Document:

EXHIBIT 10

EXHIBIT 10.2

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT, dated and effective as of September 30, 2002, is by and between AMBIENT CORPORATION, a Delaware corporation (the "Company"), and CONSOLIDATED EDISON, INC., a New York corporation (the "Investor", each of the Company and the Investor being a "Party" and together the "Parties").

WITNESSETH:

WHEREAS, the Company and the Consolidated Edison Company of New York, Inc. ("CECONY") have entered into the Research and Development Agreement dated as of February 7, 2002, as subsequently amended by Amendment No. 1 dated as of June 11, 2002 and by Amendment No. 2 dated as of August 19, 2002 (the "Development Agreement", capitalized terms used herein and not otherwise defined being used

herein as defined in the Development Agreement), pursuant to which they are jointly designing, developing and testing the Company's proposed power-line communications technology;

WHEREAS, as of August 19, 2002, the Company and CECONY entered into Amendment No. 2 to the Development Agreement ("Amendment No.2") pursuant to which, inter-alia, Investor is entitled to purchase from the Company shares of the Company's Common Stock, par value $0.001 (the "Common Stock"), for an aggregate investment of $1.4 million, subject to the completion of a due diligence examination to the Investor's satisfaction in its sole and unfettered discretion not subject to any standard of commercial reasonableness (the "Investment"); and

WHEREAS, the Investor has notified the Company that it intends to complete the Investment and, accordingly, the Parties are entering into this Agreement, as contemplated by Amendment No. 2, to address the Parties' respective rights and obligations concerning the Investment.

NOW, THEREFORE, the Parties hereto agree as follows:

1. PURCHASE AND SALE OF COMMON STOCK

1.1 Sale and Issuance of Common Stock. Subject to the terms and conditions of this Agreement, and to the completion of a due diligence examination to the Investor's satisfaction in its sole and unfettered discretion not subject to any standard of commercial reasonableness the Investor agrees to purchase and the

Company agrees to sell and issue to the Investor, an aggregate of thirty-five million (35,000,000) shares (the "Shares") of the Company's Common Stock. The purchase price for the Shares shall be Four Cents ($0.04) per Share, for an aggregate purchase price of One Million Four Hundred Thousand Dollars ($1,400,000) (the "Purchase Price").

1.2 Closing. The purchase and sale of the Shares shall take place as hereinafter provided. The purchase and sale of an initial tranche of twelve million two hundred fifty thousand (12,250,000) of the Shares shall take place at the Investor's headquarters at 4 Irving Place, New York, New York, at 10 a.m.

on September 30, 2002 (or such other location and time as the Investor and the Company consent to)(the "Initial Closing") against the payment of $225,000 of the Purchase Price and the cancellation by the Investor of the principal amount of $265,000 previously advanced to the Company pursuant to Amendment 

No. 2 and pursuant to Amendment No. 1 to the Development Agreement ("Amendment No. 1") entered into by the Company and the Investor on August 19, 2002 and June 11, 2002, respectively, and further amended and restated as of the date hereof. Thereafter, subsequent closings for the purchase and sale of five additional tranches shall take place at intervals of not more than 30 days, with the first such subsequent closing taking place not more than 30 days from the Initial Closing (each such subsequent closing shall be referred to as a "Subsequent Closing" and collectively with the Initial Closing, may be referred to as the "Closing") and with the first four (4) such subsequent Closings being for five million (5,000,000) Shares each against the payment of $200,000 and the last Closing being for two million seven hundred fifty thousand (2,750,000) Shares against the payment of $110,000. At each of the Initial Closing and each

respective Subsequent Closing, the Company shall deliver to the Investor the certificate representing the Shares purchased at such Closing against receipt by the Company from the Investor of payment of the respective portion of the Purchase Price then due.

1.3 Forgiveness of Amounts Previously Advanced by the Investor. Upon the Initial Closing and the conversion into Shares as provided in Section 1.2 above, the obligations of the Company to repay the advance of $175,000 made pursuant to Amendment No. 2 and the advance of $90,000 made pursuant to Amendment No. 1, in each case by the Investor, shall be deemed to have been satisfied in full.

1.4 Continuing Effect of Amendment No. 2 and Amendment No. 1. As provided in Section 7.10 hereof, each of the Company and the Investor covenant and agree that it is their intention that the terms and provisions of this Agreement shall reflect their entire understanding and agreement with respect to the Investment and the other matters addressed herein. Notwithstanding the foregoing, all of the terms and provisions contained in the Development Agreement, Amendment No. 1 and Amendment No. 2 (other than the provisions relating to the Investment which are superceded by this Agreement, and except that all references to Second Advance and Third Advance contained in the Development Agreement, as amended by Amendment No. 1 and Amendment No. 2, shall be null and void and of no further force and effect) shall be of continuing force and effect and CECONY may choose to assign any right thereunder to the Investor or to any other affiliate and CECONY hereby agrees and, if requested by Ambient at the time of such assignment, CECONY will at that time confirm in writing that such assignment does not operate as a novation of CECONY. In the event of an inconsistency between this Agreement and Amendment No. 1 or Amendment No. 2, the provisions of this Agreement shall control.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth in a Disclosure Letter delivered to Investor prior to the Initial Closing, as of the date hereof, the date of the Initial Closing and the date of each Subsequent Closing, the Company hereby represents and warrants to the Investor as follows:

2.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on (a) the business, operations, assets, or financial condition of the Company on a consolidated basis or (b) the ability of the Company to perform its obligations pursuant to the transactions contemplated by this Agreement or under the agreements or instruments to be entered into or filed in connection herewith ("Material Adverse Effect").

2.2 Authorization. All corporate action on the part of the Company necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and the authorization, issuance and delivery of the Shares being sold hereunder, has been taken or will be taken prior to the Initial Closing, and this Agreement, upon due execution and delivery, constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally. 

2.3 Valid Issuances. The Shares being purchased by the Investor hereunder, or any portion(s) thereof, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and the Investor shall have good and valid title to such Shares, free and clear of any liens, pledges, encumbrances, taxes, charges or restrictions of any kind (other than as created by or through the Investor).

2.4 Compliance with Law and Charter Documents. The Company is in compliance with, and is not in violation of, or default under, any provisions of its Certificate of Incorporation or Bylaws, both as currently in effect. To its knowledge, the Company is in compliance in all material respects with all applicable laws, rules, regulations, judgments, decrees and governmental orders, except for such non-compliance that would not have a Material Adverse Effect. The execution, delivery and performance of the Agreement and the consummation of the transactions contemplated hereby will not result in a violation or default of any agreement that the Company is party to, or be in conflict with or constitute, either a default under the Company's Certificate of Incorporation or Bylaws, both as currently in effect, or an event which results in the creation of any material lien, charge or encumbrance upon the capital stock or any asset of the Company, or a default under any agreement, contract, license, instrument or commitment (oral or written) to which the Company is a party or is bound and which involves payment by the Company or any of its subsidiaries which is material to the business, properties, financial condition or results of operation of the Company or its subsidiaries (a "Material Agreement"), or a violation of any material laws, rules, regulations, judgments, decrees or orders. All material licenses, permits, approvals, registrations, qualifications, certificates and other authorizations necessary for the conduct of the Company's business as presently conducted (the "Licenses") have been duly obtained and are in full force and effect, and there are no proceedings pending or threatened which may result in the revocation, cancellation, suspension or any material adverse modification of any of such Licenses, except for Licenses that, individually or in the aggregate, the Company need not hold or possess in order to avoid a Material Adverse Effect

2.5 Litigation. Except as set forth in the Disclosure Letter, there is no action, suit, proceeding or investigation pending or currently threatened against the Company which questions the validity of this Agreement or the consummation of the transactions contemplated hereby, which might result, either individually or in the aggregate, in any Material Adverse Effects on the assets, financial condition, operations or business of the Company, financially or otherwise. There is no action, suit, proceeding or investigation by the Company currently pending.

2.6 Intellectual Property.

(i) As used in this Agreement, the term "Intellectual Property" means the following items that are held for use or used in the businesses of the Company and its subsidiaries as conducted as of the date hereof or as presently contemplated to be conducted and any licenses to use any of the following: all trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and general intangibles of like nature, together with the goodwill, registrations and applications relating to the foregoing, and any material unregistered trademarks or service marks (collectively, "Trademarks"); patents,

patent applications and any continuations, divisionals, continuations-in-part, renewals, reissues for any of the foregoing (collectively, "Patents"); copyrights (including registrations and applications for any of the foregoing and material common law or unregistered copyrights) (collectively, "Copyrights"); computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, databases and compilations, including any and all data and collections  of data, all documentation, including user manuals and training materials, related to any of the foregoing and the content and information contained on any Web site (collectively, "Software"); confidential information, technology, know-how, inventions, processes, formulae, algorithms, models and methodologies (collectively, "Trade Secrets").

