Document:

EXHIBIT 10.1

 

SEPARATION AGREEMENT AND RELEASE

 

I.  Release.  For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned, with
the intention of binding himself, his heirs, executors, administrators and
assigns, does hereby release and forever discharge Michaels Stores, Inc.,
a Delaware corporation (the “Company”), and its present and former parent,
officers, directors, executives, agents, employees, affiliated companies,
subsidiaries, successors, predecessors and assigns (collectively, the “Released
Parties”), from any and all claims, complaints, actions, causes of action,
demands, rights, damages, debts, accounts, suits, expenses, attorneys’ fees and
liabilities of whatever kind or nature in law, equity, or otherwise, whether
now known or unknown (collectively, the “Claims”), which the undersigned
now has, owns or holds, or has at any time heretofore had, owned or held
against any Released Party, arising out of or in any way connected with the
undersigned’s employment relationship with the Company, its subsidiaries,
predecessors or affiliated entities, or the termination thereof, under any
Federal, state or local statute, rule, or regulation, or principle of common,
tort or contract law, including but not limited to, Title VII of the Civil
Rights Act of 1964, as  amended, 42 U.S.C. §§ 2000e et  seq.,
the Age Discrimination in Employment Act of 1967, as  amended, 29
U.S.C. §§ 621 et  seq., the Americans with Disabilities Act of
1990, as  amended, 42 U.S.C. §§ 12101, et  seq., and
any other equivalent or similar Federal, state, or local statute; provided,
however, that nothing herein shall release the Company of its
obligations under that certain Change in Control Severance Agreement (the “Change
in Control Severance Agreement”) in which the undersigned participates and
pursuant to which this Separation Agreement and Release is being executed and
delivered.  The undersigned understands
that, as a result of executing this Separation Agreement and Release, he will
not have the right to assert that the Company or any other Released Party
unlawfully terminated his employment or violated any of his rights in
connection with his employment or otherwise.

 

The undersigned affirms that he has not filed, caused to be filed, or
presently is a party to any Claim against any Released Party in any forum or
form and that he knows of no facts which may lead to any Claim being filed
against any Released Party in any forum by the undersigned or by any agency or
group.  Except for his final paycheck and
other payments and benefits specifically provided for under this Separation
Agreement and Release Agreement, the undersigned further affirms that he has
been paid and/or has received all leave (paid or unpaid), compensation, wages,
bonuses, commissions, and/or benefits to which he may be entitled and that no
other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or
benefits are due to him from any Released Party. The Company acknowledges that
the undersigned may be entitled to additional payments and benefits after the
Effective Date of this Separation Agreement and Release, specifically those
identified in Sections 6(b)(ii), 7, 8, 11, 13 and 16 of the Change in Control
Severance Agreement.   The undersigned furthermore affirms that he
has no known workplace injuries or occupational diseases and has been provided
and/or has not been denied any leave requested under the FMLA.  If any court assumes jurisdiction of any such
Claim against any Released Party on behalf of the undersigned, the undersigned
will request such court to withdraw the matter.

 

 

The undersigned further declares and represents that he has carefully
read and fully understands the terms of this Separation Agreement and Release;
that he has been advised and had the opportunity to seek the advice and
assistance of counsel with regard to this Separation Agreement and Release; that
he may take up to and including twenty-one (21) calendar days from receipt of
this Separation Agreement and Release to consider whether to sign it; that he
may revoke this Separation Agreement and Release within seven (7) calendar
days after signing it by delivering to the Company written notification of
revocation; and that he knowingly and voluntarily, of his own free will, without
any duress, being fully informed and after due deliberate action, accepts the
terms of and signs the same as his own free act.

 

II.  Resignation
and Severance Compensation. The termination of the undersigned is effective
July 2, 2008 (“Termination Date”). 
Accordingly, the undersigned hereby irrevocably and unconditionally
resigns from any officer or director position he holds within Michaels or any
of its subsidiaries or divisions effective on the Termination Date.  It is stipulated and agreed that the undersigned’s
resignation from the Company is for “Good Reason” (as that term is defined in Section 1(t) of
the Severance Agreement), and that the undersigned is not obligated to comply
with the notice provisions set forth in Section 1(t) of the Change in
Control Severance Agreement. It is further stipulated and agreed that the
Company shall pay, provide and/or grant the undersigned all compensation and
benefits set forth under Section 6(b) of the Change in Control Severance
Agreement.

 

III.  Severance
Pay.  Pursuant to Section 6(b)(i) of
the Change in Control Severance Agreement, the Company shall pay a lump-sum
payment in the gross amount of One Million, One Hundred Twenty Two Thousand,
Six Hundred Twelve Dollars and 66/100 ($1,122,612.66), subject to all applicable
or customary tax withholding requirements.

 

IV.  Prorated Annual Bonus.
Pursuant to Section 6(b)(ii) of the Change in Control Severance Agreement,
the Company shall pay a lump-sum payment in the gross amount of Seventy Seven
Thousand, Four Hundred Three Dollars and 89/100 ($77,403.89), subject to all
applicable or customary tax withholding requirements.

 

V. Continued Welfare and Fringe Benefits.  The undersigned’s welfare and fringe benefits
will continue in accordance with Section 6(b)(iii) of the Change in
Control Severance Agreement.  The
undersigned agrees that he will notify the Company within seven calendar days
of becoming eligible under another employer’s medical and/or welfare benefits
plan.  The Company will make a lump-sum
payment in the amount of Two Thousand Seventy Five Dollars and 76/100 ($2,075.76)
which is the equivalent of certain welfare benefits that are unavailable to the
undersigned after the Termination Date.

 

VI.  Savings and Retirement
Plan Benefits.  Pursuant to Section 6(b)(v) of
the Change in Control Severance Agreement, the Company will pay a lump-sum
payment in the gross amount of Thirty Six Thousand Dollars and 50/100 ($36,000.50),
subject to all applicable or customary tax withholding requirements.

