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                                                                    EXHIBIT 4.01

                            MERRIMAC INDUSTRIES, INC.
                        2001 KEY EMPLOYEE INCENTIVE PLAN

     1. Purpose. The purpose of the Merrimac Industries, Inc. 2001 Key Employee
Incentive Plan (the "Plan") is to give Merrimac Industries, Inc. (the "Company")
a competitive advantage in retaining and motivating key officers and employees
and to provide the Company and its Subsidiaries with a stock plan providing
incentives linked to increases in stockholder value. The Plan was approved by
the Board of Directors of the Company (the "Board") on April 20, 2001 (the
"Effective Date"), subject to approval by the stockholders of the Company at the
2001 Annual Meeting of Stockholders.

     2. Definitions. For purposes of the Plan, the following terms are defined
as set forth below:

         (a) "Cause" means: (i) a plea of guilty or nolo contendere to, or
conviction for, the commission of a felony offense by a Participant; (ii) a
material breach by a Participant of a fiduciary duty owed to the Company or any
of its Subsidiaries; (iii) a material breach by a Participant of any
nondisclosure, non-solicitation or non-competition obligation owed to the
Company or any of its Subsidiaries and (iv) the willful and continued failure or
gross neglect on the part of a Participant to perform his employment duties. The
Committee shall have the sole discretion to determine whether "Cause" exists,
and its determination shall be final.

         (b) "Change in Control" means the happening of any of the following
events:

            (i) The acquisition by any individual, entity or group (within the
     meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
     of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
     the Exchange Act) of 50% or more of the then outstanding shares of Common
     Stock of the Company ("Outstanding Company Common Stock"); provided,
     however, that for purposes of this subsection (i), the following
     acquisitions shall not constitute a Change in Control: (A) any acquisition
     by the Company, (B) any acquisition by any employee benefit plan (or
     related trust) sponsored or maintained by the Company or any of its
     Subsidiaries or (C) any acquisition by any Person pursuant to a transaction
     which complies with clauses (A) and (B) of subsection (iii); or

            (ii) Individuals who, as of the Effective Date, constitute the Board
     (the "Incumbent Board") cease for any reason to constitute at least a
     majority of the Board; provided, however, that any individual becoming a
     director subsequent to the Effective Date whose election, or nomination for
     election by the Company's stockholders, was approved by a vote of at least
     a majority of the directors then comprising the Incumbent Board shall be
     considered as though such individual were a member of the Incumbent Board,
     but excluding, for this purpose, any such individual whose initial
     assumption of office occurs as a result of an actual or threatened election
     contest with respect to the election or removal of directors or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or

            (iii) Approval by the stockholders of the Company of a
     reorganization, merger or consolidation or sale or other disposition of all
     or substantially all of the assets of the Company or the purchase of assets
     or stock of another entity (a "Business Combination"), in each case, unless
     immediately following such Business Combination, (A) all or substantially
     all of the individuals and entities who were the beneficial owners of the
     Outstanding Company Common Stock immediately prior to such Business
     Combination will beneficially own, directly or indirectly, more than 50% of
     the combined voting power of the then outstanding securities entitled to
     vote generally in the election of directors of the corporation resulting
     from such Business Combination (including, without limitation, a
     corporation which as a result of such transaction owns the Company or all
     or substantially all of the Company's assets either directly or through one
     or more subsidiaries) and (B) at least a majority of the members of the
     board of directors of the

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     corporation resulting from such Business Combination will have been members
     of the Incumbent Board at the time of the initial agreement, or action of
     the Board, providing for such Business Combination; or

            (iv) Approval by the stockholders of the Company of a complete
     liquidation or dissolution of the Company.

         (c) "Change in Control Market Capitalization" means the number of
outstanding shares of Common Stock on the date of a Change in Control (excluding
any shares of Common Stock issued subsequent to the Effective Date, other than
shares of Common Stock issued (i) upon exercise of stock options granted to
employees, directors or consultants, (ii) through the purchase of shares of
Common Stock under any stock purchase plan maintained by the Company or its
Subsidiaries for the benefit of employees or (iii) upon the exercise of any or
all of the 360,000 warrants outstanding on the Effective Date), calculated on a
fully diluted basis, multiplied by the Change in Control Price.