(ii) Except as set forth in this Agreement, in the Development Agreement and in the Disclosure Letter, the Company has the right to use all Intellectual Property, free and clear of all liens, pledges, encumbrances, taxes, charges or restrictions of any kind, and the Company is listed in the records of the appropriate United States, state, or foreign registry as the sole current owner of record for each application and registration.

(iii) Any Intellectual Property owned or used by the Company has been duly maintained, is valid and subsisting, is in full force and effect and has not been cancelled, expired or abandoned.

(iv) There is no pending or, to the knowledge of the Company, threatened claim, suit, arbitration or other adversarial proceeding before any court, agency, arbitral tribunal, or registration authority, in any jurisdiction, and neither the Company nor its subsidiaries has received written notice regarding any of the foregoing, involving: (i) the Intellectual Property owned by the Company, (ii) the Intellectual Property licensed to the Company, (A) alleging that the activities or the conduct of the businesses of the Company infringes upon, violate, or constitute the unauthorized use of the intellectual property rights of any third party, or (B) challenging the ownership rights of the Company, or validity, enforceability, and registrability of, any Intellectual Property. 

(v) To the knowledge of the Company, no third party is misappropriating, infringing, diluting or violating any Intellectual Property owned by the Company.

(vi) The Company takes reasonable measures to protect the confidentiality of Trade Secrets. No Trade Secret of the Company has been disclosed or authorized to be disclosed to any third party other than pursuant to a written nondisclosure agreement that adequately protects the proprietary interests of the Company in and to such Trade Secrets.

2.7 Title to Property and Assets. The Company owns and has valid title to its property and assets free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise and do not materially impair the Company's ownership or use of such property or assets or which would not, in the aggregate, have a Material Adverse Effect. With respect to the property and assets it leases, the Company is in compliance with such leases and, to the best of its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances. The Company does not own any real property.

2.8 Security Interest in the Collateral. The Company is in compliance and has been in compliance at all times since February 7, 2002 with the covenants set forth in the first two sentences of Section 3.6(e) of the Development Agreement.

2.9. Capitalization. The capitalization of the Company is as set forth in Schedule 2.9 hereto, which Schedule 2.9 includes all warrants, options, calls, puts, pre-emptive or appraisal rights, or other rights to buy, sell or otherwise acquire or dispose of Common Stock.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.

As of the date hereof, the date of the Initial Closing and the date of each Subsequent Closing, the Investor hereby represents and warrants to the Company that:

3.1 Authorization, Compliance with Laws and Charter Documents. The Investor has full power and authority to enter into this Agreement. This Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally. The execution, delivery and performance of the Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a default under the Investor's organizational documents, as currently in effect, or an event which results in the creation of any lien, charge or encumbrance upon the capital stock or 

any asset of the Investor, or a default under any agreement or contract of the Investor, or a violation of any laws, rules, regulations, judgments, decrees or orders, except in the case of any of the foregoing, such default(s), lien(s)

charge(s), encumbrance(s) or violation(s) as would not have a material adverse effect on the Investor and Consolidated Edison, Inc. ("CEI") and all other companies (besides the Investor) directly or indirectly owned by CEI, considered as a whole.

3.2 Purchase Entirely for Own Account. The Investor is acquiring the Shares for investment for its own account, not as a nominee or agent, and not with a view to, or for the resale or distribution of any part thereof. The Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Shares.

3.3 Disclosure of Information. The Investor has received all of the information which it considers necessary or appropriate for deciding whether to purchase the Shares. The Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares.

3.4 Accredited Investor. The Investor is an "accredited investor" within the meaning of Rule 501 of Regulation D, as presently in effect.

3.5 Restricted Securities. The Investor acknowledges that, because the Shares have not been registered under the Securities Act, the Shares, and must be held indefinitely unless the resale of which is subsequently registered under the Securities Act or an exemption from such registration is available. The Investor is aware of the provisions of Rule 144 promulgated under the Securities Act which permits limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions.

3.6 Possession of Material Non-Confidential Information: Investor acknowledges, in connection with Investor's purchase of the Shares and discussions and negotiations with respect thereto, that the Investor may be in possession of material non-public information and, accordingly, agrees that it may not transfer any securities owned by it unless in compliance with applicable securities laws and regulations.

3.7 Legends. The Investor understands that until (a) the Shares may be sold by the Investor under Rule 144(k) or (b) such time as the resale of the Shares have been registered under the Securities Act as contemplated in Section 4 hereof, the certificates representing the Shares will bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Shares):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS, OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN OPINION FROM COUNSEL THAT SUCH OFFER, SALE OR TRANSFER FALLS WITHIN AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THOSE LAWS.

3.8 Standstill. The Investor hereby agrees that neither the Investor nor any of its affiliates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), will (and the Investor and such affiliates will not assist, provide or arrange financing to or for others or encourage others to), directly or indirectly, acting alone or in concert with others: (a) acquire or agree, offer, seek or propose to acquire through a business combination or otherwise, ownership (including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of a substantial portion of the assets or business of the Company (other than in the ordinary course of business) or any additional securities of the Company, or any bank debt, claims or other obligations of the Company, or any rights or options to acquire such ownership (including from a third party), or make any public announcement with respect to any of the foregoing; or (b) sell, assign, transfer, pledge or otherwise convey any or all of the Shares (other than in connection with open market transactions pursuant to an effective registration statement), in either case pursuant to (a) or (b) above unless the Investor shall first give the Company thirty (30) days prior written notice of the conveyance and the opportunity to acquire the Shares on the same terms.

4. COVENANTS OF THE COMPANY AND DEMAND REGISTRATION RIGHTS

4.1 Board Representation: Following the Initial Closing and so long as the Investor shall hold, in the aggregate, at all times following the completion of all the Closings, at least 25.0% of the issued and outstanding shares of the Company's Common Stock (the "Requisite Percentage"), the Investor shall be entitled to designate one member (the Investor's Director Designee") of the Company's board of directors (the "Board"). The Investor shall be entitled to first exercise its right hereunder to designate the Investor's Director Designee only after it has paid into the Company the final installment of the Purchase Price at the last Closing and such right shall then continue in full force and effect so long as the Investor shall hold the Requisite Percentage. Investor acknowledges and agrees that the director designated by it to sit on the

Company's Board shall be subject to re-election by the Company's stockholders at the Company's scheduled meetings for the election of directors.

4.1.1 The right of the Investor under Section 3.7 of the Development Agreement to appoint an observer to the Company Board shall, upon the first exercise of the Investor's right under Section 4.1 to appoint the Investor's Director Designee, cease and be of no further force and effect.

4.2 Approvals: Following the Initial Closing and so long as the Investor shall hold, in the aggregate, at all times following the completion of all the Closings, at least the Requisite Percentage of the Common Stock, the Company covenants to notify the Investor in writing in advance of, and the Investor shall be entitled to approve or reject, in a commercially reasonable manner: (1) any debt or equity financing or asset sale to be undertaken by Ambient involving an amount in excess of $500,000; and (2) any single expenditure involving in excess of $100,000 or aggregate monthly expenditures involving in excess of $300,000, provided, however, that the rights specified in (1) above shall terminate on the earlier to occur of the Investor's decision to terminate such rights, or June 30, 2003. Subsequent to June 30, 2003, the Investor retains the right to approve or reject a debt or equity financing in excess of $750,000 provided that in the event the Investor disapproves, the Investor is to provide financing to the Company on substantially similar terms and conditions within 30 days. In addition, the right specified in (2) above shall expire upon the earlier to occur of the successful raising by the Company of $500,000 of capital other than from the Investment or February 28, 2003.

4.3 Registration Rights (i) Upon the written request of the Investor, the Company shall file a registration statement (the "Registration Statement"), with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933 (the "Act") with respect to the Shares; provided, however that such request must be for the registration of not less than 10,000,000 Shares.

(ii) At such time as the Company files a Registration Statement with the SEC under the Act with respect to securities held by any of the Company's other stockholders or rights holders, the Company will include the Shares in such Registration Statement, subject to the Investor agreeing to any lock up or other restriction then asked of the other registering holders, and if the such securities (the "Outstanding Shares") cannot be accommodated in such Registration Statement, then the Outstanding Shares shall be included in proportion to corresponding respective ownership stakes they represent.

