Document:

Unassociated Document

Exhibit
4.1

 

FARO
TECHNOLOGIES, INC.

 

2004
EQUITY INCENTIVE PLAN

 

	I.  	
      Purpose

 

The
purpose of the FARO Technologies, Inc. 2004 Equity Incentive Plan (the “Plan”)
is to promote the best interests of FARO Technologies, Inc. (together with any
successor thereto, the “Company”) and its shareholders by providing Employees
and non-employee directors of the Company and its Affiliates (as defined below)
with an opportunity to acquire a proprietary interest in the Company. It is
intended that the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those Employees
who are primarily responsible for shaping and carrying out the long-range plans
of the Company and securing the Company’s continued growth and financial
success. In addition, by encouraging stock ownership by directors who are not
employees of the Company or its Affiliates, the Company seeks to attract and
retain on its Board of Directors persons of exceptional competence and to
provide a further incentive to serve as a director of the Company.

 

II.  Definitions

 

As used
in the Plan, the following terms shall have the respective meanings set forth
below:

 

(a)  “Affiliate”
shall mean any entity that, directly or through one or more intermediaries, is
controlled by, controls, or is under common control with, the
Company.

 

(b)  “Award”
shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Unit, Performance Share or Performance Unit granted under the
Plan.

 

(c)  “Award
Agreement” shall mean any written agreement, contract, or other instrument or
document evidencing any Award granted under the Plan.

 

(d)  “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time. Any
reference to a specific provision of the Code shall also be deemed a reference
to any successor provision thereto.

 

(e)  “Commission”
shall mean the United States Securities and Exchange Commission or any successor
agency.

 

(f)  “Committee”
shall mean a committee of the Board of Directors of the Company designated by
such Board to administer the Plan and comprised solely of not less than two
directors, each of whom will be a “non-employee director” within the meaning of
Rule 16b-3 and each of whom will be an “outside director” within the meaning of
Section 162(m)(4)(C) of the Code; provided that the
mere fact that the Committee shall fail to qualify under the foregoing
requirements shall not invalidate any Award made by the Committee that is
otherwise validly made under the Plan, unless the Committee is aware at the time
of the Award’s grant of the Committee’s failure to so qualify.

 

(g)  “Dividend
Equivalent” shall mean a right, granted to a Participating Employee or a
Non-Employee Director under the Plan, to receive cash equal to the cash
dividends paid with respect to a specified number of Shares. Dividend
Equivalents shall not be deemed to be Awards under the Plan.

 

(h)  “Employee”
shall mean any employee of the Company or any of its subsidiaries.

 

(i)  
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from
time to time.

 

(j)  “Excluded
Items” shall mean any items which the Committee determines shall be excluded in
fixing Performance Goals, including, without limitation, any gains or losses
from discontinued operations, any extraordinary gains or losses and the effects
of accounting changes. 

 

(k)  “Fair
Market Value” shall mean, with respect to any property (including, without
limitation, any Shares or other securities), the fair market value of such
property determined by such methods or procedures as shall be established from
time to time by the Committee.

 

(l)  “Incentive
Stock Option” shall mean an option granted under Section 6(a) of the Plan
that is intended to meet the requirements of Section 422 of the
Code.

 

(m)  “Non-Employee
Director” shall mean a director of the Company or any Affiliate who is not an
employee of the Company or any Affiliate.

 

(n)  “Non-Qualified
Stock Option” shall mean an option granted under Section 6(a) of the Plan
that is not intended to be an Incentive Stock Option.

 

(o)  “Option”
shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

 

(p)  “Participating
Employee” shall mean a Employee designated by the Committee to be granted an
Award under the Plan.

 

(q)  “Performance
Goals” shall mean each of, or a combination of one or more of, the following (in
all cases after excluding the impact of applicable Excluded Items):

 

(i)  Return on
equity;

 

(ii)  Return on
investment;

 

(iii)  Return on
net assets;

 

(iv)  Return on
revenues;

 

(v)  Operating
income;

 

(vi)  Performance
value added (as defined by the Committee at the time of selection);

 

(vii)  Pre-tax
profits;

 

(viii)  Net
income;

 

(ix)  Net
income per Share;

 

(x)  Working
capital as a percent of net revenues;

 

(xi)  Net cash
provided by operating activities;

 

(xii)  Market
price per Share;

 

(xiii)  Total
shareholder return;

 

(xiv)  Key
operational measures, which shall be deemed to include new customer origination,
customer penetration, customer satisfaction, employee safety, market share,
plant utilization, cost containment, and cost structure reduction.

 

(xv)  Cash flow
or cash flow per share;

 

(xvi)  Reserve
value or reserve value per share;

 

(xvii)  Net asset
value or net asset value per share;

 

(xviii)  Production
volumes; and

 

(xix)  Product
and technology developments and improvements.

 

measured
in each case for the Performance Period (aa) for the Company on a
consolidated basis, (bb) for any one or more Affiliates or divisions of the
Company, where appropriate, and/or (cc) for any other business unit or
units of the Company or any Affiliate, where appropriate, as defined by the
Committee at the time of selection; provided that it shall only be appropriate
to measure net earnings per Share and market price per Share on a consolidated
basis.

 

(r)  
“Performance Period” shall mean, in relation to Performance Shares or
Performance Units, any period for which a Performance Goal or Goals have been
established; provided,
however, that
such period shall not be less than one year.

 

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(s)  “Performance
Share” shall mean any right granted under Section 6(e) of the Plan that
will be paid out in cash, as a Share (which, in specified circumstances, may be
a Share of Restricted Stock) or as a Restricted Stock Unit, which right is
contingent on the achievement of one or more Performance Goals during a
specified Performance Period.

 

(t)  “Performance
Unit” shall mean any right granted under Section 6(e) of the Plan to
receive a designated dollar value amount in cash, Shares (which, in specified
circumstances, may be a designated dollar value amount of Shares of Restricted
Stock) or Restricted Stock Units, which right is contingent on the achievement
of one or more Performance Goals during a specified Performance
Period.

 

(u)  “Person”
shall mean any individual, corporation, partnership, association, joint-stock
company, trust, unincorporated organization, or government or political
subdivision thereof.

 

(v)  “Released
Securities” shall mean Shares of Restricted Stock with respect to which all
applicable restrictions have expired, lapsed, or been waived.

 

(w)  “Restricted
Securities” shall mean Awards of Restricted Stock or other Awards under which
issued and outstanding Shares are held subject to certain
restrictions.