         (d) "Change in Control Price" means the higher of (i) the highest Fair
Market Value during the 60-day period prior to and including the date of a
Change in Control or (ii) if the Change in Control is the result of a tender or
exchange offer or a Business Combination, the highest price per share of Common
Stock paid in such tender or exchange offer or Business Combination. To the
extent that the consideration paid in any such tender or exchange offer or
Business Combination consists all or in part of securities or other non-cash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Committee.

         (e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

         (f) "Committee" means the committee of directors which shall administer
the Plan and shall be appointed pursuant to Section 3.

         (g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.

         (h) "Common Stock" means the common stock, par value $0.01 per share,
of the Company, subject to adjustment as set forth in Section 5(f).

         (i) "Fair Market Value" means, as of any date, the closing price of the
Common Stock as reported on the American Stock Exchange (or, if the Common Stock
is listed on a different national securities exchange or in the over-the-counter
market, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national security exchange or
as reported by NASDAQ, as the case may be, on which the Common Stock is listed
or admitted to trading) on such date or, if there are no reported sales on such
date, on the last day prior to such date on which there are such reported sales.

         (j) "Market Capitalization" means, as of any date, the number of then
outstanding shares of Common Stock (excluding any shares of Common Stock issued
subsequent to the Effective Date, other than shares of Common Stock issued (i)
upon exercise of stock options granted to employees, directors or consultants,
(ii) through the purchase of shares of Common Stock under any stock purchase
plan maintained by the Company or its Subsidiaries for the benefit of employees
or (iii) upon the exercise of any or all of the 360,000 warrants outstanding on
the Effective Date), calculated on a fully diluted basis, multiplied by the Fair
Market Value.

         (k) "Participants" means the key employees of the Company and its
Subsidiaries who shall be eligible to participate in the Plan.

         (l) "Subsidiaries" means a corporation or other entity in which the
Company directly or indirectly controls 50% or more of the total combined voting
power of all classes of such corporation's or other entity's stock, equity
securities, partnership interests or membership interests.

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     3. Committee. The Plan shall be administered by the Committee, which shall
consist of two or more members of the Board both or all of whom are intended to
be "outside directors" within the contemplation of section 162(m)(4)(C)(i) of
the Code. The Committee shall be appointed annually by the Board, which may at
any time and from time to time remove any members of the Committee, with or
without cause, appoint additional members of the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made by
a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed by all
of the members of the Committee shall be fully as effective as if it had been
made at a meeting duly called and held.

     4. Administration. Concurrently with the adoption of the Plan, the
Committee shall determine the Participants and shall allocate to each
Participant the percentage share (the "Award Percentage") of the restricted
shares (the "Restricted Shares") that will be granted to such Participant in the
event that the Company achieves the performance goals provided in Section 5.
Subject to the express provisions of the Plan, the Committee shall have complete
authority, in its discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and
potential contributions to the success of the Company and its Subsidiaries and
such other factors as the Committee in its discretion shall deem relevant. The
Committee's determinations on the matters referred to in this Section 4 shall be
conclusive. Any dispute or disagreement which may arise hereunder, or as a
result of, or with respect to, any Restricted Shares shall be determined by the
Committee, in its sole discretion, and any interpretations by the Committee of
the terms thereof shall be final, binding and conclusive.

     5. Performance Goals.

         (a) $50,000,000 Market Capitalization. In the event that the Company
shall achieve an average Market Capitalization equal to or greater than
$50,000,000 during any six-month period during the five-year period beginning on
the Effective Date (the "$50,000,000 Market Capitalization"), then the Company
shall issue to each Participant who shall still be in the employ of the Company
or its Subsidiaries, subject to the terms and conditions set forth in Section 6,
the number of Restricted Shares determined by multiplying (i) such Participant's
Award Percentage, (ii) 5% and (iii) the average Market Capitalization during
such six-month period and dividing the product by the average Fair Market Value
during such six-month period. In no event shall Restricted Shares be issued more
than once pursuant to this Section 5(a).