(iii) The Shares sought to be registered pursuant to (i) or (ii) above are hereinafter referred to as the "Securities". The Investor (also referred to hereinafter as the "Holder") shall pay any and all underwriting commissions, if any, in connection with the registration and sale of the Securities under this Section 4.3, but the Company shall bear all fees and expenses attendant to registering the Securities under federal, state and any other securities laws, and any required filings with the NASD, including, without limitation, all printing costs.

(iv) The Company shall use its best efforts through its officers, directors, auditors, and counsel to cause such registration statement to become effective as promptly as practicable.

(v) The Company shall use its best efforts to cause the Securities to be registered or qualified for sale under the securities or blue sky laws of such jurisdictions as the Holder may reasonably request; provided, however, that the Company shall not by reason of this Section 4.3 be required to qualify to do business in any state in which it is not otherwise required to qualify to do business or to file a general consent to service of process in such jurisdiction.

(vi) Upon request, the Company shall furnish the Holder and its counsel copies of all registration statements and amendments and supplements thereto, each preliminary and final prospectus and amendment and supplement thereto, comment letters from the SEC, the National Association of Securities Dealers ("NASD") and state securities commissions, and such other documents as the Investor shall reasonably request to facilitate the disposition of the Securities included in such registration.

(vii) The Company will indemnify and hold harmless the Holder, and each partner, officer, director, and controlling person of the Holder, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement against all claims, losses, damages and liabilities (or actions in respect thereof under the Act, the Exchange Act, common law or otherwise arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like as

amended and supplemented) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Act or any state securities or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will promptly reimburse the Holder, and each partner, officer, director, and each controlling person of the Holder, for any legal and other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, that the Company will not be liable to the Holder or any partner, officer, director and controlling person of the Holder, to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission contained in information furnished to the Company by the Holder in writing for use therein.

(viii) In connection with any registration statement in which the Holder is participating, the Holder shall furnish to the Company in writing such information and affidavits as the Company and any underwriter reasonably requests for use in connection with any such registration statement or prospectus and shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by the Holder.

(ix) If the indemnification provided for in subparagraph (vi) above is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such of loss, liability, claim, damage, expense in such proportion as is appropriate to reflect the relative fault of the

indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of competent jurisdiction by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the party's relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(x) With a view to making available the benefits of certain rules and regulations of the SEC which may permit the sale of restricted securities (as that term is used in Rule 144 under the Act) to the public without registration, the Company undertakes to use its best efforts to:

(A) make and keep public information available as those terms are understood and defined in Rule 144 under the Act;

(B) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act at any time after it has become subject to such reporting requirements; and

(C) so long as the Holder owns any restricted Securities, furnish to the Holder promptly upon a written request by the Holder as to the Company's compliance with the reporting requirements of Rule 144 (at any time from and after ninety days following the effective date of the first registration statement filed by the Company for an offering of Securities to the general public), and of the Act and Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Holder may reasonably request in availing himself, herself or itself of any rule or regulation of the SEC allowing the Holder to sell any such Securities without registration.

(ix) Notwithstanding the forgoing, if at any time or from time to time after the date of effectiveness of the Registration Statement, the Company notifies the Holder in writing of the existence of a Potential Material Event, the Holder shall not offer or sell any Securities, or engage in any other transaction involving or relating to the Securities, from the time of the giving of notice with respect to a Potential Material Event until either the events or circumstances comprising such Potential Material Event have been disclosed to the public or no longer constitute a Potential Material Event; provided however, that the Company may not so suspend the right to the Holder during the periods the Registration Statement is required to be in effect other than during a Permitted Suspension Period. The term "Permitted Suspension Period" means one or more suspension periods during any consecutive 12-month period and the term "Potential Material Event" shall mean any of the following: (i) the possession by the Company of material information not ripe for disclosure in a registration statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the registration statement would be detrimental to the business and affairs of the Company; or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time, which determination shall be accompanied by a good faith determination. Notwithstanding anything to the contrary contained herein, the provisions hereof shall not apply to the extent that any of the Securities then included in such Registration Statement may be sold or otherwise transferred under Rule 144 under the Act or are transferred in a private non-brokerage transaction.

4.4 Security Interest Granted Pursuant to Development Agreement. The Company agrees to take any action reasonably requested by the Investor to further assure the attachment and perfection of the security interest granted pursuant to Section 3.6(e) of the Development Agreement, including, without limitation, executing appropriate instruments required by the Uniform Commercial Code (UCC) and pursuant to the rules and regulations of the United States Patent and Trademark Office ("PTO"). Specifically the Company covenants to provide, prior to any public announcement of the granting to it of any US or foreign jurisdiction patent, a letter to the Investor for purposes of filing with the PTO or its foreign counterpart(s), substantially identical to the letter provided by the Company to the Investor dated September 18, 2002 regarding US Patent #6,452,482.

5. CONDITIONS OF INVESTOR'S SIGNING AND OF INVESTOR'S OBLIGATIONS AT CLOSING.

The obligations of the Investor under subsection 1.1 of this Agreement are subject to the fulfillment, or written waiver by the Investor, on or before the Initial Closing and, thereafter, on each Subsequent Closing, of each of the following conditions:

5.1 Representatives, Warranties, Covenants. The representations and warranties of the Company must be true and correct in all material respects as of the Closing as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties must be true and correct as of such date) and the Company must have performed and complied in all material respects with the covenants and conditions required by this Agreement to be performed or complied with by the Company at or prior to the Closing.

5.2 Litigation. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction will have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

5.3 Miscellaneous Conditions. There shall not have occurred any of the following events (any of  which shall give the Investor the option, but not the obligation, to refuse to consummate the Initial Closing or any Subsequent Closing, as the case may be):

(a) 

there shall occur any event, voluntary or involuntary, relating to the Company's bankruptcy, insolvency, reorganization, moratorium or liquidation, or to the Company's inability to pay its debts as they come due, including but not limited to any filing under Chapter 7 or 11 of the United States Bankruptcy Code;

(b)

the commencement of any proceeding, judicial or administrative, which in the Investor's sole and unfettered discretion not subject to any standard of commercial reasonableness, is likely to have a Material Adverse Effect; and

(c)

any of John Joyce, Yehuda Cern or Ram Rao shall die or become unable to perform their duties as presently being performed, which inability shall continue for a period of at least 10 days; provided, however, that during any such 10 day period, the Investor's obligation's under Section 1.2 hereunder shall be temporarily suspended.

6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.

The obligations of the Company to the Investor under this Agreement are subject to the fulfillment on or before the Initial Closing and, thereafter, on each Subsequent Closing, of each of the following conditions:

6.1 Execution of Agreement. The Investor will have executed and delivered this Agreement to the Company.

6.2 Purchase Price. The Investor will have delivered the Purchase Price then due to the Company in accordance with this Agreement.

6.3 Representations, Warranties, Covenants. The representations and warranties of the Investor must be true and correct in all material respects as of the Initial Closing and must remain true and correct through each Additional Closing, as though made at that time (except for representations and warranties that speak as of a specific date, which representations and warranties must be correct as of such date), and the Investor will have performed and complied in all material respects with the covenants and conditions required by this Agreement to be performed or complied with by the Investor at or prior to the Initial Closing and each Additional Closing.

6.3 Legal Impediment. No statute, rule, regulation, executive order, decree, ruling or injunction will have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7. MISCELLANEOUS.

7.1 Survival of Representations, Warranties and Covenants. The warranties, representations and covenants of the Company and the Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the completion of all of the Subsequent Closings and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor or the Company.

7.2 Successor and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Shares). Nothing in this Agreement, express or implied, is intended to

confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

7.3 Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York as applicable to contracts to be performed entirely within that state. Each of the parties consents to the exclusive jurisdiction of the state or federal courts whose districts encompass any part of the New York County or the Second Circuit, in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each party waives its

right to trial by jury. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law.

7.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original by the party executing the same, but all of which together shall constitute one and the same instrument.

7.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience and are not to be considered in construing or interpreting this Agreement.

7.6 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and (i) delivered personally, (ii) mailed by registered or certified mail (postage prepaid, return receipt requested) or (iii) sent by telecopier, with the written notice sent by mail as set forth in (ii) above, to the parties as follows:

(i)

if to Company to:

Ambient Corporation

1033 Beacon Street

Brookline, MA 02446

Attention: John Joyce - Chief Executive Officer

Telecopier No.: 1-617-566-3035

with a copy to:

Aboudi & Brounstein

3 Gavish Street

Kfar Saba, Israel

Telecopier No. 011-972-9 764-4833

(ii)

if to Investor to:

Consolidated Edison, Inc.