 

(x)  “Restricted
Stock” shall mean any Share granted under Section 6(c) of the Plan or, in
specified circumstances, a Share paid in connection with another Award, with
such Share subject to risk of forfeiture and restrictions on transfer or other
restrictions that will lapse upon the achievement of one or more goals relating
to completion of service by the Employee or Non-Employee Director or the
achievement of performance or other objectives, as determined by the
Committee.

 

(y)  “Restricted
Stock Unit” shall mean any right to receive Shares in the future granted under
Section 6(d) of the Plan or paid in connection with another Award, with
such right subject to risk of forfeiture and restrictions on transfer or other
restrictions that will lapse upon the achievement of one or more goals relating
to completion of service by the Employee or Non-Employee Director or the
achievement of performance or other objectives, as determined by the
Committee.

 

(z)  “Rule
16b-3” shall mean Rule 16b-3 as promulgated by the Commission under the Exchange
Act, or any successor rule or regulation thereto.

 

(aa)  “Shares”
shall mean shares of common stock of the Company, $.001 par value, and such
other securities or property as may become subject to Awards pursuant to an
adjustment made under Section 4(b) of the Plan.

 

(bb)  “Stock
Appreciation Right” shall mean any right granted under Section 6(b) of the
Plan.

 

III.  Administration

 

The Plan
shall be administered by the Committee; provided,
however, that if
at any time the Committee shall not be in existence, the functions of the
Committee as specified in the Plan shall be exercised by a committee consisting
of those members of the Board of Directors of the Company who qualify as
“non-employee directors” under Rule 16b-3 and as “outside directors” under
Section 162(m)(4)(C) of the Code. To the extent permitted by applicable law, the
Committee may delegate to one or more executive officers of the Company any or
all of the authority and responsibility of the Committee with respect to the
Plan, other than with respect to Persons who are subject to Section 16 of
the Exchange Act. To the extent the Committee has so delegated to one or more
executive officers the authority and responsibility of the Committee, all
references to the Committee herein shall include such officer or
officers.

 

Subject
to the terms of the Plan and without limitation by reason of enumeration, the
Committee shall have full discretionary power and authority to:
(i) designate Participating Employees and select Non-Employee Directors to
be participants under the Plan; (ii) determine the type or types of Awards
to be granted to each Participating Employee and Non-Employee Director under the
Plan; (iii) determine the number of Shares to be covered by (or with
respect to which payments, rights, or other matters are to be calculated in
connection with) Awards granted to Participating Employees or Non-Employee
Directors; (iv) determine the terms and conditions of any Award granted to
a Participating Employee or Non-Employee Director (provided,
however, that the
exercise price of any Option shall not be less than 100% of the Fair Market
Value of a Share on the date of grant of such Option); (v) determine
whether, to what extent, and under what circumstances Awards granted to
Participating Employees or Non-Employee Directors may be settled or exercised in
cash, Shares, other securities, other Awards, or other property, and the method
or methods by which Awards may be settled, exercised, cancelled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, and other amounts payable with respect
to an Award granted to Participating Employees of Non-Employee Directors under
the Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret and administer the Plan and
any instrument or agreement relating to, or Award made under, the Plan
(including, without limitation, any Award Agreement); (viii) establish,
amend, suspend, or waive such rules and regulations and appoint such agents as
it shall deem appropriate for the proper administration of the Plan; and
(ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time, and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participating Employee, any
Non-Employee Director, any holder or beneficiary of any Award, any shareholder,
and any employee of the Company or of any Affiliate.

 

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IV.  Shares
Available for Award

 

(a)  Shares
Available. Subject
to adjustment as provided in ‎IV(b):

 

(i)  Number
of Shares Available. The
number of Shares with respect to which Awards may be granted under the Plan
shall be 1,750,000 Shares. If, after the effective date of the Plan, any Shares
covered by an Award granted under the Plan, or to which any Award relates, are
forfeited or if an Award otherwise terminates, expires or is cancelled prior to
the delivery of all of the Shares or of other consideration issuable or payable
pursuant to such Award, then the number of Shares counted against the number of
Shares available under the Plan in connection with the grant of such Award, to
the extent of any such forfeiture, termination, expiration or cancellation,
shall again be available for granting of additional Awards under the
Plan.

 

(ii)  Limitations
on Awards to Individual Participants. No
Participating Employee shall be granted, during any calendar year, Options for
more than 150,000 Shares, Stock Appreciation Rights with respect to more than
150,000 Shares, more than 105,000 Shares of Restricted Stock, more than 105,000
Restricted Stock Units, more than 105,000 Performance Shares nor more than
105,000 Performance Units under the Plan. In all cases, determinations under
this ‎IV(a)(ii) shall be
made in a manner that is consistent with the exemption for performance-based
compensation provided by Section 162(m) of the Code and any regulations
promulgated thereunder.

 

(iii)  Accounting
for Awards. The
number of Shares covered by an Award under the Plan, or to which such Award
relates, shall be counted on the date of grant of such Award against the number
of Shares available for granting Awards under the Plan.

 

(iv)  Sources
of Shares Deliverable Under Awards. Any
Shares delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.

 

(b)  Adjustments. In the
event that the Committee shall determine that any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee to be appropriate, then the Committee may, in such
manner as it may deem equitable, adjust any or all of (i) the number and type of
Shares subject to the Plan and which thereafter may be made the subject of
Awards under the Plan, (ii) the number and type of Shares subject to the
individual participant limits of Section 4(a)(ii), (iii) the number and type of
Shares subject to outstanding Awards, and (iv) the grant, purchase, or exercise
price with respect to any Award to reflect such transaction or event; or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award in exchange for cancellation of such Award or in lieu of any
or all of the foregoing adjustments; provided,
however, in each
case, that with respect to Awards of Incentive Stock Options no such adjustment
shall be authorized to the extent that such authority would cause the Plan to
violate Section 422(b) of the Code; and provided
further that the
number of Shares subject to any Award payable or denominated in Shares shall
always be a whole number.

 

V.  Eligibility

 

The
Committee may designate any Employee as a Participating Employee. All
Non-Employee Directors shall be eligible to receive, at the discretion of the
Committee, Awards of Non-Qualified Stock Options pursuant to Section 6(a),
Restricted Stock pursuant to Section 6(c) and Restricted Stock Units pursuant to
Section 6(d). 

 

VI.  Awards

 

(a)  Option
Awards. The
Committee may grant Options to Employees and Non-Employee Directors with the
terms and conditions as set forth below and with such additional terms and
conditions, in either case not inconsistent with the provisions of the Plan, as
the Committee shall determine.

