                                 Stockholder Approval.  The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted.  Such stockholder approval
shall be obtained in the manner and to the degree required under Applicable
Laws.



 17