4 Irving Place - Room 1810

New York, NY 10003

Attention: Senior Vice President and General Counsel

Telecopier No.: (212) 674-7329

with a copy to:

Consolidated Edison Company of New York, Inc.

4 Irving Place -Room 700

New York, NY 10003

Attention: Vice President, Corporate Planning

Telecopier No.: (212) 673-6484

or at such other addresses as shall be furnished by the parties by like notice, and such notice or communication shall be deemed to have been given or made as of the date so delivered, mailed or sent.

7.7 Finder's Fee. Each Party represents that it neither is nor will be obligated for any finders' fee or commission in connection with this transaction. The Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders' fee (and the costs and expenses of defending against such liability or asserted liability) for which the Investor or any of its officers, partners, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Investor from any liability for any commission or compensation in the nature of a finders' fee (and the costs and 

expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

7.8 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor.

7.9 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

7.10 Entire Agreement. This Agreement and all schedules and exhibits attached thereto, constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein. All other prior agreements, understandings and representations, both oral and written, between the parties with respect to the subject matter hereof, including without limitation, Amendment No. 2, are superseded and of no effect. This Agreement may be executed in counterparts and by the exchange of facsimile signed copies.

IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement.

AMBIENT CORPORATION

BY: /s/ John J. Joyce

Name: John J. Joyce

Title: Chief Executive Officer

CONSOLIDATED EDISON, INC.

BY: /s/ Robert P. Stelben

Name: Robert P. Stelben

Title: Vice President and Treasurerex10_1.htm

    EDOORWAYS
INC. 2008 INCENTIVE STOCK PLAN

    

    

    This eDoorways, inc. 2008 Incentive
Stock Plan (the "Plan") is designed to retain
directors, executives and selected employees and consultants and reward them for
making major contributions to the success of the Company. These objectives are
accomplished by making long-term incentive awards under the Plan thereby
providing Participants with a proprietary interest in the growth and performance
of the Company.

    

    
      	
              1.  

            	
              Definitions.

            

    

    

    
      	
              (a)  

            	
              "Board" - The Board of
      Directors of the Company.

            

    

    

    
      	
              (b)  

            	
              "Code" - The Internal
      Revenue Code of 1986, as amended from time to
  time.

            

    

    

    
      	
              (c)  

            	
              "Committee" - The
      Compensation Committee of the Company's Board, or such other committee of
      the Board that is designated by the Board to administer the Plan, composed
      of not less than two members of the Board all of whom are disinterested
      persons, as contemplated by Rule 16b-3 ("Rule 16b-3") promulgated
      under the Securities Exchange Act of 1934, as amended (the "Exchange
      Act").

            

    

    

    
      	
              (d)  

            	
              "Company" - eDoorways,
      Inc. and its subsidiaries including subsidiaries of
      subsidiaries.

            

    

    

    
      	
              (e)  

            	
              "Exchange Act" - The Securities
      Exchange Act of 1934, as amended from time to
  time.

            

    

    

    
      	
              (f)  

            	
              "Fair Market Value" - The
      fair market value of the Company's issued and outstanding Stock as
      determined in good faith by the Board or
  Committee.

            

    

     

    
      	
              (g)  

            	
              "Grant" - The grant of
      any form of stock option, stock award, or stock purchase offer, whether
      granted singly, in combination or in tandem, to a Participant pursuant to
      such terms, conditions and limitations as the Committee may establish in
      order to fulfill the objectives of the
Plan.

            

    

    

    
      	
              (h)  

            	
              "Grant Agreement" - An
      agreement between the Company and a Participant that sets forth the terms,
      conditions and limitations applicable to a
  Grant.

            

    

    

    
      	
              (i)  

            	
              "Option" - Either an
      Incentive Stock Option, in accordance with Section 422 of Code, or a
      Nonstatutory Option, to purchase the Company's Stock that may be awarded
      to a Participant under the Plan. A Participant who receives an award of an
      Option shall be referred to as an "Optionee."

            

    

    

    
      	
              (j)  

            	
              "Participant" - A
      director, officer, employee or consultant of the Company to whom an Award
      has been made under the Plan.

            

    

    

    
      	
              (k)  

            	
              "Restricted Stock Purchase
      Offer" - A Grant of the right to purchase a specified number of
      shares of Stock pursuant to a written agreement issued under the
      Plan.

            

    

    

    
      	
              (l)  

            	
              "Securities Act" - The
      Securities Act of 1933, as amended from time to
  time.

            

    

    

    
      	
              (m)  

            	
              "Stock" - Authorized and
      issued or unissued shares of common stock of the
  Company.

            

    

    

    
      	
              (n)  

            	
              "Stock Award" - A Grant
      made under the Plan in stock or denominated in units of stock for which
      the Participant is not obligated to pay additional
      consideration.

            

    

    

    
      	
              2.  

            	
              Administration.
      The Plan shall be administered by the Board, provided however, that the
      Board may delegate such administration to the Committee. Subject to the
      provisions of the Plan, the Board and/or the Committee shall have
      authority to (a) grant, in its discretion, Incentive Stock Options in
      accordance with Section 422 of the Code, or Nonstatutory Options, Stock
      Awards or Restricted Stock Purchase Offers; (b) determine in good faith
      the fair market value of the Stock covered by any Grant; (c) determine
      which eligible persons shall receive Grants and the number of shares,
      restrictions, terms and conditions to be included in such Grants; (d)
      construe and interpret the Plan; (e) promulgate, amend and rescind rules
      and regulations relating to its administration, and correct defects,
      omissions and inconsistencies in the Plan or any Grant; (f) consistent
      with the Plan and with the consent of the Participant, as appropriate,
      amend any outstanding Grant or amend the exercise date or dates thereof;
      (g) determine the duration and purpose of leaves of absence which may be
      granted to Participants without constituting termination of their
      employment for the purpose of the Plan or any Grant; and (h) make all
      other determinations necessary or advisable for the Plan's administration.
      The interpretation and construction by the Board of any provisions of the
      Plan or selection of Participants shall be conclusive and final. No member
      of the Board or the Committee shall be liable for any action or
      determination made in good faith with respect to the Plan or any Grant
      made thereunder.

            

    

    

    
      	
              3.  

            	
              Eligibility.

            

    

    

    
      	
              (a)  

            	
              General: The persons who shall be eligible
      to receive Grants shall be directors, officers, employees or consultants
      to the Company. The term consultant shall mean any person, other than an
      employee, who is engaged by the Company to render services and is
      compensated for such services. An Optionee may hold more than one Option.
      Any issuance of a Grant to an officer or director of the Company
      subsequent to the first registration of any of the securities of the
      Company under the Exchange Act shall comply with the requirements of Rule
      16b-3.

            

    

    

    
      	
              (b)  

            	
              Incentive Stock Options: Incentive Stock
      Options may only be issued to employees of the Company. Incentive Stock
      Options may be granted to officers or directors, provided they are also
      employees of the Company. Payment of a director's fee shall not be
      sufficient to constitute employment by the
  Company.

            

    

    

    The
Company shall not grant an Incentive Stock Option under the Plan to any employee
if such Grant would result in such employee holding the right to exercise for
the first time in any one calendar year, under all Incentive Stock Options
granted under the Plan or any other plan maintained by the Company, with respect
to shares of Stock having an aggregate fair market value, determined as of the
date of the Option is granted, in excess of $100,000. Should it be determined
that an Incentive Stock Option granted under the Plan exceeds such maximum for
any reason other than a failure in good faith to value the Stock subject to such
option, the excess portion of such option shall be considered a Nonstatutory
Option. To the extent the employee holds two (2) or more such Options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such Option as Incentive Stock Options under
the Federal tax laws shall be applied on the basis of the order in which such
Options are granted. If, for any reason, an entire Option does not qualify as an
Incentive Stock Option by reason of exceeding such maximum, such Option shall be
considered a Nonstatutory Option.

    

    
      	
              (c)  

            	
              Nonstatutory Option: The provisions of the
      foregoing Section 3(b) shall not apply to any Option designated as a
      "Nonstatutory
      Option" or which sets forth the intention of the parties that the
      Option be a Nonstatutory Option.

            

    

    

    
      	
              (d)  

            	
              Stock Awards and Restricted Stock Purchase
      Offers: The provisions of this Section 3 shall not apply to any
      Stock Award or Restricted Stock Purchase Offer under the
    Plan.