 

(i)  Type
of Option. The
Committee shall determine whether an Option granted to a Participating Employee
is to be an Incentive Stock Option or Non-Qualified Stock Option; provided,
however, that
Incentive Stock Options may be granted only to Employees of the Company, a
parent corporation (within the meaning of Code Section 424(e)) or a subsidiary
corporation (within the meaning of Code Section 424(f)). All Options granted to
Non-Employee Directors shall be Non-Qualified Stock Options.

 

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(ii)  Exercise
Price. The
exercise price per Share of an Option granted pursuant to this ‎VI(a) shall be
determined by the Committee; provided,
however, that
such exercise price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of such Option.

 

(iii)  Option
Term. The
term of each Option shall be fixed by the Committee; provided,
however, that in
no event shall the term of any Option exceed a period of ten years from the date
of its grant.

 

(iv)  Exercisability
and Method of Exercise. An
Option shall become exercisable in such manner and within such period or periods
and in such installments or otherwise as shall be determined by the Committee;
provided,
however, that no
Option may vest and become exercisable within a period that is less than one
year from the date of grant of such Option (subject to acceleration of vesting,
to the extent permitted by the Committee, in the event of the Participating
Employee’s or Non-Employee Director’s death, disability, retirement or
involuntary termination or in the event of a change in control of the Company
(as defined by the Committee)). The Committee also shall determine the method or
methods by which, and the form or forms, including, without limitation, cash,
Shares, other securities, other Awards, or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the relevant
exercise price, in which payment of the exercise price with respect to any
Option may be made or deemed to have been made.

 

(v)  Incentive
Stock Options. The
terms of any Incentive Stock Option granted to a Employee under the Plan shall
comply in all respects with the provisions of Section 422 of the Code and
any regulations promulgated thereunder. Notwithstanding any provision in the
Plan to the contrary, no Incentive Stock Option may be granted hereunder after
the tenth anniversary of the adoption of the Plan by the Board of
Directors.

 

(b)  Stock
Appreciation Rights. The
Committee may grant Stock Appreciation Rights to Employees. Non-Employee
Directors are not eligible to be granted Stock Appreciation Rights under the
Plan. Subject to the terms of the Plan and any applicable Award Agreement, a
Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the Fair
Market Value of one Share on the date of exercise over (ii) the grant price of
the Stock Appreciation Right as specified by the Committee, which shall not be
less than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan, the grant price,
term, methods of exercise, methods of settlement (including whether the
Participating Employee will be paid in cash, Shares, other securities, other
Awards, or other property, or any combination thereof), and any other terms and
conditions of any Stock Appreciation Right shall be determined by the
Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.

 

(c)  Restricted
Stock Awards.

 

(i)  Issuance. The
Committee may grant Awards of Restricted Stock to Employees and Non-Employee
Directors.

 

(ii)  Restrictions. Shares
of Restricted Stock granted to Participating Employees and Non-Employee
Directors shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share of
Restricted Stock or the right to receive any dividend or other right or
property), which restrictions may lapse separately or in combination at such
time or times, in such installments or otherwise, as the Committee may deem
appropriate.

 

(iii)  Registration. Any
Restricted Stock granted under the Plan to a Participating Employee or
Non-Employee Director may be evidenced in such manner as the Committee may deem
appropriate, including, without limitation, book-entry registration or issuance
of a stock certificate or certificates. In the event any stock certificate is
issued in respect of Shares of Restricted Stock granted under the Plan to a
Participating Employee or Non-Employee Director, such certificate shall be
registered in the name of the Participating Employee or Non-Employee Director
and shall bear an appropriate legend (as determined by the Committee) referring
to the terms, conditions, and restrictions applicable to such Restricted
Stock.

 

(iv)  Payment
of Restricted Stock. At the
end of the applicable restriction period relating to Restricted Stock granted to
a Participating Employee or Non-Employee Director, one or more stock
certificates for the appropriate number of Shares, free of restrictions imposed
under the Plan, shall be delivered to the Participating Employee or Non-Employee
Director, or, if the Participating Employee or Non-Employee Director received
stock certificates representing the Restricted Stock at the time of grant, the
legends placed on such certificates shall be removed.

 

5

(v)  Forfeiture. Except
as otherwise determined by the Committee, upon termination of employment of a
Participating Employee or service as a director of a Non-Employee Director (as
determined under criteria established by the Committee) for any reason during
the applicable restriction period, all Shares of Restricted Stock still subject
to restriction shall be forfeited by the Participating Employee or Non-Employee
Director; provided,
however, that
the Committee may, when it finds that a waiver would be in the best interests of
the Company, waive in whole or in part any or all remaining restrictions with
respect to Shares of Restricted Stock held by a Participating Employee or
Non-Employee Director.

 

(vi)  Minimum
Period of Service. If the
right to become vested in a Restricted Stock Award granted under this
Section 6(c) is conditioned on the completion of a specified period of
service with the Company or its Affiliates, without achievement of Performance
Goals or other performance objectives being required as a condition of vesting,
and without it being granted in lieu of other compensation, then the required
period of service for vesting shall be not less than three years (subject to
acceleration of vesting, to the extent permitted by the Committee, in the event
of the Participating Employee’s or Non-Employee Director’s death, disability,
retirement or involuntary termination or in the event of a change in control of
the Company (as defined by the Committee)).

 

(d)  Restricted
Stock Units.

 

(i)  Issuance. The
Committee may grant Awards of Restricted Stock Units to Employees or
Non-Employee Directors.

 

(ii)  Restrictions.
Restricted Stock Units granted to Participating Employees or Non-Employee
Directors shall be subject to such restrictions as the Committee may impose,
which restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise, as the Committee may deem
appropriate.

 

(iii)  Payment
of Shares. At the
end of the applicable restriction period relating to Restricted Stock Units
granted to a Participating Employee or Non-Employee Director, one or more stock
certificates for the number of Shares equal to the corresponding number of
Restricted Stock Units, free of restrictions imposed under the Plan, shall be
delivered to the Participating Employee or Non-Employee Director.

 

(iv)  Forfeiture. Except
as otherwise determined by the Committee, upon termination of employment of a
Participating Employee or service as a director of a Non-Employee Director (as
determined under criteria established by the Committee) for any reason during
the applicable restriction period, all unvested Restricted Stock Units shall be
forfeited by the Participating Employee or Non-Employee Director; provided,
however, that
the Committee may, when it finds that a waiver would be in the best interests of
the Company, waive in whole or in part any or all remaining restrictions with
respect to Restricted Stock Units held by a Participating Employee or
Non-Employee Director.