 

VII.  Outplacement Services.  Pursuant to Section 6(b)(vi) of the
Change in Control Severance Agreement, the Company agrees to reimburse him, or
directly pay expenses, for outplacement services up to $50,000; provided he
commences such services no later than six months following 

 

 

the Release Effective Date and stops using these services within one
year after the Termination Date.

 

VIII.  Protected Rights.  The Company and the undersigned agree that
nothing in this Separation Agreement and Release is intended to or shall be
construed to affect, limit or otherwise interfere with any non-waivable right
of the undersigned under any Federal, state or local law, including the right
to file a charge or participate in an investigation or proceeding conducted by
the Equal Employment Opportunity Commission (“EEOC”) or to exercise any
other right that cannot be waived under applicable law.  The undersigned is releasing, however, his
right to any monetary recovery or relief should the EEOC or any other agency
pursue Claims on his behalf.  Further,
should the EEOC or any other agency obtain monetary relief on his behalf, the
undersigned assigns to the Company all rights to such relief.

 

IX.  Nonsolicitation/Non-Interference
with Business Relationships.  The
undersigned further agrees that for one-year after the Termination Date, he
will not, directly or indirectly, (i) solicit, recruit or hire any person
who is at such time, or who at any time during the six-month period prior to
such solicitation or hiring had been, an employee of, or exclusive consultant
then under contract with, the Company, its subsidiaries, affiliates or
divisions without the Company’s prior written consent; (ii) solicit or
encourage any employee of the Company or its subsidiaries, affiliates and
divisions to leave the employment of the Company or its subsidiaries; (iii) intentionally
interfere with the relationship of the Company or any of its subsidiaries with
any employee of, or exclusive consultant then under contract with, the Company
or any such subsidiary; or (iv) intentionally interfere with, disrupt or
attempt to disrupt any past, present or prospective relationship, contractual
or otherwise, between the Company or any of its subsidiaries, on the one hand,
and any of their respective customers or suppliers, on the other hand.

 

X.  Equitable Remedies.  The undersigned acknowledges that a violation
by the undersigned of any of the covenants contained in Section IX would
cause irreparable damage to the Company and its subsidiaries in an amount that
would be material but not readily ascertainable, and that any remedy at law
(including the payment of damages) would be inadequate.  Accordingly, the undersigned agrees that,
notwithstanding any provision of this Separation Agreement and Release to the
contrary, the Company shall be entitled (without the necessity of showing
economic loss or other actual damage) to injunctive relief (including temporary
restraining orders, preliminary injunctions and/or permanent injunctions) in
any court of competent jurisdiction for any actual or threatened breach of any
of the covenants set forth in Section IX in addition to any other legal or
equitable remedies it may have.

 

XI.  Third-Party Litigation.  The undersigned agrees to be available to the
Company, its affiliates and their attorneys on a reasonable basis in connection
with any pending or threatened claims, charges or litigation in which the
Company or any of its affiliates is now or may become involved, or any other
claims or demands made against or upon the Company or any of its affiliates,
regardless of whether or not the undersigned is a named defendant in any
particular case.

 

XII.  Return of Property.  Unless expressly stated otherwise herein, the
undersigned shall return to the Company on or before the Termination Date, all
property of the Company in the 

 

 

undersigned’s possession or subject to the undersigned’s control,
including without limitation any keys, credit cards, and files, including all
copies.  The undersigned shall not alter
any of the Company’s records or computer files in any way after the Termination
Date.  The Company is allowing the undersigned
to keep his cellular phone and laptop computer, except that all company files
on such computer must be returned to the Company on or before the Termination
Date.

 

XIII.  Confidential
Information.  The undersigned agrees
to hold confidential, and not to disclose to any person, firm, corporation,
partnership or agency, any trade secret or Confidential Information (as defined
below) gained in the course of the undersigned’s employment with the Company
concerning the Company, its subsidiaries, affiliates, divisions, or employees except
if such disclosure is required by law or legal process. “Confidential
Information” shall include, without limitation, information concerning
financial affairs, business plans or strategies, product pricing information,
operating policies and procedures, vendor information and proprietary
statistics or reports.  The undersigned
agrees not to remove any Confidential Information from the Company, not to
request that others do so on the undersigned’s behalf, and to return any
Confidential Information currently in the undersigned’s possession or control to
the Company.

 

XIV.  Stock Options.  In accordance with the Company’s 2006 Equity
Incentive Plan, upon the Termination Date, all unvested stock options granted
to the undersigned by the Company will be forfeited without further action on
the part of any party.

 

XV.  Severability.  If any term or provision of this Separation
Agreement and Release is invalid, illegal or incapable of being enforced by any
applicable law or public policy, all other conditions and provisions of this
Separation Agreement and Release shall nonetheless remain in full force and
effect so long as the economic and legal substance of the transactions
contemplated by this Separation Agreement and Release is not affected in any
manner materially adverse to any party.

 

[Remaining
portion intentionally left black]

 

 

XVI.  GOVERNING LAW.  THIS SEPARATION AGREEMENT AND RELEASE SHALL
BE DEEMED TO BE MADE IN THE STATE OF TEXAS, AND THE VALIDITY, INTERPRETATION,
CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTS SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAW.

 

Effective on the eighth calendar day following the date set forth
below.

 

 

	
   

  	
  MICHAELS STORES, INC.,

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
   

  	
        /s/
  Shawn Hearn

  
	
   

  	
        Name:  Shawn Hearn 

  
	
   

  	
        Title:    SVP, Human Resources

  
				

 

 

	
   

  	
  EMPLOYEE,

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/ Thomas M.
  Bazzone

  
	
   

  	
         Thomas
  M. Bazzone

  
	
   

  	
         Date
  Signed:  7/2/08

  
				

 

 

ACKNOWLEDGMENTS

 

	
  STATE OF
  TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF
  DALLAS

  	
  ‘

  	
   

  

 

BEFORE ME, the undersigned
authority, on this day personally appeared SHAWN
HEARN, SVP - HUMAN RESOURCES of MICHAELS
STORES, INC. a Delaware corporation, known to me to be the person
whose name is subscribed to the foregoing instrument and acknowledged to me
that he executed the same for the purposes and consideration therein expressed,
in the capacity therein stated and as the act and deed of said corporation.