            

    

    

    
      	
              4.  

            	
              Stock.

            

    

    

    
      	
              (a)  

            	
              Authorized Stock: Stock subject to Grants
      may be either unissued or reacquired
Stock.

            

    

    

    
      	
              (b)  

            	
              Number of Shares: Subject to adjustment as
      provided in Section 5(i) of the Plan, the total number of shares of Stock
      which may be purchased or granted directly by Options, Stock Awards or
      Restricted Stock Purchase Offers, or purchased indirectly through exercise
      of Options granted under the Plan shall not exceed Two Million
      (2,000,000). If any Grant shall for any reason terminate or expire, any
      shares allocated thereto but remaining unpurchased upon such expiration or
      termination shall again be available for Grants with respect thereto under
      the Plan as though no Grant had previously occurred with respect to such
      shares. Any shares of Stock issued pursuant to a Grant and repurchased
      pursuant to the terms thereof shall be available for future Grants as
      though not previously covered by a
Grant.

            

    

    

    
      	
              (c)  

            	
              Reservation of Shares: The Company shall
      reserve and keep available at all times during the term of the Plan such
      number of shares as shall be sufficient to satisfy the requirements of the
      Plan. If, after reasonable efforts, which efforts shall not include the
      registration of the Plan or Grants under the Securities Act, the Company
      is unable to obtain authority from any applicable regulatory body, which
      authorization is deemed necessary by legal counsel for the Company for the
      lawful issuance of shares hereunder, the Company shall be relieved of any
      liability with respect to its failure to issue and sell the shares for
      which such requisite authority was so deemed necessary unless and until
      such authority is obtained.

            

    

    

    
      	
              (d)  

            	
              Application of Funds: The proceeds received
      by the Company from the sale of Stock pursuant to the exercise of Options
      or rights under Stock Purchase Agreements will be used for general
      corporate purposes.

            

    

    

     

    
      	
              (e)  

            	
              No Obligation to Exercise: The issuance of
      a Grant shall impose no obligation upon the Participant to exercise any
      rights under such Grant.

            

    

    

    
      	
              5.  

            	
              Terms
      and Conditions of Options. Options granted hereunder shall be evidenced by
      agreements between the Company and the respective Optionees, in such form
      and substance as the Board or Committee shall from time to time approve.
      The form of Incentive Stock Option Agreement attached hereto as Exhibit A and the three forms of a
      Nonstatutory Stock Option Agreement for employees, for directors and for
      consultants, attached hereto as Exhibit
      B-1, Exhibit B-2 and Exhibit B-3, respectively, shall be deemed
      to be approved by the Board. Option agreements need not be identical, and
      in each case may include such provisions as the Board or Committee may
      determine, but all such agreements shall be subject to and limited by the
      following terms and conditions:

            

    

    

    
      	
              (a)  

            	
              Number of Shares: Each Option shall state
      the number of shares to which it
pertains.

            

    

    

    
      	
              (b)  

            	
              Exercise Price: Each Option shall state the
      exercise price, which shall be determined as
  follows:

            

    

    

    
      	
              (i)  

            	
              Any
      Incentive Stock Option granted to a person who at the time the Option is
      granted owns (or is deemed to own pursuant to Section 424(d) of the Code)
      stock possessing more than ten percent (10%) of the total combined voting
      power or value of all classes of stock of the Company ("Ten Percent Holder")
      shall have an exercise price of no less than 110% of the Fair Market Value
      of the Stock as of the date of grant;
and

            

    

    

    
      	
              (ii)  

            	
              Incentive
      Stock Options granted to a person who at the time the Option is granted is
      not a Ten Percent Holder shall have an exercise price of no less than 100%
      of the Fair Market Value of the Stock as of the date of
    grant.

            

    

    

    For the
purposes of this Section 5(b), the Fair Market Value shall be as determined by
the Board in good faith, which determination shall be conclusive and binding;
provided however, that if there is a public market for such Stock, the Fair
Market Value per share shall be the average of the bid and asked prices (or the
closing price if such stock is listed on the NASDAQ National Market System or
Small Cap Issue Market) on the date of grant of the Option, or if listed on a
stock exchange, the closing price on such exchange on such date of
grant.

    

    
      	
              (c)  

            	
              Medium and Time of Payment: The exercise
      price shall become immediately due upon exercise of the Option and shall
      be paid in cash or check made payable to the Company. Should the Company's
      outstanding Stock be registered under Section 12(g) of the Exchange Act at
      the time the Option is exercised, then the exercise price may also be paid
      as follows:

            

    

    
      	
               

            

    

    
      	
              (i)  

            	
              in
      shares of Stock held by the Optionee for the requisite period necessary to
      avoid a charge to the Company's earnings for financial reporting purposes
      and valued at Fair Market Value on the exercise date,
  or

            

    

    

    
      	
              (ii)  

            	
              through
      a special sale and remittance procedure pursuant to which the Optionee
      shall concurrently provide irrevocable written instructions (a) to a
      Company designated brokerage firm to effect the immediate sale of the
      purchased shares and remit to the Company, out of the sale proceeds
      available on the settlement date, sufficient funds to cover the aggregate
      exercise price payable for the purchased shares plus all applicable
      Federal, state and local income and employment taxes required to be
      withheld by the Company by reason of such purchase and (b) to the Company
      to deliver the certificates for the purchased shares directly to such
      brokerage firm in order to complete the sale
  transaction.

            

    

    

    At the
discretion of the Board, exercisable either at the time of Option grant or of
Option exercise, the exercise price may also be paid (i) by Optionee's delivery
of a promissory note in form and substance satisfactory to the Company and
permissible under the Securities Rules of the applicable state and bearing
interest at a rate determined by the Board in its sole discretion, but in no
event less than the minimum rate of interest required to avoid the imputation of
compensation income to the Optionee under the Federal tax laws, or (ii) in such
other form of consideration permitted by the applicable state corporations law
as may be acceptable to the Board.

    

    
      	
              (d)  

            	
              Term and Exercise of Options: Any Option
      granted to an employee of the Company shall become exercisable over a
      period of no longer than five (5) years, and no less than twenty percent
      (20%) of the shares covered thereby shall become exercisable annually. No
      Option shall be exercisable, in whole or in part, prior to one (1) year
      from the date it is granted unless the Board shall specifically determine
      otherwise, as provided herein. In no event shall any Option be exercisable
      after the expiration of ten (10) years from the date it is granted, and no
      Incentive Stock Option granted to a Ten Percent Holder shall, by its
      terms, be exercisable after the expiration of five (5) years from the date
      of the Option. Unless otherwise specified by the Board or the Committee in
      the resolution authorizing such Option, the date of grant of an Option
      shall be deemed to be the date upon which the Board or the Committee
      authorizes the granting of such
Option.

            

    

    

    Each
Option shall be exercisable to the nearest whole share, in installments or
otherwise, as the respective Option agreements may provide. During the lifetime
of an Optionee, the Option shall be exercisable only by the Optionee and shall
not be assignable or transferable by the Optionee, and no other person shall
acquire any rights therein. To the extent not exercised, installments (if more
than one) shall accumulate, but shall be exercisable, in whole or in part, only
during the period for exercise as stated in the Option agreement, whether or not
other installments are then exercisable.

    

    
      	
              (e)  

            	
              Termination of Status as Employee, Consultant or
      Director: If Optionee's status as an employee shall terminate for
      any reason other than Optionee's disability or death, then Optionee (or if
      the Optionee shall die after such termination, but prior to exercise,
      Optionee's personal representative or the person entitled to succeed to
      the Option) shall have the right to exercise the portions of any of
      Optionee's Incentive Stock Options which were exercisable as of the date
      of such termination, in whole or in part, not less than 30 days nor more
      than three (3) months after such termination (or, in the event of "termination for good
      cause" as that term is defined in the applicable state case law
      related thereto, or by the terms of the Plan or the Option Agreement or an
      employment agreement, the Option shall automatically terminate as of the
      termination of employment as to all shares covered by the
      Option).

            

    

    

    With
respect to Nonstatutory Options granted to employees, directors or consultants,
the Board may specify such period for exercise, not less than 30 days (except
that in the case of "termination for cause" or
removal of a director, the Option shall automatically terminate as of the
termination of employment or services as to shares covered by the Option,
following termination of employment or services as the Board deems reasonable
and appropriate. The Option may be exercised only with respect to installments
that the Optionee could have exercised at the date of termination of employment
or services. Nothing contained herein or in any Option granted pursuant hereto
shall be construed to affect or restrict in any way the right of the Company to
terminate the employment or services of an Optionee with or without
cause.