 

(v)  Minimum
Period of Service. If the
right to become vested in a Restricted Stock Unit Award granted under this
Section 6(d) is conditioned on the completion of a specified period of
service with the Company or its Affiliates, without achievement of Performance
Goals or other performance objectives being required as a condition of vesting,
and without it being granted in lieu of other compensation, then the required
period of service for vesting shall be not less than three years (subject to
acceleration of vesting, to the extent permitted by the Committee, in the event
of the Participating Employee’s or Non-Employee Director’s death, disability,
retirement or involuntary termination or in the event of a change in control of
the Company (as defined by the Committee)).

 

(e)  Performance
Shares and Performance Units.

 

(i)  Issuance. The
Committee may grant Awards of Performance Shares and/or Performance Units to
Employees. Non-Employee Directors are not eligible to be granted Performance
Shares or Performance Units under the Plan.

 

(ii)  Performance
Goals and Other Terms. The
Committee shall determine the Performance Period, the Performance Goal or Goals
(and the performance level or levels related thereto) to be achieved during any
Performance Period, the proportion of payments, if any, to be made for
performance between the minimum and full performance levels for any Performance
Goal and, if applicable, the relative percentage weighting given to each of the
selected Performance Goals. The Committee shall also determine the restrictions
applicable to Shares of Restricted Stock or Restricted Stock Units received upon
payment of Performance Shares or Performance Units if Performance Shares or
Performance Units are paid in such manner, and any other terms, conditions and
rights relating to a grant of Performance Shares or Performance Units. The
Committee shall have sole discretion to choose among the selected Performance
Goals set forth in ‎II(q). Subject
to shareholder approval to the extent required to qualify the Award for the
performance-based exemption provided by Section 162(m) of the Code, the
Committee shall have sole discretion to choose Performance Goals in addition to
those set forth in ‎II(q), or
alter such Performance Goals. Notwithstanding the foregoing, in the event the
Committee determines it is advisable to grant Performance Shares or Performance
Units which do not qualify for the performance-based exemption under
Section 162(m) of the Code, the Committee may make such grants without
satisfying the requirements thereof.

 

6

(iii)  No
Voting Rights.
Participating Employees shall have no voting rights with respect to Performance
Shares or Shares underlying Performance Units held by them during the applicable
Performance Period.

 

(iv)  Payment. As soon
as is reasonably practicable following the end of the applicable Performance
Period, and subject to the Committee certifying in writing as to the
satisfaction of the requisite Performance Goal or Goals if such certification is
required in order to qualify the Award for the performance-based exemption
provided by Section 162(m) of the Code, payment of earned Performance
Shares and/or Performance Units shall be made. The Committee, in its sole
discretion, may pay earned Performance Shares and Performance Units in the form
of cash, Shares (which may be Shares of Restricted Stock), Restricted Stock
Units or a combination of cash, Shares (which may be Shares of Restricted Stock)
and/or Restricted Stock Units, which have an aggregate Fair Market Value equal
to the value of the earned Performance Shares and Shares underlying earned
Performance Units at the close of the applicable Performance Period. Any Shares
of Restricted Stock payable in connection with Performance Shares or Performance
Units shall, pending the expiration, lapse, or waiver of the applicable
restrictions, be evidenced in the manner as set forth in ‎VI(c)(iii) hereof.

 

(f)  General.

 

(i)  No
Consideration for Awards. Awards
shall be granted to Participating Employees and Non-Employee Directors for no
cash consideration unless otherwise determined by the Committee.

 

(ii)  Award
Agreements. Each
Award granted under the Plan shall be evidenced by an Award Agreement in such
form (consistent with the terms of the Plan) as shall have been approved by the
Committee.

 

(iii)  Awards
May Be Granted Separately or Together. Awards
to Participating Employees under the Plan may be granted either alone or in
addition to, in tandem with, or in substitution for any other Award or any award
granted under any other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards, or in addition to or in tandem with
awards granted under any other plan of the Company or any Affiliate, may be
granted either at the same time as or at a different time from the grant of such
other Awards or awards.

 

(iv)  Forms
of Payment Under Awards. Subject
to the terms of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant, exercise, or
payment of an Award to a Participating Employee or Non-Employee Director may be
made in such form or forms as the Committee shall determine, and may be made in
a single payment or transfer, in installments, or on a deferred basis, in each
case in accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for the payment
or crediting of interest on installment or deferred payments.

 

(v)  Limits
on Transfer of Awards. Except
as otherwise provided by the Committee, no Award (other than Released
Securities), and no right under any such Award, shall be assignable, alienable,
saleable, or transferable by a Participating Employee or Non-Employee Director
otherwise than by will or by the laws of descent and distribution (or, in the
case of an Award of Restricted Securities, to the Company); provided,
however, that a
Participating Employee or Non-Employee Director at the discretion of the
Committee may be entitled, in the manner established by the Committee, to
designate a beneficiary or beneficiaries to exercise his or her rights, and to
receive any property distributable, with respect to any Award upon the death of
the Participating Employee or Non-Employee Director, as the case may be. Each
Award, and each right under any Award, shall be exercisable, during the lifetime
of the Participating Employee or Non-Employee Director, only by such individual
or, if permissible under applicable law, by such individual’s guardian or legal
representative. Except as otherwise provided by the Committee, no Award (other
than Released Securities), and no right under any such Award, may be pledged,
alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.

 

(vi)  Term
of Awards. Except
as otherwise provided in the Plan, the term of each Award shall be for such
period as may be determined by the Committee.

 

(vii)  Share
Certificates; Representation. In
addition to the restrictions imposed pursuant to ‎VI(c) and
‎VI(e) hereof,
all certificates for Shares delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Commission, any stock exchange or
other market upon which such Shares are then listed or traded, and any
applicable federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. The Committee may require each Participating
Employee, Non-Employee Director or other Person who acquires Shares under the
Plan by means of an Award originally made to a Participating Employee or
Non-Employee Director to represent to the Company in writing that such
Participating Employee, Non-Employee Director or other Person is acquiring the
Shares without a view to the distribution thereof.