 

GIVEN MY HAND AND SEAL this 7th
day of July, 2008.

 

 

	
   

  	
  Kerri Bates

  
	
   

  	
  Notary Public in and for
  the

  
	
   

  	
  State of Texas

  
	
  [NOTARY SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary’s Printed Name and

  
	
   

  	
  Commission Expiration

  

 

	
  STATE OF
  TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF
  DALLAS

  	
  ‘

  	
   

  

 

 

BEFORE ME, the undersigned
authority, on this day personally appeared THOMAS
M. BAZZONE, known to me to be the person whose name is subscribed to
the foregoing instrument, and acknowledged to me that he executed the same for
the purposes and consideration therein expressed.

 

GIVEN UNDER MY HAND AND SEAL
this 2nd day of July, 2008.

 

 

	
   

  	
  Betty J. Bauerle

  
	
   

  	
  Notary Public in and for
  the

  
	
   

  	
  State of Texas

  
	
  [NOTARY SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary’s Printed Name and

  
	
   

  	
  Commission ExpirationExhibit
4.1

 

THE

2006
STOCK COMPENSATION PLAN

OF

MESA
LABORATORIES, INC.

(a
Colorado corporation)

 

 

TABLE OF
CONTENTS

 

* * *

 

THE

2006
STOCK COMPENSATION PLAN

OF

MESA
LABORATORIES, INC.

 

	
  SECTION

  	
   

  	
  SUBJECT

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Purpose of Plan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Stock Subject to the
  Plan

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Administration of the
  Plan

  	
   

  	
  2

  
	
   

  	
   

  	
  (a)

  	
  General

  	
   

  	
  2

  
	
   

  	
   

  	
  (b)

  	
  Changes in Law
  Applicable

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Types of Awards Under
  the Plan

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Persons to Whom Options
  Shall Be Granted

  	
   

  	
  5

  
	
   

  	
   

  	
  (a)

  	
  Nonqualified Options

  	
   

  	
  5

  
	
   

  	
   

  	
  (b)

  	
  Incentive Options

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Factors to Be
  Considered in Granting Options

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Time of Granting
  Options

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Terms and Conditions of
  Options

  	
   

  	
  6

  
	
   

  	
   

  	
  (a)

  	
  Number of Shares

  	
   

  	
  6

  
	
   

  	
   

  	
  (b)

  	
  Type of Option

  	
   

  	
  6

  
	
   

  	
   

  	
  (c)

  	
  Option Period

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
  (1)

  	
  General

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
  (2)

  	
  Termination of
  Employment

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
  (3)

  	
  Cessation of Service as
  Director or Advisor

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
  (4)

  	
  Disability

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
  (5)

  	
  Death

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
  (6)

  	
  Acceleration and
  Exercise Upon Change of Control

  	
   

  	
  8

  

 

ii

 

	
   

  	
   

  	
  (d)

  	
  Option Prices

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
  (1)

  	
  Nonqualified Options

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
  (2)

  	
  Incentive Options

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
  (3)

  	
  Determination of Fair
  Market Value

  	
   

  	
  10

  
	
   

  	
   

  	
  (e)

  	
  Exercise of Options

  	
   

  	
  11

  
	
   

  	
   

  	
  (f)

  	
  Nontransferability of
  Options

  	
   

  	
  12

  
	
   

  	
   

  	
  (g)

  	
  Limitations on 10%
  Shareholders

  	
   

  	
  12

  
	
   

  	
   

  	
  (h)

  	
  Compliance with
  Securities Laws

  	
   

  	
  13

  
	
   

  	
   

  	
  (i)

  	
  Additional Provisions

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Medium and Time of
  Payment

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Rights as a Shareholder

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Optionee’s Agreement to
  Serve

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Adjustments on Changes
  in Capitalization

  	
   

  	
  16

  
	
   

  	
   

  	
  (a)

  	
  Changes in
  Capitalization

  	
   

  	
  16

  
	
   

  	
   

  	
  (b)

  	
  Reorganization,
  Dissolution or Liquidation

  	
   

  	
  17

  
	
   

  	
   

  	
  (c)

  	
  Change in Par Value

  	
   

  	
  17

  
	
   

  	
   

  	
  (d)

  	
  Notice of Adjustments

  	
   

  	
  17

  
	
   

  	
   

  	
  (e)

  	
  Effect Upon Holder of
  Option

  	
   

  	
  18

  
	
   

  	
   

  	
  (f)

  	
  Right of Company to
  Make Adjustments

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  Investment Purpose

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  No Obligation to
  Exercise Option

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  Modification,
  Extension, and Renewal of Options

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  Effective Date of the
  Plan

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  Termination of the Plan

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  Amendment of the Plan

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  Withholding

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  Indemnification of
  Committee

  	
   

  	
  22

  

 

iii

 

	
  21.

  	
   

  	
  Application of Funds

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  Governing Law

  	
   

  	
  23

  

 

iv

 

THE

2006
STOCK COMPENSATION PLAN

OF

MESA
LABORATORIES, INC.