    

    
      	
              (f)  

            	
              Disability of Optionee: If an Optionee is
      disabled (within the meaning of Section 22(e)(3) of the Code) at the time
      of termination, the three (3) month period set forth in Section 5(e) shall
      be a period, as determined by the Board and set forth in the Option, of
      not less than six months nor more than one year after such
      termination.

            

    

    

    
      	
              (g)  

            	
              Death of Optionee: If an Optionee dies
      while employed by, engaged as a consultant to, or serving as a Director of
      the Company, the portion of such Optionee's Option which was exercisable
      at the date of death may be exercised, in whole or in part, by the estate
      of the decedent or by a person succeeding to the right to exercise such
      Option at any time within (i) a period, as determined by the Board and set
      forth in the Option, of not less than six (6) months nor more than one (1)
      year after Optionee's death, which period shall not be more, in the case
      of a Nonstatutory Option, than the period for exercise following
      termination of employment or services, or (ii) during the remaining term
      of the Option, whichever is the lesser. The Option may be so exercised
      only with respect to installments exercisable at the time of Optionee's
      death and not previously exercised by the
  Optionee.

            

    

    

    
      	
              (h)  

            	
              Nontransferability of Option: No Option
      shall be transferable by the Optionee, except by will or by the laws of
      descent and distribution.

            

    

    

    
      	
              (i)  

            	
              Recapitalization: Subject to any required
      action of shareholders, the number of shares of Stock covered by each
      outstanding Option, and the exercise price per share thereof set forth in
      each such Option, shall be proportionately adjusted for any increase or
      decrease in the number of issued shares of Stock of the Company resulting
      from a stock split, stock dividend, combination, subdivision or
      reclassification of shares, or the payment of a stock dividend, or any
      other increase or decrease in the number of such shares affected without
      receipt of consideration by the Company; provided, however, the conversion
      of any convertible securities of the Company shall not be deemed to have
      been "effected without
      receipt of consideration" by the
Company.

            

    

    

    In the
event of a proposed dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving entity, or a sale of all
or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), unless
otherwise provided by the Board, this Option shall terminate immediately prior
to such date as is determined by the Board, which date shall be no later than
the consummation of such Reorganization. In such event, if the entity which
shall be the surviving entity does not tender to Optionee an offer, for which it
has no obligation to do so, to substitute for any unexercised Option a stock
option or capital stock of such surviving of such surviving entity, as
applicable, which on an equitable basis shall provide the Optionee with
substantially the same economic benefit as such unexercised Option, then the
Board may grant to such Optionee, in its sole and absolute discretion and
without obligation, the right for a period commencing thirty (30) days prior to
and ending immediately prior to the date determined by the Board pursuant hereto
for termination of the Option or during the remaining term of the Option,
whichever is the lesser, to exercise any unexpired Option or Options without
regard to the installment provisions of Paragraph 6(d) of the Plan; provided,
that any such right granted shall be granted to all Optionees not receiving an
offer to receive substitute options on a consistent basis, and provided further,
that any such exercise shall be subject to the consummation of such
Reorganization.

    

    Subject
to any required action of shareholders, if the Company shall be the surviving
entity in any merger or consolidation, each outstanding Option thereafter shall
pertain to and apply to the securities to which a holder of shares of Stock
equal to the shares subject to the Option would have been entitled by reason of
such merger or consolidation.

    

    In the
event of a change in the Stock of the Company as presently constituted, which is
limited to a change of all of its authorized shares without par value into the
same number of shares with a par value, the shares resulting from any such
change shall be deemed to be the Stock within the meaning of the
Plan.

    

    To the
extent that the foregoing adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as expressly
provided in this Section 5(i), the Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number of shares
of stock of any class, and the number or price of shares of Stock subject to any
Option shall not be affected by, and no adjustment shall be made by reason of,
any dissolution, liquidation, merger, consolidation or sale of assets or capital
stock, or any issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.

    

    The Grant
of an Option pursuant to the Plan shall not affect in any way the right or power
of the Company to make any adjustments, reclassifications, reorganizations or
changes in its capital or business structure or to merge, consolidate, dissolve,
or liquidate or to sell or transfer all or any part of its business or
assets.

    

    
      	
              (j)  

            	
              Rights as a Shareholder: An Optionee shall
      have no rights as a shareholder with respect to any shares covered by an
      Option until the effective date of the issuance of the shares following
      exercise of such Option by Optionee. No adjustment shall be made for
      dividends (ordinary or extraordinary, whether in cash, securities or other
      property) or distributions or other rights for which the record date is
      prior to the date such stock certificate is issued, except as expressly
      provided in Section 5(i) hereof.

            

    

    

     

    
      	
              (k)  

            	
              Modification, Acceleration, Extension, and Renewal
      of Options: Subject to the terms and conditions and within the
      limitations of the Plan, the Board may modify an Option, or, once an
      Option is exercisable, accelerate the rate at which it may be exercised,
      and may extend or renew outstanding Options granted under the Plan or
      accept the surrender of outstanding Options (to the extent not theretofore
      exercised) and authorize the granting of new Options in substitution for
      such Options, provided such action is permissible under applicable state
      securities law. Notwithstanding the provisions of this Section 5(k),
      however, no modification of an Option shall, without the consent of the
      Optionee, alter to the Optionee's detriment or impair any rights or
      obligations under any Option theretofore granted under the
      Plan.

            

    

    

    
      	
              (l)  

            	
              Exercise Before Exercise Date: At the
      discretion of the Board, the Option may, but need not, include a provision
      whereby the Optionee may elect to exercise all or any portion of the
      Option prior to the stated exercise date of the Option or any installment
      thereof. Any shares so purchased prior to the stated exercise date shall
      be subject to repurchase by the Company upon termination of Optionee's
      employment as contemplated by Section 5(n) hereof prior to the exercise
      date stated in the Option and such other restrictions and conditions as
      the Board or Committee may deem
advisable.

            

    

    

    
      	
              (m)  

            	
              Other Provisions: The Option agreements
      authorized under the Plan shall contain such other provisions, including,
      without limitation, restrictions upon the exercise of the Options, as the
      Board or the Committee shall deem advisable. Shares shall not be issued
      pursuant to the exercise of an Option, if the exercise of such Option or
      the issuance of shares thereunder would violate, in the opinion of legal
      counsel for the Company, the provisions of any applicable law or the rules
      or regulations of any applicable governmental or administrative agency or
      body, such as the Code, the Securities Act, the Exchange Act, state and
      securities laws, and the rules promulgated under the foregoing or the
      rules and regulations of any exchange upon which the shares of the Company
      are listed. Without limiting the generality of the foregoing, the exercise
      of each Option shall be subject to the condition that if at any time the
      Company shall determine that (i) the satisfaction of withholding tax or
      other similar liabilities, or (ii) the listing, registration or
      qualification of any shares covered by such exercise upon any securities
      exchange or under any state or federal law, or (iii) the consent or
      approval of any regulatory body, or (iv) the perfection of any exemption
      from any such withholding, listing, registration, qualification, consent
      or approval is necessary or desirable in connection with such exercise or
      the issuance of shares thereunder, then in any such event, such exercise
      shall not be effective unless such withholding, listing registration,
      qualification, consent, approval or exemption shall have been effected,
      obtained or perfected free of any conditions not acceptable to the
      Company.

            

    

    

    
      	
              (n)  

            	
              Repurchase Agreement: The Board may, in its
      discretion, require as a condition to the Grant of an Option hereunder,
      that an Optionee execute an agreement with the Company, in form and
      substance satisfactory to the Board in its discretion ("Repurchase Agreement"),
      (i) restricting the Optionee's right to transfer shares purchased under
      such Option without first offering such shares to the Company or another
      shareholder of the Company upon the same terms and conditions as provided
      therein; and (ii) providing that upon termination of Optionee's employment
      with the Company, for any reason, the Company (or another shareholder of
      the Company, as provided in the Repurchase Agreement) shall have the right
      at its discretion (or the discretion of such other shareholders) to
      purchase and/or redeem all such shares owned by the Optionee on the date
      of termination of his or her employment at a price equal to: (A) the fair
      value of such shares as of such date of termination; or (B) if such
      repurchase right lapses at 20% of the number of shares per year, the
      original purchase price of such shares, and upon terms of payment
      permissible under applicable state securities rules; provided that in the
      case of Options or Stock Awards granted to officers, directors,
      consultants or affiliates of the Company, such repurchase provisions may
      be subject to additional or greater restrictions as determined by the
      Board or Committee.