 

7

(g)  Dividend
Equivalents. In
addition to Awards granted under the Plan, the Committee may grant Dividend
Equivalents to Participating Employees and Non-Employee Directors, entitling the
Participating Employees and Non-Employee Directors to receive cash equal to cash
dividends paid with respect to a specified number of Shares. Dividend
Equivalents may only be granted in connection with an Award granted to the
Participating Employee or Non-Employee Director under the Plan. The Committee
may provide that Dividend Equivalents shall be paid or distributed when accrued
or shall be deemed to have been reinvested in such investment vehicles as
determined by the Committee, subject to such restrictions and risks of
forfeiture as the Committee may impose.

 

(h)  No
Repricing of Options. Except
adjustments made pursuant to ‎IV(b) or
adjustments made with prior approval of the Company’s shareholders, the
Committee shall not have the authority to effect (i) the repricing of any
outstanding Options under the Plan or (ii) the modification of an Option or
entering into a transaction or series of transactions which modification or
transaction(s) would be deemed to constitute a repricing of an Option pursuant
to Financial Accounting Standards Board Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation, March 2000, as amended or
supplemented from time to time. The provisions of this ‎VI(h) cannot
be amended unless the amendment is approved by the Company’s
shareholders.

 

VII.  Amendment
and Termination of the Plan; Correction of Defects and Omissions

 

(a)  Amendments
to and Termination of the Plan. Except
as otherwise provided herein, the Board of Directors of the Company may at any
time amend, alter, suspend, discontinue, or terminate the Plan; provided,
however, that
shareholder approval of any amendment of the Plan shall also be obtained (i) if
such amendment (A) increases the number of Shares with respect to which Awards
may be granted under the Plan (other than increases related to adjustments made
as provided in ‎IV(b) hereof),
(B) expands the class of persons eligible to participate under the Plan or (C)
otherwise increases in any material respect the benefits payable under the Plan;
or (ii) if otherwise required by (A) the Code or any rules promulgated
thereunder (in order to allow for Incentive Stock Options to be granted under
the Plan), or (B) the listing requirements of the New York Stock Exchange or any
principal securities exchange or market on which the Shares are then traded (in
order to maintain the listing of the Shares thereon). Termination of the Plan
shall not affect the rights of Participating Employees or Non-Employee Directors
with respect to Awards previously granted to them, and all unexpired Awards
shall continue in force and effect after termination of the Plan except as they
may lapse or be terminated by their own terms and conditions.

 

(b)  Correction
of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award Agreement in the manner and to
the extent it shall deem desirable to carry the Plan into effect.

 

VIII.  General Provisions

 

(a)  No
Rights to Awards. No
Employee, Participating Employee, Non-Employee Director or other Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Employees, Participating Employees,
Non-Employee Directors or holders or beneficiaries of Awards under the Plan. The
terms and conditions of Awards need not be the same with respect to each
Participating Employee or Non-Employee Director.

 

(b)  Withholding. No
later than the date as of which tax withholding is first required with respect
to any Award under the Plan, the Participating Employee shall pay to the
Company, or make arrangements satisfactory to the Company regarding the payment
of, any federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising with respect to Awards to
Participating Employees under the Plan may be settled with Shares (other than
Restricted Securities), including Shares that are part of, or are received upon
exercise of, the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and any Affiliate shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participating Employee. The Committee may establish such
procedures as it deems appropriate for the settling of withholding obligations
with Shares, including, without limitation, the establishment of such procedures
as may be necessary to satisfy the requirements of Rule 16b-3.

 

8

(c)  No
Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.

 

(d)  Rights
and Status of Recipients of Awards. The
grant of an Award shall not be construed as giving a Participating Employee the
right to be retained in the employ of the Company or any Affiliate. Further, the
Company or any Affiliate may at any time dismiss a Participating Employee from
employment, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement. The grant of
an Award to a Non-Employee Director pursuant to Section 6(a) of the Plan shall
confer no right on such Non-Employee Director to continue as a director of the
Company or any Affiliate. Except for rights accorded under the Plan and under
any applicable Award Agreement, Participating Employees and Non-Employee
Directors shall have no rights as holders of Shares as a result of the granting
of Awards hereunder.

 

(e)  No
Compensation for Benefit Plans. No
Award payable under this Plan shall be deemed salary or compensation for the
purpose of computing benefits under any benefit plan or other arrangement of the
Company or any Affiliate for the benefit of its employees or directors unless
the Company or appropriate Affiliate shall determine otherwise.

 

(f)  Approval
of Material Terms of Performance Goals.
Notwithstanding anything herein to the contrary, if so determined by the Board
of Directors, the Plan provisions specifying the material terms of the Plan’s
performance goals (within the meaning of Code Section 162(m)) shall be submitted
to the shareholders of the Company for re-approval no later than the first
shareholder meeting that occurs in the fifth year following the year in which
shareholders previously approved such Plan provisions.

 

(g)  Unfunded
Status of the Plan. Unless
otherwise determined by the Committee, the Plan shall be unfunded and shall not
create (or be construed to create) a trust or a separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and any
Participating Employee, Non-Employee Director or other Person. To the extent any
Person holds any right by virtue of a grant under the Plan, such right (unless
otherwise determined by the Committee) shall be no greater than the right of a
general unsecured creditor of the Company.

 

(h)  Governing
Law. The
validity, construction, and effect of the Plan and any rules and regulations
relating to the Plan shall be determined in accordance with the internal laws of
the State of Florida, without reference to conflict of law principles thereof,
and applicable federal law.

 

(i)  Severability. If any
provision of the Plan or any Award Agreement or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to
any Person or Award, or would disqualify the Plan, any Award Agreement or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, any Award Agreement or the Award,
such provision shall be stricken as to such jurisdiction, Person, or Award, and
the remainder of the Plan, any such Award Agreement and any such Award shall
remain in full force and effect.

 

(j)  No
Fractional Shares. No
fractional Shares or other securities shall be issued or delivered pursuant to
the Plan, any Award Agreement or any Award, and the Committee shall determine
(except as otherwise provided in the Plan) whether cash, other securities, or
other property shall be paid or transferred in lieu of any fractional Shares or
other securities, or whether such fractional Shares or other securities or any
rights thereto shall be canceled, terminated, or otherwise
eliminated.

 

(k)  Headings.
Headings are given to the Sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision thereof.

 

IX.  Effective
Date of the Plan

 

The Plan
shall be effective on the day
immediately following its approval by the shareholders of the Company provided
that such approval is obtained within twelve months following the date of
adoption of the Plan by the Board of Directors of the Company.

 

9Unassociated Document

Exhibit
4.2

 

FARO
TECHNOLOGIES, INC.