 

1.             Purpose of Plan.  This 2006
Stock Compensation Plan (“Plan”) is intended to encourage ownership of the
common stock of MESA LABORATORIES, INC., a
Colorado corporation, (“Company”), by certain officers, directors, employees
and advisors of the Company or any Subsidiary or Subsidiaries of the Company
(as hereinafter defined) in order to provide additional incentive for such
persons to promote the success and the business of the Company or its
Subsidiaries and to encourage them to remain in the employ of the Company or
its Subsidiaries by providing such persons an opportunity to benefit from any
appreciation of the common stock of the Company through the issuance of stock
options to such persons in accordance with the terms of the Plan.  It is further intended that options granted
pursuant to this Plan shall constitute either incentive stock options (“Incentive
Options”) within the meaning of Section 422 (formerly Section 422A)
of the Internal Revenue Code of 1986, as amended (“Code”), or options which do
not constitute Incentive Options (“Nonqualified Options”) as determined by the
Committee (as hereinafter defined) at the time of issuance of such
options.  Incentive Options and
Nonqualified Options are herein sometimes referred to collectively as “Options.”  As used herein, the term Subsidiary or
Subsidiaries shall mean any corporation (other than the employer corporation)
in an unbroken chain of corporations beginning with the employer corporation
if, at the time of granting of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.

 

1

 

2.             Stock Subject to the Plan. 
Subject to adjustment as provided in Section 12 hereof, there will
be reserved for the use upon the exercise of Options to be granted from time to
time under the Plan, an aggregate of four hundred thousand (400,000) shares of
the common stock, no par value, of the Company (“Common Stock”), which shares
in whole or in part shall be authorized, but unissued, shares of the Common
Stock or issued shares of Common Stock which shall have been reacquired by the
Company as determined from time to time by the Board of Directors of the
Company (“Board of Directors”).  To
determine the number of shares of Common Stock available at any time for the
granting of Options under the Plan, there shall be deducted from the total
number of reserved shares of Common Stock, the net number of shares of Common
Stock in respect of which Options have been granted pursuant to the Plan which
remain outstanding or which have been exercised.  If and to the extent that any Option to
purchase reserved shares shall not be exercised by the optionee for any reason
or if such Option to purchase shall terminate as provided herein, such shares
which have not been so purchased hereunder shall again become available for the
purposes of the Plan unless the Plan shall have been terminated, but such
unpurchased shares shall not be deemed to increase the aggregate number of
shares specified above to be reserved for purposes of the Plan (subject to
adjustment as provided in Section 12 hereof).

 

3.             Administration of the Plan.

 

(a)           General.  The Plan shall
be administered by the full Board of Directors or by the Compensation Committee
(“Committee”) appointed by the Board of Directors, which Committee shall
consist solely of not less than two (2) non-employee Directors.  All references in this Plan to the Committee
shall be deemed to refer instead to the full Board of Directors at any time
there is not a committee qualified to act hereunder.  The Board of Directors may from

 

2

 

time to time appoint
members of the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the
Committee.  If the Board of Directors
does not designate a Chairman of the Committee, the Committee shall select one
of its members as its Chairman.  The
Committee shall hold its meetings at such times and places as it shall deem
advisable.  A majority of its members
shall constitute a quorum.  Any action of
the Committee shall be taken by a majority vote of its members at a meeting at
which a quorum is present. 
Notwithstanding the preceding, any action of the Committee may be taken
without a meeting by a written consent signed by all of the members, and any
action so taken shall be deemed fully as effective as if it had been taken by a
vote of the members present in person at the meeting duly called and held.  The Committee may appoint a Secretary, shall
keep minutes of its meetings, and shall make such rules and regulations
for the conduct of its business at it shall deem advisable.

 

The Committee
shall have the sole authority and power, subject to the express provisions and
limitations of the Plan, to construe the Plan and option agreements granted
hereunder, and to adopt, prescribe, amend, and rescind rules and
regulations relating to the Plan, and to make all determinations necessary or
advisable for administering the Plan, including, but not limited to, (i) who
shall be granted Options under the Plan, (ii) the term of each Option, (iii) the
number of shares covered by such Option, (iv) whether the Option shall
constitute an Incentive Option or a Nonqualified Option, (v) the exercise
price for the purchase of the shares of the Common Stock covered by the Option,
(vi) the period during which the Option may be exercised, (vii) whether
the right to purchase the number of shares covered by the Option shall be fully
vested on issuance of the Option so that such shares may be purchased in full
at one time or whether the right to purchase such shares shall become vested
over a period of time so that such shares may 

 

3

 

only be purchased
in installments, and (viii) the time or times at which Options shall be granted.  The Committee’s determinations under the
Plan, including the above enumerated determinations, need not be uniform and
may be made by it selectively among the persons who receive, or are eligible to
receive, Options under the Plan, whether or not such persons are similarly
situated.

 

The interpretation
by the Committee of any provision of the Plan or of any option agreement
entered into hereunder with respect to any Incentive Option shall be in
accordance with Section 422 of the Code and the regulations issued
thereunder, as such section or regulations may be amended from time to time, in
order that the rights granted hereunder and under said option agreements shall
constitute “Incentive Stock Options” within the meaning of such section.  The interpretation and construction by the
Committee of any provision of the Plan or of any Option granted hereunder shall
be final and conclusive, unless otherwise determined by the Board of
Directors.  No member of the Board of
Directors or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under it.  Upon issuing an Option under the Plan, the
Committee shall report to the Board of Directors the name of the person granted
the Option, whether the Option is an Incentive Option or a Nonqualified Option,
the number of shares of Common Stock covered by the Option, and the terms and
conditions of such Option.

 

(b)           Changes in Law Applicable. 
If the laws relating to Incentive Options or Nonqualified Options are
changed, altered or amended during the term of the Plan, the Board of Directors
shall have full authority and power to alter or amend the Plan with respect to
Incentive Options or Nonqualified Options, respectively, to conform to such
changes in the law, unless the changes require shareholder approval.

 

4

 

4.             Type of Awards Under the Plan. 
Awards under the Plan shall be in the form of Options.

 

5.             Persons to Whom Options Shall Be Granted.

 

(a)           Nonqualified Options.  Nonqualified
Options shall be granted only to officers, directors, employees and advisors of
the Company or a Subsidiary who, in the judgment of the Committee, are
responsible for or contribute to the management or success of the Company or a
Subsidiary and who, at the time of the granting of the Nonqualified Options,
are either officers, directors, employees or advisors of the Company or a
Subsidiary.