         (b) $80,000,000 Market Capitalization. In the event that the Company
shall achieve an average Market Capitalization equal to or greater than
$80,000,000 during any six-month period during the five-year period beginning on
the Effective Date (the "$80,000,000 Market Capitalization"), then the Company
shall issue to each Participant who shall still be in the employ of the Company
or its Subsidiaries, subject to the terms and conditions set forth in Section 6,
the number of Restricted Shares determined by multiplying (i) such Participant's
Award Percentage, (ii) 5% and (iii) the average Market Capitalization during
such six-month period and dividing the product by the average Fair Market Value
during such six-month period. Such six-month period may be, in whole or in part,
coterminous with, the six-month period in which the $50,000,000 Market
Capitalization is achieved. In event shall Restricted Shares be issued more than
once pursuant to this Section 5(b).

         (c) Change in Control - $50,000,000 Market Capitalization. In the event
that there shall be a Change in Control prior to the achievement of the
$50,000,000 Market Capitalization and the Change in Control Market
Capitalization shall equal or exceed $50,000,000 but shall not exceed
$80,000,000, then the Company shall issue to each Participant who shall still be
in the employ of the Company or its Subsidiaries, the number of Restricted
Shares determined by multiplying (i) such Participant's Award Percentage, (ii)
5% and (iii) the Change in Control Market Capitalization and dividing the
product by the Change in Control Price.

         (d) Change in Control - $80,000,000 Market Capitalization. In the event
that there shall be a Change in Control prior to the achievement of the
$80,000,000 Market Capitalization and the Change in Control Market
Capitalization shall equal or exceed $80,000,000, then the Company shall issue
to each Participant who shall

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still be in the employ of the Company or its Subsidiaries, the number of
Restricted Shares determined by multiplying (i) such Participant's Award
Percentage, (ii) (A) if the $50,000,000 Market Capitalization shall have
previously been achieved, 5% or (B) if the $50,000,000 Market Capitalization
shall not have previously been achieved, 10% and (iii) the Change in Control
Market Capitalization and dividing the product by the Change in Control Price.

         (e) Maximum Grant. Notwithstanding anything to the contrary contained
herein, (i) the maximum value of Restricted Shares which may be granted to any
Participant upon achievement of the performance goals set forth in Section 5(a)
or (c) shall be $1,500,000 (based on the Fair Market Value on the date of
issuance of such shares), and (ii) the maximum value of Restricted Shares which
may be granted to any Participant upon achievement of the performance goals set
forth in Section 5(b) or (d) shall be $3,500,000 (based on the Fair Market Value
on the date of issuance of such shares); provided, however, that the maximum
value of Restricted Shares payable upon achievement of the performance goals set
forth in Section 5(d) shall be $5,000,000 (based on the Fair Market Value on the
date of issuance of such shares) in the event that the $50,000,000 Market
Capitalization shall not have been achieved prior to the date of the Change in
Control.

         (f) Adjustments. In the event of any change in corporate
capitalization, such as a stock dividend, stock split or a corporate
transaction, such as a merger, consolidation, separation, including a spin-off,
or other distribution of stock or property of the Company, any reorganization
(whether or not such reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete liquidation of the Company,
the Committee may make such substitution or adjustments in the aggregate number
and kind of shares available for issuance under the Plan, to the extent
necessary to account for any such change in corporate capitalization and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion.

     6. Restricted Stock Awards.

         (a) Certificates. Certificates issued in respect of Restricted Shares
shall be registered in the names of the Participants and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Shares, substantially in the following form:

     "The transferability of this certificate and the shares of stock
     represented hereby are subject to the terms and conditions (including
     forfeiture) of the Merrimac Industries, Inc. 2001 Key Employee Incentive
     Plan. Copies of such Plan are on file at the offices of Merrimac
     Industries, Inc."

         (b) Holding of Shares. The Committee may require that the certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any issuance of Restricted
Shares to a Participant, such Participant shall have delivered to the Company a
stock power, endorsed in blank, relating to such Restricted Shares.