AMENDED
AND RESTATED

1997
EMPLOYEE STOCK OPTION PLAN

 

	I.          
        	
      Purpose
      of Plan

 

The
purpose of this Plan is to enable FARO Technologies, Inc. (the “Company”) and
its Subsidiaries to compete successfully in attracting, motivating and retaining
Employees with outstanding abilities by making it possible for them to purchase
Shares on terms that will give them a direct and continuing interest in the
future success of the businesses of the Company and its Subsidiaries and
encourage them to remain in the employ of the Company or one or more of its
Subsidiaries. Each Option is intended to be an Incentive Stock Option, except to
the extent that (a) any such Option would exceed the limitations set forth in
Section 3.(c) hereof and (b) for Options specifically designated at the time of
grant as not being Incentive Stock Options.

 

The Plan
was originally effective on July 28, 1997. The Plan is amended and restated
effective as of November 29, 1999, to reflect certain administrative and legal
changes and to reflect an increase in the number of Shares that are authorized
for issuance under the Plan; provided, however, that the increase in the number
of authorized Shares shall be effective only if approved by the shareholders of
the Company prior to November 29, 2000.

 

	II.         
       	
      Definitions

 

For
purposes of the Plan, except where the context clearly indicates otherwise, the
following terms shall have the meanings set forth below:

 

(a)  “Board”
means the Board of Directors of the Company.

 

(b)  “Code”
means the United States Internal Revenue Code of 1986, as amended.

 

(c)  “Committee”
means the Committee described in Section 9 hereof.

 

(d)  “Employee”
means a person who is regularly employed on a salary basis by the Company or any
Subsidiary, including an officer or director of the Company or any Subsidiary
who is also an employee of the Company or a Subsidiary.

 

(e)  “Fair
Market Value” means, with respect to a Share, if the Shares are then listed and
traded on a registered national or regional securities exchange, or quoted on
The National Association of Securities Dealers’ Automated Quotation System
(including The Nasdaq Stock Market’s National Market), the average of the high
and low prices of a Share on the relevant date as reported on the composite list
used by the Wall Street Journal for reporting stock prices, or if no such sale
shall have been made on that day, on the last preceding day on which there was
such a sale. If the Shares are not traded on a registered securities exchange or
quoted in such a quotation system, the Committee shall determine the Fair Market
Value of a Share.

 

(f)  “Incentive
Stock Option” means an option granted under this Plan and which is an incentive
stock option within the meaning of section 422 of the Code, or the corresponding
provision of any subsequently enacted tax statute.

 

(g)  “Option”
means an option granted under this Plan, whether or not such option is an
Incentive Stock Option.

 

(h)  “Optionee”
means any person who has been granted an Option which Option has not expired or
been fully exercised or surrendered.

 

(i)  “Plan”
means the Company’s Amended and Restated 1997 Employee Stock Option
Plan.

 

(j)  “Rule
16b-3” means Rule 16b-3 promulgated pursuant to Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any successor rule.

 

(k)  “Share”
means one share of voting common stock, par value $.001 per share, of the
Company, and such other stock or securities that may be substituted therefor
pursuant to Section 6 hereof.

 

(l)  “Subsidiary”
means any “subsidiary corporation” within the meaning of Section 424(f) of the
Code.

 

 

 

	III.       
        	
      Limits
      on Options

 

(a)  The total
number of Shares with respect to which Options may be granted under the Plan
shall not exceed in the aggregate 1,400,000 Shares, subject to adjustment as
provided in Section 6 hereof. If any Option expires, terminates or is terminated
for any reason prior to its exercise in full, the Shares that were subject to
the unexercised portion of such Option shall be available for future grants
under the Plan.

 

(b)  No
incentive Stock Option shall be granted to any Employee who at the time such
option is granted, owns capital stock of the Company possessing more than 10% of
the total combined voting power or value of all classes of capital stock of the
Company or any Subsidiary, determined in accordance with the provisions of
Section 422(b)(6) and 424(d) of the Code, unless the option price at the time
such Incentive Stock Option is granted is at least 110 percent (110%) of the
Fair Market Value of the Shares subject to the Incentive Stock Option and such
Incentive Stock Option is not exercisable by its terms after the expiration of
five (5) years from the date of grant.

 

(c)  An
Incentive Stock Option shall be granted hereunder only to the extent that the
aggregate Fair Market Value (determined at the time the Incentive Stock Option
is granted) of the Shares with respect to which such Incentive Stock Option and
any other “incentive stock option” (within the meaning of Section 422 of the
Code) are exercisable for the first time by any Optionee during any calendar
year (under the Plan and all other plans of the Optionee’s employer corporation
and its parent and subsidiary corporations within the meaning of Section 422(d)
of the Code) does not exceed $100,000. To the extent such limit is exceeded,
such Option shall automatically be treated as a nonqualified stock option. This
limitation shall be applied by taking Incentive Stock Options and any such other
“incentive stock options” into account in the order in which such Incentive
Stock Options and any such other “incentive stock options” were
granted.

 

(d)  No
Optionee shall, in any calendar year, be granted Options to purchase more than
150,000 Shares. Options granted to the Optionee and cancelled during the same
calendar year shall be counted against such maximum number of Shares. In the
event that the number of Options which may be granted is adjusted as provided in
the Plan, the above limit shall automatically be adjusted in the same
ratio.

 

	IV.        
       	
      Granting
      of Options

 

The
Committee is authorized to grant Options to selected Employees pursuant to the
Plan beginning on the July 28, 1997. Subject to the provisions of the Plan, the
Committee shall have exclusive authority to select the Employees to whom Options
will be awarded under the Plan, to determine the number of Shares to be included
in such Options, and to determine such other terms and conditions of Options,
including terms and conditions which may be necessary to qualify Incentive Stock
Options as “incentive stock options” under Section 422 of the Code. The date on
which the Committee approves the grant of an Option shall be considered the date
on which such Option is granted, unless the Committee provides for a specific
date of grant which is subsequent to the date of such approval. 

 

	V.          
       	
      Terms
      of Stock Options

 

Subject
to Section 3 hereof, the terms of Options granted under this Plan shall be as
follows:

 

(a)  The
exercise price of each Share subject to an Option shall be fixed by the
Committee. Notwithstanding the prior sentence, the option exercise price of an
Incentive Stock Option shall be fixed by the Committee but shall in no event be
less than 100% of the Fair Market Value of a Share on the date of
grant.