 

(b)           Incentive Options.  Incentive
Options shall be granted only to employees of the Company or a Subsidiary who,
in the judgment of the Committee, are responsible for or contribute to the
management or success of the Company or a Subsidiary and who, at the time of
the granting of the Incentive Option, are an employee of either the Company or
a Subsidiary pursuant to an effective employment agreement.

 

6.             Factors to Be Considered in Granting Options. 
In making any determination as to persons to whom Options shall be
granted and as to the number of shares to be covered by such Options, the
Committee shall take into account the duties and responsibilities of the
respective officers, directors, employees, or advisors, their current and
potential contributions to the success of the Company or a Subsidiary, and such
other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan.

 

7.             Time of Granting Options. 
Neither anything contained in the Plan or in any resolution adopted or
to be adopted by the Board of Directors or the Shareholders of the Company or a
Subsidiary nor any action taken by the Committee shall constitute the granting
of any Option.  The granting of an Option
shall be effected only when a written Option Agreement 

 

5

 

acceptable in form
and substance to the Committee, subject to the terms and conditions hereof
including those set forth in Section 8 hereof, shall have been duly
executed by or on behalf of the Company. 
No person shall have any rights under the Plan until such time, if any,
as a written Option Agreement shall have been duly executed as set forth in
this Section 7.

 

8.             Terms and Conditions of Options. 
All Options granted pursuant to this Plan must be granted within ten (10) years
from the date the Plan is adopted by the Board of Directors of the
Company.  Each Option Agreement governing
an Option granted hereunder shall be subject to at least the following terms
and conditions, and shall contain such other terms and conditions, not inconsistent
therewith, that the Committee shall deem appropriate:

 

(a)           Number of Shares.  Each Option
shall state the number of shares of Common Stock which it represents.

 

(b)           Type of Option.  Each Option
shall state whether it is intended to be an Incentive Option or a Nonqualified
Option.

 

(c)           Option Period.

 

(1)           General.  Each Option
shall state the date upon which it is granted. 
Each Option shall be exercisable in whole or in part during such period
as is provided under the terms of the Option subject to any vesting period set
forth in the Option, but in no event shall an Option be exercisable either in
whole or in part after the expiration of ten (10) years from the date of
grant.

 

(2)           Termination of Employment. 
Except as otherwise provided in case of Disability (as hereinafter
defined), death or Change of Control (as hereinafter defined), no Option shall
be exercisable after an optionee who is an employee of the Company or a
Subsidiary ceases to be employed by the Company or a Subsidiary as an employee;
provided, 

 

6

 

however, that the
Committee shall have the right in its sole discretion, but not the obligation,
to extend the exercise period following the date of termination of such
optionee’s employment; provided further, however, that no Option shall be
exercisable after the expiration of ten (10) years from the date it is
granted.

 

(3)           Cessation of Service as Director or Advisor. 
Except as otherwise provided in case of Disability, death or Change of
Control, no Option shall be exercisable after an optionee who was a director or
advisor of the Company or a Subsidiary ceases to be a director or advisor of
the Company or a Subsidiary; provided, however, that the Committee shall have
the right in its sole discretion, but not the obligation, to extend the
exercise period following the date such optionee ceases to be a director or
advisor of the Company or a Subsidiary; provided further, however, that no
Option shall be exercisable after the expiration of ten (10) years from the
date it is granted.

 

(4)           Disability.  If an optionee’s
employment is terminated by reason of the permanent and total Disability of
such optionee or if an optionee who is a director or advisor of the Company or
a Subsidiary ceases to serve as a director or advisor by reason of the
permanent and total Disability of such optionee, the Committee shall have the
right in its sole discretion, but not the obligation, to extend the exercise
period following the date of termination of the optionee’s employment or the
date such optionee ceases to be a director or advisor of the Company or a
Subsidiary, as the case may be, subject to the condition that no Option shall
be exercisable after the expiration of ten (10) years from the date it is
granted.  For purposes of this Plan, the
term “Disability” shall mean the inability of the optionee to fulfill such
optionee’s obligations to the Company or a Subsidiary by reason of any physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a 

 

7

 

continuous period
of not less than twelve (12) months as determined by a physician acceptable to
the Committee in its sole discretion.

 

(5)           Death.  If an optionee
dies while in the employ of the Company or a Subsidiary, or while serving as a
director or advisor of the Company or a Subsidiary, and shall not have fully
exercised Options granted pursuant to the Plan, such Options may be exercised
in whole or in part at any time within one (1) year after the optionee’s
death, by the executors or administrators of the optionee’s estate or by any
person or persons who shall have acquired the Options directly from the
optionee by bequest or inheritance, but only to the extent that the optionee
was entitled to exercise such Option at the date of such optionee’s death,
subject to the condition that no Option shall be exercisable after the
expiration of ten (10) years from the date it is granted.