         (c) Vesting. The Restricted Shares shall vest ratably in annual
installments over a three-year period commencing on the date of issuance. During
the vesting period, such Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered. Upon a Participant's termination
of employment for any reason other than involuntary termination of employment by
the Company (other than for Cause), all unvested Restricted Shares shall be
forfeited by the Participant.

         (d) Holding Period. Restricted Shares which have vested may not be
sold, assigned, transferred, pledged or otherwise encumbered for a period of two
years following the vesting date of such Restricted Shares, except that
Restricted Shares may be sold by a Participant to the extent required to satisfy
all federal, state, local and foreign taxes of any kind, with respect to the
vesting of Restricted Shares, including the withholding obligation described in
Section 7.

         (e) Impact of Change in Control. Notwithstanding any other provision of
the Plan to the contrary, upon a Change in Control, all Restricted Shares shall
immediately become fully vested, transferable and free of all restrictions.

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         (f) Waiver of Restrictions. The Committee shall have the discretion to
waive, in whole or in part at any time, any or all remaining restrictions with
respect to any or all of a Participant's Restricted Shares.

     7. Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for federal income tax
purposes with respect to any grant of Restricted Shares or the vesting of
Restricted Shares, such Participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount. To the extent determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that is
part of the grant of Restricted Shares. The Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to such Participant. The Committee may establish such procedures
as it deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.

     8. Term, Amendment and Termination.

         (a) Term. The Plan will terminate on April 19, 2006; provided, however,
that any grants of Restricted Shares outstanding as of such date shall not be
affected or impaired by the termination of the Plan.

         (b) Amendment and Termination. The Board may amend, alter, or terminate
the Plan, but no amendment, alteration or termination shall be made which would
impair the rights of a Participant without the Participant's consent. In
addition, no such amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by law.

     9. No Employment Right. Neither the existence of the Plan nor the grant of
Restricted Shares shall require the Company or any Subsidiary to continue any
Participant in the employ or service of the Company or such Subsidiary.

     10. Compliance With Securities Laws. The Committee may require each
Participant to represent to and agree with the Company in writing that such
person is acquiring any Restricted Shares without a view to the distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan, the Company shall not be
required to issue or deliver any certificate for shares of Common Stock under
the Plan prior to fulfillment of all of the following conditions:

         (a) Listing or approval for listing upon notice of issuance of such
shares on the American Stock Exchange or such other securities exchange as may
at the time be the principal market for the Common Stock;

         (b) Any registration or other qualification of such shares under any
state or federal law or regulation or the maintaining in effect of any such
registration or other qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and

         (c) Obtaining any other consent, approval or permit from any state or
federal governmental agency which the Committee shall, in its absolute
discretion upon the advice of counsel, determine to be necessary or advisable.

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                                                                    EXHIBIT 4.01

                            MERRIMAC INDUSTRIES, INC.
                             2001 STOCK OPTION PLAN

         1. Purpose. The purposes of the 2001 Stock Option Plan (the "Plan") are
to induce certain individuals to remain in the employ, or to continue to serve
as directors of, or consultants or advisors to, Merrimac Industries, Inc. (the
"Company") and its present and future subsidiary corporations (each a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to attract new individuals to enter into such
employment or service and to encourage such individuals to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors of
the Company (the "Board") believes that the granting of stock options
("Options") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth and financial success.
Options granted hereunder are intended to be either (i) "incentive stock
options" (which term shall have the meaning ascribed thereto by the provisions
of Section 422(b) of the Code) or (ii) options which are not incentive stock
options ("non-qualified stock options") or (iii) a combination thereof, as
determined by the Committee (the "Committee") referred to in Section 5 hereof at
the time of the grant thereof.

         2. Effective Date of Plan. The Plan became effective on April 20, 2001,
subject to ratification by the stockholders of the Company.

         3. Stock Subject to Plan. 175,000 of the authorized but unissued shares
of the common stock, $0.01 par value, of the Company (the "Common Stock") are
hereby reserved for issue upon the exercise of Options granted under the Plan;
provided, however, that the number of shares so reserved may from time to time
be reduced to the extent that a corresponding number of issued and outstanding
shares of the Common Stock are purchased by the Company and set aside for issue
upon the exercise of Options. If any Options expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for the purposes of the Plan.