            

    

    

     

    
      	
              6.  

            	
              Stock
      Awards and Restricted Stock Purchase
Offers.

            

    

    

    
      	
              (a)  

            	
              Types of
Grants.

            

    

    

    
      	
              (i)  

            	
              Stock Award. All or part of any Stock Award
      under the Plan may be subject to conditions established by the Board or
      the Committee, and set forth in the Stock Award Agreement, which may
      include, but are not limited to, continuous service with the Company,
      achievement of specific business objectives, increases in specified
      indices, attaining growth rates and other comparable measurements of
      Company performance. Such Awards may be based on Fair Market Value or
      other specified valuation. All Stock Awards will be made pursuant to the
      execution of a Stock Award Agreement substantially in the form attached
      hereto as Exhibit
  C.

            

    

    

    
      	
              (ii)  

            	
              Restricted Stock Purchase Offer. A Grant of
      a Restricted Stock Purchase Offer under the Plan shall be subject to such
      (i) vesting contingencies related to the Participant's continued
      association with the Company for a specified time and (ii) other specified
      conditions as the Board or Committee shall determine, in their sole
      discretion, consistent with the provisions of the Plan. All Restricted
      Stock Purchase Offers shall be made pursuant to a Restricted Stock
      Purchase Offer substantially in the form attached hereto as Exhibit
D.

            

    

    

    
      	
              (b)  

            	
              Conditions and Restrictions. Shares of
      Stock which Participants may receive as a Stock Award under a Stock Award
      Agreement or Restricted Stock Purchase Offer under a Restricted Stock
      Purchase Offer may include such restrictions as the Board or Committee, as
      applicable, shall determine, including restrictions on transfer,
      repurchase rights, right of first refusal, and forfeiture provisions. When
      transfer of Stock is so restricted or subject to forfeiture provisions it
      is referred to as "Restricted Stock".
      Further, with Board or Committee approval, Stock Awards or Restricted
      Stock Purchase Offers may be deferred, either in the form of installments
      or a future lump sum distribution. The Board or Committee may permit
      selected Participants to elect to defer distributions of Stock Awards or
      Restricted Stock Purchase Offers in accordance with procedures established
      by the Board or Committee to assure that such deferrals comply with
      applicable requirements of the Code including, at the choice of
      Participants, the capability to make further deferrals for distribution
      after retirement. Any deferred distribution, whether elected by the
      Participant or specified by the Stock Award Agreement, Restricted Stock
      Purchase Offers or by the Board or Committee, may require the payment be
      forfeited in accordance with the provisions of Section 6(c). Dividends or
      dividend equivalent rights may be extended to and made part of any Stock
      Award or Restricted Stock Purchase Offers denominated in Stock or units of
      Stock, subject to such terms, conditions and restrictions as the Board or
      Committee may establish.

            

    

    

    
      	
              (c)  

            	
              Cancellation and Rescission of Grants.
      Unless the Stock Award Agreement or Restricted Stock Purchase Offer
      specifies otherwise, the Board or Committee, as applicable, may cancel any
      unexpired, unpaid, or deferred Grants at any time if the Participant is
      not in compliance with all other applicable provisions of the Stock Award
      Agreement or Restricted Stock Purchase Offer, the Plan and with the
      following conditions:

            

    

    

    
      	
              (i)  

            	
              A
      Participant shall not render services for any organization or engage
      directly or indirectly in any business which, in the judgment of the chief
      executive officer of the Company or other senior officer designated by the
      Board or Committee, is or becomes competitive with the Company, or which
      organization or business, or the rendering of services to such
      organization or business, is or becomes otherwise prejudicial to or in
      conflict with the interests of the Company. For Participants whose
      employment has terminated, the judgment of the chief executive officer
      shall be based on the Participant's position and responsibilities while
      employed by the Company, the Participant's post-employment
      responsibilities and position with the other organization or business, the
      extent of past, current and potential competition or conflict between the
      Company and the other organization or business, the effect on the
      Company's customers, suppliers and competitors and such other
      considerations as are deemed relevant given the applicable facts and
      circumstances. A Participant who has retired shall be free, however, to
      purchase as an investment or otherwise, stock or other securities of such
      organization or business so long as they are listed upon a recognized
      securities exchange or traded over-the-counter, and such investment does
      not represent a substantial investment to the Participant or a greater
      than ten percent (10%) equity interest in the organization or
      business.

            

    

    

    
      	
              (ii)  

            	
              A
      Participant shall not, without prior written authorization from the
      Company, disclose to anyone outside the Company, or use in other than the
      Company's business, any confidential information or material, as defined
      in the Company's Proprietary Information and Invention Agreement or
      similar agreement regarding confidential information and intellectual
      property, relating to the business of the Company, acquired by the
      Participant either during or after employment with the
      Company.

            

    

    

    
      	
              (iii)  

            	
              A
      Participant, pursuant to the Company's Proprietary Information and
      Invention Agreement, shall disclose promptly and assign to the Company all
      right, title and interest in any invention or idea, patentable or not,
      made or conceived by the Participant during employment by the Company,
      relating in any manner to the actual or anticipated business, research or
      development work of the Company and shall do anything reasonably necessary
      to enable the Company to secure a patent where appropriate in the United
      States and in foreign countries.

            

    

    

    
      	
              (iv)  

            	
              Upon
      exercise, payment or delivery pursuant to a Grant, the Participant shall
      certify on a form acceptable to the Committee that he or she is in
      compliance with the terms and conditions of the Plan. Failure to comply
      with all of the provisions of this Section 6(c) prior to, or during the
      six months after, any exercise, payment or delivery pursuant to a Grant
      shall cause such exercise, payment or delivery to be rescinded. The
      Company shall notify the Participant in writing of any such rescission
      within two years after such exercise, payment or delivery. Within ten days
      after receiving such a notice from the Company, the Participant shall pay
      to the Company the amount of any gain realized or payment received as a
      result of the rescinded exercise, payment or delivery pursuant to a Grant.
      Such payment shall be made either in cash or by returning to the Company
      the number of shares of Stock that the Participant received in connection
      with the rescinded exercise, payment or
  delivery.

            

    

    

     

    
      	
              (d)  

            	
              Nonassignability.

            

    

    

    
      	
              (i)  

            	
              Except
      pursuant to Section 6(e)(iii) and except as set forth in Section 6(d)(ii),
      no Grant or any other benefit under the Plan shall be assignable or
      transferable, or payable to or exercisable by, anyone other than the
      Participant to whom it was granted.

            

    

    

    
      	
              (ii)  

            	
              Where
      a Participant terminates employment and retains a Grant pursuant to
      Section 6(e)(ii) in order to assume a position with a governmental,
      charitable or educational institution, the Board or Committee, in its
      discretion and to the extent permitted by law, may authorize a third party
      (including but not limited to the trustee of a "blind" trust), acceptable
      to the applicable governmental or institutional authorities, the
      Participant and the Board or Committee, to act on behalf of the
      Participant with regard to such
Awards.

            

    

    

    
      	
              (e)  

            	
              Termination of Employment. If the
      employment or service to the Company of a Participant terminates, other
      than pursuant to any of the following provisions under this Section 6(e),
      all unexercised, deferred and unpaid Stock Awards or Restricted Stock
      Purchase Offers shall be cancelled immediately, unless the Stock Award
      Agreement or Restricted Stock Purchase Offer provides
      otherwise:

            

    

    

    
      	
              (i)  

            	
              Retirement Under a Company Retirement Plan.
      When a Participant's employment terminates as a result of retirement in
      accordance with the terms of a Company retirement plan, the Board or
      Committee may permit Stock Awards or Restricted Stock Purchase Offers to
      continue in effect beyond the date of retirement in accordance with the
      applicable Grant Agreement and the exercisability and vesting of any such
      Grants may be accelerated.

            

    

    

    
      	
              (ii)  

            	
              Rights in the Best Interests of the
      Company. When a Participant resigns from the Company and, in the
      judgment of the Board or Committee, the acceleration and/or continuation
      of outstanding Stock Awards or Restricted Stock Purchase Offers would be
      in the best interests of the Company, the Board or Committee may (i)
      authorize, where appropriate, the acceleration and/or continuation of all
      or any part of Grants issued prior to such termination and (ii) permit the
      exercise, vesting and payment of such Grants for such period as may be set
      forth in the applicable Grant Agreement, subject to earlier cancellation
      pursuant to Section 9 or at such time as the Board or Committee shall deem
      the continuation of all or any part of the Participant's Grants are not in
      the Company's best interest.