 

(6)           Acceleration and Exercise Upon Change of Control. 
Notwithstanding the preceding provisions of this Section 8(c), if
any Option granted under the Plan provides for either (a) an incremental
vesting period whereby such Option may only be exercised in installments as
such incremental vesting period is satisfied or (b) a delayed vesting
period whereby such Option may only be exercised after the lapse of a specified
period of time, such as after the expiration of one (1) year, such vesting
period shall be accelerated upon the occurrence of a Change of Control (as
hereinafter defined) of the Company, or a threatened Change of Control of the
Company as determined by the Committee, so that such Option shall thereupon
become exercisable immediately in part or its entirety by the holder thereof,
as such holder shall elect.  For the
purposes of this Plan, a “Change of Control” shall be deemed to have occurred
if:

 

8

 

(i)            Any “person”, including a “group” as
determined in accordance with Section 13(d)(3) of the Securities
Exchange Act of 1934 (“Exchange Act”) and the Rules and Regulations
promulgated thereunder, is or becomes, through one or a series of related
transactions or through one or more intermediaries, the beneficial owner,
directly or indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company’s then outstanding securities,
other than a person who is such a beneficial owner on the effective date of the
Plan and any affiliate of such person;

 

(ii)           As a result of, or in connection
with, any tender offer or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the foregoing
transactions (“Transaction”), the persons who were Directors of the Company
before the Transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company;

 

(iii)          Following the effective date of the
Plan, the Company is merged or consolidated with another corporation and as a
result of such merger or consolidation less than 40% of the outstanding voting
securities of the surviving or resulting corporation shall then be owned in the
aggregate by the former stockholders of the Company, other than (x) any
party to such merger or consolidation, or (y) any affiliates of any such
party;

 

(iv)          A tender offer or exchange offer is
made and consummated for the ownership of securities of the Company
representing 25% or more of the combined voting power of the Company’s then
outstanding voting securities; or

 

(v)           The Company transfers more than 50%
of its assets, or the last of a series of transfers results in the transfer of
more than 50% of the assets of the Company, to another corporation that is not
a wholly-owned corporation of the Company. 
For purposes of

 

9

 

this subsection
8(c)(6)(v), the determination of what constitutes more than 50% of the assets
of the Company shall be determined based on the sum of the values attributed to
(i) the Company’s real property as determined by an independent appraisal
thereof, and (ii) the net book value of all other assets of the Company,
each taken as of the date of the Transaction involved.

 

In addition, upon a
Change of Control, any Options previously granted under the Plan to the extent
not already exercised may be exercised in whole or in part either immediately
or at any time during the term of the Option as such holder shall elect.

 

(d)           Option Prices.

 

(1)           Nonqualified Options.  The purchase price or prices of the shares of
the Common Stock which shall be offered to any person under the Plan and
covered by a Nonqualified Option shall be the price determined by the Committee
at the time of granting of the Nonqualified Option, which price shall be one
hundred percent (100%) of the fair market value of the Common Stock at the time
of granting the Nonqualified Option or such higher purchase price as may be determined
by the Committee at the time of granting the Nonqualified Option.

 

(2)           Incentive Options.  The purchase price or prices of the shares of
the Common Stock which shall be offered to any person under the Plan and
covered by an Incentive Option shall be one hundred percent (100%) of the fair
market value of the Common Stock at the time of granting the Incentive Option
or such higher purchase price as may be determined by the Committee at the time
of granting the Incentive Option.

 

(3)           Determination of Fair Market
Value.  During such time as the
Common Stock of the Company is not listed upon an established stock exchange,
the fair market value per share shall be deemed to be the closing bid price of
the Common Stock on The Nasdaq

 

10

 

Stock Market (“Nasdaq”)
on the day the Option is granted, as reported by Nasdaq, if the Common Stock is
so quoted, and if not so quoted, the average of the “bid” and “ask” prices of
the Common Stock on the Electronic Bulletin Board on the day the Option is
granted, as reported by the National Association of Securities Dealers, Inc.  If the Common Stock is listed upon an
established stock exchange or exchanges, such fair market value shall be deemed
to be the closing price of the Common Stock on such stock exchange or exchanges
on the day the Option is granted or, if no sale of the Common Stock of the
Company shall have been made on an established stock exchange on such day, on
the next preceding day on which there was a sale of such stock.  If there is no market price for the Common
Stock, then the Board of Directors and the Committee may, after taking all
relevant facts into consideration, determine the fair market value of the
Common Stock.

 

(e)           Exercise of Options.  To the extent that a holder of an Option has
a current right to exercise, the Option may be exercised from time to time by
written notice to the Company at its principal place of business.  Such notice shall state the election to
exercise the Option, the number of whole shares in respect of which it is being
exercised, shall be signed by the person or persons so exercising the Option,
and shall contain any investment representation required by Section 8(i) hereof.  Such notice shall be accompanied by payment
of the full purchase price of such shares and by the Option Agreement
evidencing the Option.  In addition, if
the Option shall be exercised pursuant to Section 8(c)(4) or Section 8(c)(5) hereof
by any person or persons other than the optionee, such notice shall also be
accompanied by appropriate proof of the right of such person or persons to
exercise the Option.  The Company shall
deliver a certificate or certificates representing such shares as soon as
practicable after the aforesaid notice and payment of such shares shall be
received.  The certificate or
certificates for the shares as to

 

11

 

which the Option shall
have been so exercised shall be registered in the name of the person or persons
so exercising the Option.  In the event
the Option shall not be exercised in full, the Secretary of the Company shall
endorse or cause to be endorsed on the Option Agreement the number of shares
which has been exercised thereunder and the number of shares that remains
exercisable under the Option and return such Option Agreement to the holder
thereof.

 

(f)            Nontransferability of Options.  An Option granted pursuant to the Plan shall
be exercisable only by the optionee or the optionee’s court appointed guardian
as set forth in Section 8(c)(4) hereof during the optionee’s lifetime and shall
not be assignable or transferable by the optionee otherwise than by Will, the
laws of descent and distribution, or as permitted by the rules and regulations
of the Securities and Exchange Commission. 
An Option granted pursuant to the Plan shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise other than by
Will, the laws of descent and distribution, or as permitted by the rules and
regulations of the Securities and Exchange Commission) and shall not be subject
to execution, attachment, or similar process. 
Any attempted transfer, assignment, pledge, hypothecation, or other
disposition of any Option or of any rights granted thereunder contrary to the
foregoing provisions of this Section 8(f), or the levy of any attachment or
similar process upon an Option or such rights, shall be null and void.