         4. Administration. The Plan shall be administered by the Committee.
Subject to the express provisions of the Plan, the Committee shall have complete
authority, in its discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements or certificates (which need not
be identical), to determine the individuals (each a "Participant") to whom and
the times and the prices at which Options shall be granted, the periods during
which each Option shall be exercisable, the number of shares of the Common Stock
to be subject to each Option and whether such Option shall be an incentive stock
option or a non-qualified stock option and to make all other determinations
necessary or advisable for the administration of the Plan. In making such
determinations, the Committee may take into account the nature of the services
rendered by the respective individuals, their present and potential
contributions to the success of the Company and the Subsidiaries and such other
factors as the Committee in its discretion shall deem relevant. The Committee's
determination on the matters referred to in this Section 4 shall

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be conclusive. Any dispute or disagreement which may arise under or as a result
of or with respect to any Option shall be determined by the Committee, in its
sole discretion, and any interpretations by the Committee of the terms of any
Option shall be final, binding and conclusive.

         5. Committee. The Committee shall consist of two or more members of the
Board. The Committee shall be appointed annually by the Board, which may at any
time and from time to time remove any members of the Committee, with or without
cause, appoint additional members to the Committee and fill vacancies, however
caused, in the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members present at a meeting duly called and held. Any decision
or determination of the Committee reduced to writing and signed by all of the
members of the Committee shall be fully as effective as if it had been made at a
meeting duly called and held.

         6. Eligibility. An Option may be granted only to a key employee of the
Company or a Subsidiary or to a director of the Company or a Subsidiary who is
not an employee of the Company or a Subsidiary or to an independent consultant
or advisor who renders services to the Company or a Subsidiary.

         7. Option Prices.

                  (a) The initial per share option price of any Option shall be
the price determined by the Committee, but not less than the fair market value
of a share of the Common Stock on the date of grant; provided, however, that, in
the case of a Participant who owns more than 10% of the total combined voting
power of the Common Stock at the time an Option which is an incentive stock
option is granted to him or her, the initial per share option price shall not be
less than 110% of the fair market value of a share of the Common Stock on the
date of grant.

                  (b) For all purposes of the Plan, the fair market value of a
share of the Common Stock on any date shall be equal to (i) the closing sale
price of the Common Stock on the American Stock Exchange on such date or (ii) if
there is no sale of the Common Stock on such Exchange on such date, the average
of the bid and asked prices on such Exchange at the close of the market on such
business day.

         8. Option Term. Participants shall be granted Options for such term as
the Committee shall determine, not in excess of 10 years from the date of the
granting thereof; provided, however, that, in the case of a Participant who owns
more than 10% of the total combined voting power of the Common Stock at the time
an Option which is an incentive stock option is granted to him or her, the term
with respect to such Option shall not be in excess of five years from the date
of the granting thereof.

         9. Limitations on Amount of Options Granted.

                  (c) The aggregate fair market value of the shares of the
Common Stock for which any Participant may be granted incentive stock options
which are exercisable for the first time in any calendar year (whether under the
terms of the Plan or any other stock option plan of the Company) shall not
exceed $100,000.

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                  (d) No Participant shall, during any fiscal year of the
Company, be granted Options under the Plan to purchase more than 15,000 shares
of the Common Stock.

         10. Exercise of Options.

                  (a) Except as otherwise determined by the Committee at the
time of grant, a Participant may not exercise an Option during the period
commencing on the date of the grant of such Option to him or her and ending on
the day immediately preceding the first anniversary of such date. Except as
otherwise determined by the Committee at the time of grant, a Participant may,
during the period commencing on the first anniversary of the date of the grant
of an Option to him or her and ending at the time the Option expires pursuant to
the terms hereof, exercise such Option with respect to all of the shares granted
thereby.

                  (b) Except as hereinbefore otherwise set forth, an Option may
be exercised either in whole at any time or in part from time to time.