 

(b)  Options
shall not be assignable or transferable by the Optionee other than by will or by
the laws of descent and distribution except that the Optionee may, with the
consent of the Committee, transfer without consideration Options that do not
constitute Incentive Stock Options to the Optionee’s spouse, children or
grandchildren (or to one or more trusts for the benefit of any such family
members or to one or more partnerships in which any such family members are the
only partners).

 

(c)  Each
Option shall expire and all rights thereunder shall end at the expiration of
such period (which shall not be more than ten (10) years) after the date on
which it was granted as shall be fixed by the Committee, subject in all cases to
earlier expiration as provided in subsections (d) and (e) of this Section
5.

 

(d)  During
the life of an Optionee, an Option shall be exercisable only by such Optionee
(or Optionee’s permitted assignee in the case of Options that do not constitute
Incentive Stock Options) and, except as otherwise determined by the Committee,
only within one (1) month after the termination of the Optionee’s employment
with the Company or a Subsidiary, other than by reason of the Optionee’s death,
permanent disability or retirement with the consent of the Company or a
Subsidiary as provided in subsection (e) of this Section 5, but only if and to
the extent the Option was exercisable immediately prior to such termination, and
subject to the provisions of subsection (c) of this Section 5. Except as
otherwise determined by the Committee, if the Optionee’s employment is
terminated for cause, or the Optionee terminates his employment with the
Company, Options granted at any one time by the Company which have not become
exercisable with respect to all such Options (even if a portion of such Options
have become exercisable) shall terminate immediately on the date of termination
of employment. Cause shall have the meaning set forth in any employment
agreement then in effect between the Optionee and the Company or any of its
Subsidiaries, or if the Optionee does not have any employment agreement, cause
shall mean (i) if the Optionee engages in conduct which has caused, or is
reasonably likely to cause, demonstrable and serious injury to the Company, or
(ii) if the Optionee is convicted of a felony, as evidenced by a binding and
final judgment, order or decree of a court of competent jurisdiction, which
substantially impairs the Optionee’s ability to perform his or her duties to the
Company.

 

 

2

 

(e)  Except as
otherwise determined by the Committee, if an Optionee: (i) dies while employed
by the Company or a Subsidiary or within the period when an Option could have
otherwise been exercised by the Optionee under subsection (d); (ii) terminates
employment with the Company or a Subsidiary by reason of the “permanent and
total disability” (within the meaning of Section 22(e)(3) of the Code) of such
Optionee; or (iii) terminates employment with the Company or a Subsidiary as a
result of such Optionee’s retirement, provided that the Company or such
Subsidiary has consented in writing to such Optionee’s retirement, then, in each
such case, such Optionee, or the duly authorized representatives of such
Optionee (or Optionee’s permitted assignee in the case of Options that do not
constitute Incentive Stock Options), shall have the right, at any time within
three (3) months after the death, disability or retirement of the Optionee, as
the case may be, and prior to the termination of the Option pursuant to
subsection (c) of this Section 5, to exercise any Option to the extent such
Option was exercisable by the Optionee immediately prior to such Optionee’s
death, disability or retirement. In the discretion of the Committee, the
three-month period referenced in the immediately preceding sentence may be
extended for a period of up to one year.

 

(f)  Subject
to the foregoing terms and to such additional terms regarding the exercise of an
Option as the Committee may fix at the time of grant, an Option may be exercised
in whole at one time or in part from time to time.

 

(g)  Options
granted pursuant to the Plan shall be evidenced by an agreement in writing
setting forth the material terms and conditions of the grant, including, but not
limited to, the number of Shares subject to options. Option agreements covering
Options need not contain similar provisions; provided, however, that all such
option agreements shall comply with the terms of the Plan.

 

(h)  The
Committee is authorized to modify, amend or waive any conditions or other
restrictions with respect to Options, including conditions regarding the
exercise of Options.

 

	VI.        
       	
      Effect
      of Changes in Capitalization

 

(a)  If the
number of outstanding Shares is increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any recapitalization, reclassification, stock split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company, a proportionate and appropriate
adjustment shall be made by the Committee in (i) the aggregate number of Shares
subject to the Plan, (ii) the maximum number of Shares for which Options may be
granted to any Employee during any calendar year, and (iii) the number and kind
of shares for which Options are outstanding, so that the proportionate interest
of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such adjustment
in outstanding Options shall not change the aggregate option price payable with
respect to Shares subject to the unexercised portion of the Options outstanding
but shall include a corresponding proportionate adjustment in the option price
per Share.

 

(b)  Subject
to Section 6.(c) hereof, if the Company shall be the surviving corporation in
any reorganization, merger, share exchange or consolidation of the Company with
one or more other corporations or other entities, any Option theretofore granted
shall pertain to and apply to the securities to which a holder of the number of
Shares subject to such Option would have been entitled immediately following
such reorganization, merger, share exchange or consolidation, with a
corresponding proportionate adjustment of the option price per Share so that the
aggregate option price thereafter shall be the same as the aggregate option
price of the Shares remaining subject to the Option immediately prior to such
reorganization, merger, share exchange or consolidation.

 

(c)  In the
event of: (i) the adoption of a plan of reorganization, merger, share exchange
or consolidation of the Company with one or more other corporations or other
entities as a result of which the holders of the Shares as a group would receive
less than fifty percent (50%) of the voting power of the capital stock or other
interests of the surviving or resulting corporation or entity; (ii) the adoption
of a plan of liquidation or the approval of the dissolution of the Company;
(iii) the approval by the Board of an agreement providing for the sale or
transfer (other than as a security for obligations of the Company or any
Subsidiary) of substantially all of the assets of the Company; or (iv) the
acquisition of more than twenty percent (20%) of the outstanding Shares by any
person within the meaning of Rule 13(d)(3) under the Securities Exchange Act of
1934, as amended, if such acquisition is not preceded by a prior expression of
approval by the Board, then, in each such case, any Option granted hereunder
shall become immediately exercisable in full, subject to any appropriate
adjustments in the number of Shares subject to such Option and the option price,
regardless of any provision contained in the Plan or any stock option agreement
with respect thereto limiting the exercisability of the Option for any length of
time. Notwithstanding the foregoing, if a successor corporation or other entity
as contemplated in clause (i) or (iii) of the preceding sentence agrees to
assume the outstanding Options or to substitute substantially equivalent
options, then the outstanding Options issued hereunder shall not be immediately
exercisable, but shall remain exercisable in accordance with the terms of the
Plan and the applicable stock option agreements.