            

    

    

    
      	
              (iii)  

            	
              Death or Disability of a
      Participant. 

            

    

    

    
      	
              (1)  

            	
              In
      the event of a Participant's death, the Participant's estate or
      beneficiaries shall have a period up to the expiration date specified in
      the Grant Agreement within which to receive or exercise any outstanding
      Grant held by the Participant under such terms as may be specified in the
      applicable Grant Agreement. Rights to any such outstanding Grants shall
      pass by will or the laws of descent and distribution in the following
      order: (a) to beneficiaries so designated by the Participant; if none,
      then (b) to a legal representative of the Participant; if none, then (c)
      to the persons entitled thereto as determined by a court of competent
      jurisdiction. Grants so passing shall be made at such times and in such
      manner as if the Participant were
living.

            

    

    

    
      	
              (2)  

            	
              In
      the event a Participant is deemed by the Board or Committee to be unable
      to perform his or her usual duties by reason of mental disorder or medical
      condition which does not result from facts which would be grounds for
      termination for cause, Grants and rights to any such Grants may be paid to
      or exercised by the Participant, if legally competent, or a committee or
      other legally designated guardian or representative if the Participant is
      legally incompetent by virtue of such
  disability.

            

    

    

    
      	
              (3)  

            	
              After
      the death or disability of a Participant, the Board or Committee may in
      its sole discretion at any time (1) terminate restrictions in Grant
      Agreements; (2) accelerate any or all installments and rights; and (3)
      instruct the Company to pay the total of any accelerated payments in a
      lump sum to the Participant, the Participant's estate, beneficiaries or
      representative; notwithstanding that, in the absence of such termination
      of restrictions or acceleration of payments, any or all of the payments
      due under the Grant might ultimately have become payable to other
      beneficiaries.

            

    

    

    
      	
              (4)  

            	
              In
      the event of uncertainty as to interpretation of or controversies
      concerning this Section 6, the determinations of the Board or Committee,
      as applicable, shall be binding and
conclusive.

            

    

    

    
      	
              7.  

            	
              Investment
      Intent. All Grants under the Plan are intended to be exempt from
      registration under the Securities Act provided by Rule 701 thereunder.
      Unless and until the granting of Options or sale and issuance of Stock
      subject to the Plan are registered under the Securities Act or shall be
      exempt pursuant to the rules promulgated thereunder, each Grant under the
      Plan shall provide that the purchases or other acquisitions of Stock
      thereunder shall be for investment purposes and not with a view to, or for
      resale in connection with, any distribution thereof. Further, unless the
      issuance and sale of the Stock have been registered under the Securities
      Act, each Grant shall provide that no shares shall be purchased upon the
      exercise of the rights under such Grant unless and until (i) all then
      applicable requirements of state and federal laws and regulatory agencies
      shall have been fully complied with to the satisfaction of the Company and
      its counsel, and (ii) if requested to do so by the Company, the person
      exercising the rights under the Grant shall (i) give written assurances as
      to knowledge and experience of such person (or a representative employed
      by such person) in financial and business matters and the ability of such
      person (or representative) to evaluate the merits and risks of exercising
      the Option, and (ii) execute and deliver to the Company a letter of
      investment intent and/or such other form related to applicable exemptions
      from registration, all in such form and substance as the Company may
      require. If shares are issued upon exercise of any rights under a Grant
      without registration under the Securities Act, subsequent registration of
      such shares shall relieve the purchaser thereof of any investment
      restrictions or representations made upon the exercise of such
      rights.

            

    

    

    [Missing Graphic Reference]

    
      	
              8.  

            	
              Amendment,
      Modification, Suspension or Discontinuance of the Plan. The Board may,
      insofar as permitted by law, from time to time, with respect to any shares
      at the time not subject to outstanding Grants, suspend or terminate the
      Plan or revise or amend it in any respect whatsoever, except that without
      the approval of the shareholders of the Company, no such revision or
      amendment shall (i) increase the number of shares subject to the Plan,
      (ii) decrease the price at which Grants may be granted, (iii) materially
      increase the benefits to Participants, or (iv) change the class of persons
      eligible to receive Grants under the Plan; provided, however, no such
      action shall alter or impair the rights and obligations under any Option,
      or Stock Award, or Restricted Stock Purchase Offer outstanding as of the
      date thereof without the written consent of the Participant thereunder. No
      Grant may be issued while the Plan is suspended or after it is terminated,
      but the rights and obligations under any Grant issued while the Plan is in
      effect shall not be impaired by suspension or termination of the
      Plan.

            

    

    

    In the
event of any change in the outstanding Stock by reason of a stock split, stock
dividend, combination or reclassification of shares, recapitalization, merger,
or similar event, the Board or the Committee may adjust proportionally (a) the
number of shares of Stock (i) reserved under the Plan, (ii) available for
Incentive Stock Options and Nonstatutory Options and (iii) covered by
outstanding Stock Awards or Restricted Stock Purchase Offers; (b) the Stock
prices related to outstanding Grants; and (c) the appropriate Fair Market Value
and other price determinations for such Grants. In the event of any other change
affecting the Stock or any distribution (other than normal cash dividends) to
holders of Stock, such adjustments as may be deemed equitable by the Board or
the Committee, including adjustments to avoid fractional shares, shall be made
to give proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board or the Committee shall be authorized to issue or assume
stock options, whether or not in a transaction to which Section 424(a) of the
Code applies, and other Grants by means of substitution of new Grant Agreements
for previously issued Grants or an assumption of previously issued
Grants.

    

    
      	
              9.  

            	
              Tax
      Withholding. The Company shall have the right to deduct applicable taxes
      from any Grant payment and withhold, at the time of delivery or exercise
      of Options, Stock Awards or Restricted Stock Purchase Offers or vesting of
      shares under such Grants, an appropriate number of shares for payment of
      taxes required by law or to take such other action as may be necessary in
      the opinion of the Company to satisfy all obligations for withholding of
      such taxes. If Stock is used to satisfy tax withholding, such stock shall
      be valued based on the Fair Market Value when the tax withholding is
      required to be made.

            

    

     

    
      	
              10.  

            	
              Availability
      of Information. During the term of the Plan and any additional period
      during which a Grant granted pursuant to the Plan shall be exercisable,
      the Company shall make available, not later than one hundred and twenty
      (120) days following the close of each of its fiscal years, such financial
      and other information regarding the Company as is required by the bylaws
      of the Company and applicable law to be furnished in an annual report to
      the shareholders of the Company.

            

    

     

    
      	
              11.  

            	
              Notice.
      Any written notice to the Company required by any of the provisions of the
      Plan shall be addressed to the chief personnel officer or to the chief
      executive officer of the Company, and shall become effective when it is
      received by the office of the chief personnel officer or the chief
      executive officer.

            

    

    

    
      	
              12.  

            	
              Indemnification
      of Board. In addition to such other rights or indemnifications as they may
      have as directors or otherwise, and to the extent allowed by applicable
      law, the members of the Board and the Committee shall be indemnified by
      the Company against the reasonable expenses, including attorneys' fees,
      actually and necessarily incurred in connection with the defense of any
      claim, action, suit or proceeding, or in connection with any appeal
      thereof, to which they or any of them may be a party by reason of any
      action taken, or failure to act, under or in connection with the Plan or
      any Grant granted thereunder, and against all amounts paid by them in
      settlement thereof (provided such settlement is approved by independent
      legal counsel selected by the Company) or paid by them in satisfaction of
      a judgment in any such claim, action, suit or proceeding, except in any
      case in relation to matters as to which it shall be adjudged in such
      claim, action, suit or proceeding that such Board or Committee member is
      liable for negligence or misconduct in the performance of his or her
      duties; provided that within sixty (60) days after institution of any such
      action, suit or Board proceeding the member involved shall offer the
      Company, in writing, the opportunity, at its own expense, to handle and
      defend the same.

            

    

     

    
      	
              13.  

            	
              Governing
      Law. The Plan and all determinations made and actions taken pursuant
      hereto, to the extent not otherwise governed by the Code or the securities
      laws of the United States, shall be governed by the law of the State of
      Texas and construed accordingly.

            

    

    

    
      	
              14.  

            	
              Effective
      and Termination Dates. The Plan shall become effective on the date it is
      approved by the holders of a majority of the shares of Stock then
      outstanding. The Plan shall terminate ten years later, subject to earlier
      termination by the Board pursuant to Section
8.

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