                  (c) An Option may be exercised only by a written notice of
intent to exercise such Option with respect to a specific number of shares of
the Common Stock and payment to the Company of the amount of the option price
for the number of shares of the Common Stock so specified; provided, however,
that all or any portion of such payment may be made in kind by the delivery of
shares of the Common Stock having a fair market value equal to the portion of
the option price so paid; provided further, however, that no portion of such
payment may be made by delivering shares of the Common Stock acquired upon the
exercise of an Option if such shares shall not have been held by the Participant
for at least six months; and provided further, however, that, subject to the
requirements of Regulation T (as in effect from time to time) promulgated under
the Securities Exchange Act of 1934, as amended, the Committee may implement
procedures to allow a broker chosen by a Participant to make payment of all or
any portion of the option price payable upon the exercise of an Option and
receive, on behalf of such Participant, all or any portion of the shares of the
Common Stock issuable upon such exercise.

                  (d) The Committee may, in its discretion, permit any Option to
be exercised, in whole or in part, prior to the time when it would otherwise be
exercisable.

         11. Transferability. (a) Except as otherwise provided in Section 11(b)
hereof, no Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to such Participant may be exercised only by him or her.

                  (b) A Participant may, with the prior approval of the
Committee, transfer for no consideration an Option which is a non-qualified
stock option to or for the benefit of the Participant's Immediate Family, a
trust for the exclusive benefit of the Participant's Immediate Family or to a
partnership or limited liability company for one or more members of the
Participant's Immediate Family, subject to such limits as the Committee may
establish, and the transferee shall remain subject to all the terms and
conditions applicable to the Option prior to such transfer. The term "Immediate
Family" shall mean the Participant's children, stepchildren,

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grandchildren, parents, stepparents, grandparents, spouse, former spouse,
siblings, nieces, nephews, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships or any person sharing the Participant's household (other than a
tenant or employee).

         12. Termination of Employment or Service. Unless otherwise determined
by the Committee, in the event a Participant's employment or service with the
Company and the Subsidiaries terminates by reason of his or her death, each
Option therefore granted to him or her which shall not have theretofore expired
or otherwise been cancelled shall immediately become exercisable in full and
shall terminate upon the earlier to occur of the expiration of 12 months after
the date of his or her death and the date of termination specified in such
Option. Unless otherwise determined by the Committee, in the event a
Participant's employment or service with the Company and the Subsidiaries
terminates by reason of his or her disability, each Option therefore granted to
him or her which shall not have theretofore expired or otherwise been cancelled
shall immediately become exercisable in full and shall terminate upon the
earlier to occur of the expiration of 12 months after the date of his or her
disability and the date of termination specified in such Option. Unless
otherwise determined by the Committee, in the event a Participant's employment
or service with the Company and the Subsidiaries terminates by reason of his or
her retirement, each Option therefore granted to him or her which shall not have
theretofore expired or otherwise been cancelled shall immediately become
exercisable in full and shall terminate upon the earlier to occur of the
expiration of three months after the date of his or her retirement and the date
of termination specified in such Option. Unless otherwise determined by the
Committee, in the event the employment or service of a Participant is terminated
by the Company and its Subsidiaries for any reason other than death, disability,
retirement or cause, each Option theretofore granted to him or her which shall
not have theretofore expired or otherwise been cancelled shall terminate upon
the earlier to occur of the expiration of 30 days after the date of his or her
termination and the date of termination specified in such Option. Unless
otherwise terminated by the Committee in the event a Participant leaves the
employ or service of the Company and its Subsidiaries by reason of his or her
voluntary action or for cause prior to death, disability or retirement, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not theretofore
exercised, terminate forthwith. For purposes of the foregoing (a) "disability"
means total disability as determined in accordance with the terms of any
long-term disability plan maintained by the Company or the Subsidiaries (or, if
the Company and the Subsidiaries have no such plan, as determined by the
Committee) (b) "retirement" means termination of employment in accordance with
the retirement provisions of any retirement plan maintained by the Company or
the Subsidiaries (or, if the Company and the Subsidiaries have no such plan, at
or after age 65) and (c) "cause" means (i) a plea of guilty or nolo contendere
to, or conviction for, the commission of a felony offense by a Participant; (ii)
a material breach by a Participant of a fiduciary duty owed to the Company or
any of its Subsidiaries, (iii) a material breach by a Participant of any
nondisclosure, non-solicitation or non-competition obligation owed to the
Company or any of its Subsidiaries and (iv) the willful and continued failure or
gross neglect on the part of a Participant to perform his or her employment
duties.