 

(g)           Limitations on 10% Shareholders.  If required by law or regulation applicable
to the Company, no Incentive Option may be granted under the Plan to any
individual who, immediately before such Incentive Option was granted, would own
more than ten percent (10%) of the total combined voting power or value of all
classes of stock of the Company (“10% Shareholder”) unless (i) such Incentive
Option is granted at an option price not less than one hundred ten percent
(110%) of the fair market value of the shares on the day the Incentive

 

12

 

Option is granted and (ii)
such Incentive Option expires on a date not later than five (5) years from the
date the Incentive Option is granted.

 

(h)           Compliance with Securities Laws.  The Plan and the grant and exercise of the
rights to purchase shares hereunder, and the Company’s obligations to sell and
deliver shares upon the exercise of rights to purchase shares, shall be subject
to all applicable federal, foreign and state laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may, in the
opinion of counsel for the Company, be required, and shall also be subject to
all applicable rules and regulations of any stock exchange upon which the
Common Stock of the Company may then be listed. 
At the time of exercise of any Option, the Company may require the
optionee to execute any documents or take any action which may then be
necessary to comply with the Securities Act of 1933, as amended (“Securities
Act”), and the rules and regulations promulgated thereunder, or any other
applicable federal or state laws regulating the sale and issuance of
securities, and the Company may, if it deems necessary, include provisions in
the stock option agreements to assure such compliance.  The Company may, from time to time, change
its requirements with respect to enforcing compliance with federal and state
securities laws, including the request for and enforcement of letters of
investment intent, such requirements to be determined by the Company in its
judgment as necessary to assure compliance with said laws.  Such changes may be made with respect to any
particular Option or stock issued upon exercise thereof.  Without limiting the generality of the
foregoing, if the Common Stock issuable upon exercise of an Option granted
under the Plan is not registered under the Securities Act, the Company at the
time of exercise may require that the registered owner execute and deliver an
investment representation agreement to the Company in form acceptable to the
Company and its counsel, and the Company may place a legend on the

 

13

 

certificate
evidencing such Common Stock restricting the transfer thereof, which legend
shall be substantially as follows:

 

THE SHARES OF
COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW BUT
HAVE BEEN ACQUIRED FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT
BE OFFERED, SOLD OR TRANSFERRED UNTIL EITHER (i) A REGISTRATION STATEMENT UNDER
SUCH SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (ii) THE COMPANY SHALL HAVE RECEIVED AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT REGISTRATION
UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.

 

(i)            Additional Provisions.  The Option Agreement authorized under the
Plan shall contain such other provisions as the Committee shall deem advisable,
including, without limitation, restrictions upon the exercise of the
Option.  Any such Option Agreement with
respect to an Incentive Option shall contain such limitations and restrictions
upon the exercise of the Incentive Option as shall be necessary in order that
the Option will be an “Incentive Stock Option” as defined in Section 422 of the
Code.

 

9.             Medium and Time of Payment.  The purchase price of the shares of the
Common Stock as to which the Option shall be exercised shall be paid in full
either (i) in cash at the time of exercise of the Option, (ii) by tendering to
the Company shares of the Company’s Common Stock having a fair market value (as
of the date of receipt of such shares by the Company) equal to the purchase
price for the number of shares of Common Stock purchased, or (iii) partly in
cash and partly in shares of the Company’s Common Stock valued at fair market
value as of the date

 

14

 

of receipt of such
shares by the Company.  Cash payment for
the shares of the Common Stock purchased upon exercise of the Option shall be
in the form of either a cashier’s check, certified check or money order.  Personal checks may be submitted, but will
not be considered as payment for the shares of the Common Stock purchased and
no certificate for such shares will be issued until the personal check clears
in normal banking channels.  If a
personal check is not paid upon presentment by the Company, then the attempted
exercise of the Option will be null and void. 
In the event the optionee tenders shares of the Company’s Common Stock
in full or partial payment for the shares being purchased pursuant to the
Option, the shares of Common Stock so tendered shall be accompanied by fully
executed stock powers endorsed in favor of the Company with the signature on
such stock power being guaranteed.  If an
optionee tenders shares, such optionee assumes sole and full responsibility for
the tax consequences, if any, to such optionee arising therefrom, including the
possible application of Code Section 424(c), or its successor Code section,
which negates any nonrecognition of income rule with respect to such
transferred shares, if such transferred shares have not been held for the
minimum statutory holding period to receive preferential tax treatment.

 

10.           Rights as a Shareholder.  The holder of an Option shall have no rights
as a shareholder with respect to the shares covered by the Option until the due
exercise of the Option and the date of issuance of one or more stock certificates
to such holder for such shares.  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 provided in Section 12 hereof.

 

11.           Optionee’s Agreement to Serve.  Each employee receiving an Option shall, as
one of the terms of the Option Agreement, agree that such employee will remain
in the employ of the

 

15

 

Company or
Subsidiary for a period of at least one (1) year from the date on which the
Option shall be granted to such employee, and that such employee will, during
such employment, devote such employee’s time, energy, and skill to the service
of the Company or a Subsidiary as may be required by the management thereof,
subject to vacations, sick leaves, and military absences.  Such employment, subject to the provisions of
any written contract between the Company or a Subsidiary and such employee,
shall be at the pleasure of the Board of Directors of the Company or a
Subsidiary, and at such compensation as the Company or a Subsidiary shall
reasonably determine.  Any termination of
such employee’s employment during the period which the employee has agreed
pursuant to the foregoing provisions of this Section 11 to remain in employment
that is either for cause or voluntary on the part of the employee shall be
deemed a violation by the employee of such employee’s agreement.  In the event of such violation, any Option or
Options held by such employee, to the extent not theretofore exercised, shall
forthwith terminate, unless otherwise determined by the Committee.  Notwithstanding the preceding, neither the
action of the Company in establishing the Plan nor any action taken by the
Company, a Subsidiary or the Committee under the provisions hereof shall be
construed as granting the optionee the right to be retained in the employ of
the Company or a Subsidiary, or to limit or restrict the right of the Company
or a Subsidiary, as applicable, to terminate the employment of any employee of
the Company or a Subsidiary, with or without cause.