 

 

3

(d)  Adjustments
under this Section 6 relating to Shares or securities of the Company shall be
made by the Committee, whose determination in that respect shall be final and
conclusive. Options subject to grant or previously granted under the Plan at the
time of any event described in this Section 6 shall be subject to only such
adjustments as shall be necessary to maintain the proportionate interest of the
options and preserve, without exceeding, the value of such options. No
fractional Shares or units of other securities shall be issued pursuant to any
such adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding upward to the nearest whole Share or
unit.

 

(e)  The grant
of an Option pursuant to the Plan shall not affect or limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of 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.

 

	VII.       
       	
      Delivery
      and Payment for Shares; Replacement Options

 

(a)  No Shares
shall be delivered upon the exercise of an Option until the option price for the
Shares acquired has been paid in full. No Shares shall be issued or transferred
under the Plan unless and until all legal requirements applicable to the
issuance or transfer of such Shares have been complied with to the satisfaction
of the Committee and adequate provision has been made by the Optionee for
satisfying any applicable federal, state or local income or other taxes incurred
by reason of the exercise of the Option. Any Shares issued by the Company to an
Optionee upon exercise of an Option may be made only in strict compliance with
and in accordance with applicable state and federal securities
laws.

 

(b)  Payment
of the option price for the Shares purchased pursuant to the exercise of an
Option and of any applicable withholding taxes shall be made, as determined by
the Committee and set forth in the option agreement pertaining to such Option:
(i) in cash or by check payable to the order of the Company; (ii) through the
tender to the Company of Shares, which Shares shall be valued, for purposes of
determining the extent to which the option price has been paid thereby, at their
Fair Market Value on the date of exercise; or (iii) by a combination of the
methods described in (a) and (b) hereof; provided, however, that the Committee
may in its discretion impose and set forth in the option agreement pertaining to
an Option such limitations or prohibitions on the use of Shares to exercise
Options as it deems appropriate. The Committee also may authorize payment in
accordance with a cashless exercise program under which, if so instructed by the
Optionee, Shares may be issued directly to the Optionee’s broker upon receipt of
the option price in cash from the broker.

 

(c)  To the
extent that the payment of the exercise price for the Shares purchased pursuant
to the exercise of an Option is made with Shares as provided in Section 7.(b)
hereof, then, at the discretion of the Committee, the Optionee may be granted a
replacement Option under the Plan to purchase a number of Shares equal to the
number of Shares tendered as permitted in Section 7.(b) hereof, with an exercise
price per Share equal to the Fair Market Value on the date of grant of such
replacement Option and with a term extending to the expiration date of the
original Option.

 

	VIII.     
        	
      No
      Continuation of Employment and Disclaimer of
Rights

 

No
provision in the Plan or in any Option granted or option agreement entered into
pursuant to the Plan shall be construed to confer upon any individual the right
to remain in the employ of the Company or any Subsidiary, or to interfere in any
way with the right and authority of the Company or any Subsidiary either to
increase or decrease the compensation of any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company or any Subsidiary. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any Optionee or beneficiary under
the terms of the Plan. An Optionee shall have none of the rights of a
shareholder of the Company until all or some of the Shares covered by an Option
are fully paid and issued to such Optionee.

 

	IX.        
       	
      Administration

 

(a)  The Plan
is intended to comply with Rule 16b-3. Subject to the provisions of subsection
(b) of this Section 9, the Plan shall be administered by the Committee which
shall have the authority to interpret the Plan and all option agreements, and to
make all other determinations necessary or advisable for the Plan’s
administration, including such rules and regulations and procedures as it deems
appropriate. The Committee shall consist of not fewer than two members of the
Board each of whom shall qualify (at the time of appointment to the Committee
and during all periods of service on the Committee) in all respects as a
“non-employee director” as defined in Rule 16b-3 and as an “outside director” as
defined in Section 162(m) of the Code and regulations thereunder. Subject to the
provisions of subsection (b) of this Section 9, in the event of a disagreement
as to the interpretation of the Plan, an option agreement, or any amendment
hereto or thereto, or any rule, regulation or procedure hereunder or as to any
right or obligation arising from or related to the Plan, the decision of the
Committee shall be final and binding upon all persons in interest, including the
Company, the Optionee and the Company’s shareholders. If the Committee is not in
existence, the Plan shall be administered by the Board.

 

4

 

(b)  The
Committee may delegate to one or more senior officers of the Company or the
Chairman of the Board any or all of the authority or responsibility of the
Committee with respect to the Plan, other than with respect to Employees who are
subject to Rule 16b-3, and all references to the Committee herein shall include
such officer or the Chairman to the extent of such delegation.

 

(c)  No member
of the Committee or the Board shall be liable for any action taken or decision
made, or any failure to take any action, in good faith with respect to the Plan
or any Option granted or option agreement entered into hereunder.

 

	X.         
       	
      No
      Reservation of Shares

 

The
Company shall be under no obligation to reserve or to retain in its treasury any
particular number of Shares in connection with its obligations
hereunder.

 

	XI.        
       	
      Amendment
      of Plan

 

The
Board, without further action by the shareholders, may amend this Plan from time
to time as it deems desirable and shall make any amendments which may be
required so that Options intended to be Incentive Stock Options shall at all
times continue to be Incentive Stock Options for purpose of the Code; provided,
however, that no amendment shall be made without shareholder approval if such
approval would be required to comply with the Code or the listing requirements
of the principal securities exchange or market on which the Company Shares are
then traded.

 

	XII.       
       	
      Termination
      of Plan

 

This Plan
shall terminate ten (10) years from the July 28, 1997. The Board may, in its
discretion, suspend or terminate the Plan at any time prior to such date, but
such termination or suspension shall not adversely affect any right or
obligation with respect to any outstanding Option. Notwithstanding the
foregoing, the right of the Committee to administer the Plan and option
agreements, to modify, amend or waive any conditions or other restrictions with
respect to Options, and the authority of the Board to amend the Plan shall
survive the termination of the Plan.

 

	XIII.       
      	
      Governing
      Law

 

The Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Florida.

 

	XIV.  	
      Severability

 

If any
provision of the Plan or any option agreement or any Option (a) is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction, as to any
person or award, or (b) would disqualify the Plan, any option agreement or any
Option under any law deemed applicable by the Committee, then such provision
shall be construed or deemed amended to conform to applicable laws; or if it
cannot be so construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, any option agreement or
the Option, then such provision shall be stricken as to such jurisdiction,
person or Option, and the remainder of the Plan, any such option agreement and
any such Option shall remain in full force and effect. 

 

5

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