         13. Adjustment of Number of Shares. In the event that a dividend shall
be declared upon the Common Stock payable in shares of the Common Stock, the
number of shares of the Common Stock then subject to any Option and the number
of shares of the Common Stock

                                      4
<PAGE>

reserved for issuance in accordance with the provisions of the Plan but not yet
covered by an Option, the number of shares set forth in Section 9(b) hereof and
the number of shares set forth in Section 20(b)(i) hereof shall be adjusted by
adding to each share the number of shares which would be distributable thereon
if such shares had been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend. In the event that the
outstanding shares of the Common Stock shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, whether through reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation, then, there shall be
substituted for each share of the Common Stock then subject to any Option, for
each share of the Common Stock reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option, for each share of the
Common Stock referred to in Section 9(b) hereof and for each share of the Common
Stock referred to in Section 20(b)(i) hereof, the number and kind of shares of
stock or other securities into which each outstanding share of the Common Stock
shall be so changed or for which each such share shall be exchanged. In the
event that there shall be any change, other than as specified in this Section
13, in the number or kind of outstanding shares of the Common Stock, or of any
stock or other securities into which the Common Stock shall have been changed,
or for which it shall have been exchanged, then, if the Committee shall, in its
sole discretion, determine that such change equitably requires an adjustment in
the number or kind of shares then subject to any Option, the number or kind of
shares reserved for issuance in accordance with the provisions of the Plan but
not yet covered by an Option, the number or kind of shares referred to in
Section 9(b) hereof and number or kind of shares referred to in Section 20(b)(i)
hereof, such adjustment shall be made by the Committee and shall be effective
and binding for all purposes of the Plan and of each stock option agreement or
certificate entered into in accordance with the provisions of the Plan. In the
case of any substitution or adjustment in accordance with the provisions of this
Section 13, the option price in each stock option agreement or certificate for
each share covered thereby prior to such substitution or adjustment shall be the
option price for all shares of stock or other securities which shall have been
substituted for such share or to which such share shall have been adjusted in
accordance with the provisions of this Section 13. No adjustment or substitution
provided for in this Section 13 shall require the Company to sell a fractional
share under any stock option agreement or certificate. In the event of the
dissolution or liquidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving corporation, then,
except as otherwise provided in the second sentence of this Section 13, each
Option, to the extent not theretofore exercised, shall terminate forthwith.

         14. Purchase for Investment, Withholding and Waivers. Unless the shares
to be issued upon the exercise of an Option by a Participant shall be registered
prior to the issuance thereof under the Securities Act of 1933, as amended, such
Participant will, as a condition of the Company's obligation to issue such
shares, be required to give a representation in writing that he or she is
acquiring such shares for his or her own account as an investment and not with a
view to, or for sale in connection with, the distribution of any thereof. In the
event of the death of a Participant, a condition of exercising any Option shall
be the delivery to the Company of such tax waivers and other documents as the
Committee shall determine. In the case of each non-qualified stock option, a
condition of exercising the same shall be the entry by the person exercising the
same into such arrangements with the Company with respect to withholding as the
Committee may determine.

                                      5
<PAGE>

         15. No Stockholder Status. Neither any Participant nor his or her legal
representatives, legatees or distributees shall be or be deemed to be the holder
of any share of the Common Stock covered by an Option unless and until a
certificate for such share has been issued. Upon payment of the purchase price
thereof, a share issued upon exercise of an Option shall be fully paid and
non-assessable.

         16. No Restrictions on Corporate Acts. Neither the existence of the
Plan nor any Option shall in any way affect the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or 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.

         17. No Employment Right. Neither the existence of the Plan nor the
grant of any Option shall require the Company or any Subsidiary to continue any
Participant in the employ or service of the Company or such Subsidiary.

         18. Termination and Amendment of the Plan. The Board may at any time
terminate the Plan or make such modifications of the Plan as it shall deem
advisable; provided, however, that the Board may not without further approval of
the holders of a majority of the shares of the Common Stock present in person or
by proxy at any special or annual meeting of the stockholders, increase the
number of shares as to which Options may be granted under the Plan (as adjusted
in accordance with the provisions of Section 13 hereof), or change the class of
persons eligible to participate in the Plan, or change the manner of determining
the option prices. Except as otherwise provided in Section 13 hereof, no
termination or amendment of the Plan may, without the consent of the Participant
to whom any Option shall theretofore have been granted, adversely affect the
rights of such Participant under such Option.

         19. Expiration and Termination of the Plan. The Plan shall terminate on
April 19, 2011 or at such earlier time as the Board may determine. Options may
be granted under the Plan at any time and from time to time prior to its
termination. Any Option outstanding under the Plan at the time of the
termination of the Plan shall remain in effect until such Option shall have been
exercised or shall have expired in accordance with its terms.

         20. Options for Outside Directors.

                  (a) A director of the Company who is not an employee of the
Company or a Subsidiary (an "Outside Director") shall be eligible to receive, in
addition to any other Option which he or she may receive pursuant to Section 6
hereof, an Option in accordance with Section 20(b) hereof. Except as otherwise
provided in this Section 20, each such Option shall be subject to all of the
terms and conditions of the Plan.

                  (b)(i) On the date of each annual meeting of stockholders,
each Outside Director shall receive a grant of an Option, which shall be a
non-qualified stock option, to purchase 2,500 shares of Common Stock. If an
Outside Director is first elected a member of the Company's

                                      6
<PAGE>

Board of Directors other than at an annual meeting of stockholders, then, on the
date he or she is first so elected, he or she shall receive a grant of an
Option, which shall be a non-qualified stock option, to purchase 2,500 shares of
Common Stock. Options granted to Outside Directors shall be immediately
exercisable.

                  (ii) The number and nature of shares subject to any Option
held by an Outside Director shall be subject to adjustment only to the extent
set forth in Section 13 hereof.

                  (iii) The initial per share option price of each Option
granted to an Outside Director under this Section 20 shall be equal to the fair
market value of a share of the Common Stock on the date of grant.

                  (iv) The term of each Option granted to an Outside Director
shall be five years from the date of the granting thereof, unless sooner
terminated in accordance with Section 20(c).

                  (iv) All or any portion of the payment required upon the
exercise of an Option granted to an Outside Director may be made in kind by the
delivery of shares of the Common Stock having a fair market value equal to the
portion of the option price so paid; provided, however, that no portion of such
payment may be made by delivering shares of the Common Stock acquired upon the
exercise of an Option if such shares shall not have been held by such Outside
Director for at least six months; and provided further, however, that, subject
to the requirements of Regulation T (as in effect from time to time) promulgated
under the Exchange Act, the Committee may implement procedures to allow a broker
chosen by such Outside Director to make payment of all or any portion of the
option price payable upon the exercise of an Option and receive, on behalf of
such Outside Director, all or any portion of the shares of the Common Stock
issuable upon such exercise.

         (c) If an Outside Director's service as a director terminates by reason
of his or her death, each Option theretofore granted to him or her pursuant to
Section 20(b) hereof which shall not have theretofore expired or otherwise been
cancelled shall terminate upon the earlier to occur of 12 months following the
date of his or her death and the date of termination specified in such Option.
If an Outside Director's service as a director terminates for any reason other
than death, each Option theretofore granted to him or her pursuant to Section
20(b) hereof which shall not have theretofore expired or otherwise been
cancelled shall terminate upon the earlier to occur of three months following
such termination and the date of termination specified in such Option.

         (d) The provisions of this Section 20 may not be amended except by the
vote of a majority of the members of the Board and by the vote of a majority of
the members of the Board who are not Outside Directors.

                                      7

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