 

12.           Adjustments on Changes in
Capitalization.

 

(a)           Changes in Capitalization.  The number of shares of Common Stock covered
by the Plan, the number of shares of Common Stock covered by each outstanding
Option and the exercise price per share thereof specified in each such Option
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common

 

16

 

Stock of the
Company resulting from a subdivision or consolidation of shares or the payment
of a stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of shares effected without receipt of consideration by the
Company after the date the Option is granted, so that upon exercise of the
Option, the optionee shall receive the same number of shares the optionee would
have received had the optionee been the holder of all shares subject to such
optionee’s outstanding Option immediately before the effective date of such
change in the number of issued shares of the Common Stock of the Company.

 

(b)           Reorganization, Dissolution or
Liquidation.  A dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation shall cause each outstanding Option to terminate
as of a date to be fixed by the Committee (which date shall be as of or prior to
the effective date of any such dissolution or liquidation or merger or
consolidation); provided, that not less than thirty (30) days written notice of
the date so fixed as such termination date shall be given to each optionee, and
each optionee shall, in such event, have the right, during the said period of
thirty (30) days preceding such termination date, to exercise such optionee’s
Option in whole or in part in the manner herein set forth.

 

(c)           Change in Par Value.  In the event of a change in the Common Stock
of the Company as presently constituted, which change is limited to a change of
all of its authorized shares with par value into the same number of shares with
a different par value or without par value, the shares resulting from any
change shall be deemed to be the Common Stock within the meaning of the Plan.

 

(d)           Notice of Adjustments.  To the extent that the adjustments set forth
in the foregoing paragraphs of this Section 12 relate to stock or securities of
the Company, such

 

17

 

adjustments, if any,
shall be made by the Committee, whose determination in that respect shall be
final, binding and conclusive, provided that each Incentive Option granted
pursuant to this Plan shall not be adjusted in a manner that causes the
Incentive Option to fail to continue to qualify as an “Incentive Stock Option”
within the meaning of Section 422 of the Code. 
The Company shall give timely notice of any adjustments made to each
holder of an Option under this Plan and such adjustments shall be effective and
binding on the optionee.

 

(e)           Effect Upon Holder of Option.  Except as hereinbefore expressly provided in
this Section 12, the holder of an Option 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 by reason of any dissolution, liquidation, merger,
reorganization, or consolidation, or spin-off of assets or stock of another
corporation.  Any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to the
Option.  Without limiting the generality
of the foregoing, no adjustment shall be made with respect to the number or
price of shares subject to any Option granted hereunder upon the occurrence of
any of the following events:

 

(1)           The grant or exercise of any other
options which may be granted or exercised under any qualified or nonqualified
stock option plan or under any other employee benefit plan of the Company,
whether or not such options were outstanding on the date of grant of the Option
or thereafter granted;

 

18

 

(2)           The sale of any shares of Common
Stock in the Company’s initial or any subsequent public offering, including,
without limitation, shares sold upon the exercise of any overallotment option
granted to the underwriter in connection with such offering;

 

(3)           The issuance, sale or exercise of any
warrants to purchase shares of Common Stock, whether or not such warrants were
outstanding on the date of grant of the Option or thereafter issued;

 

(4)           The issuance or sale of rights,
promissory notes or other securities convertible into shares of Common Stock in
accordance with the terms of such securities (“Convertible Securities”),
whether or not such Convertible Securities were outstanding on the date of
grant of the Option or were thereafter issued or sold;

 

(5)           The issuance or sale of Common Stock
upon conversion or exchange of any Convertible Securities, whether or not any
adjustment in the purchase price was made or required to be made upon the
issuance or sale of such Convertible Securities and whether or not such
Convertible Securities were outstanding on the date of grant of the Option or
were thereafter issued or sold; or

 

(6)           Upon any amendment to or change in
the terms of any rights or warrants to subscribe for or purchase, or options
for the purchase of, Common Stock or Convertible Securities or in the terms of
any Convertible Securities, including, but not limited to, any extension of any
expiration date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right, warrant or option,
any extension of any date through which any Convertible Securities are
convertible into or exchangeable for Common Stock or any change in the rate at
which any Convertible Securities are convertible into or exchangeable for
Common Stock.

 

19

 

(f)            Right of Company to Make
Adjustments.  The grant of an Option
pursuant to the Plan shall not affect 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 or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or assets.

 

13.           Investment Purpose.  Each Option under the Plan shall be granted
on the condition that the purchase of the shares of stock thereunder shall be
for investment purposes, and not with a view to resale or distribution;
provided, however, that in the event the shares of stock subject to such Option
are registered under the Securities Act or in the event a resale of such shares
of stock without such registration would otherwise be permissible, such
condition shall be inoperative if in the opinion of counsel for the Company
such condition is not required under the Securities Act or any other applicable
law, regulation, or rule of any governmental agency.

 

14.           No Obligation to Exercise Option.  The granting of an Option shall impose no
obligation upon the optionee to exercise such Option.

 

15.           Modification, Extension and Renewal
of Options.  Subject to the terms and
conditions and within the limitations of the Plan, the Committee and the Board
of Directors may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options (to the extent not
theretofore exercised).  Notwithstanding
the foregoing, the Company may not modify any outstanding Options so as to
specify a lower price nor accept the surrender of outstanding Options and
authorize the granting of new Options in substitution therefor specifying a
lower price.  Further, no modification of
an Option shall, without the consent of the optionee, alter or impair any
rights or obligations under any Option theretofore granted under the Plan.

 

20

 

16.           Effective Date of the Plan.  The Plan shall become effective on the date
of execution hereof, which date is the date the Board of Directors approved and
adopted the Plan (“Effective Date”); provided, however, if the Shareholders of
the Company shall not have approved the Plan by the requisite vote of the
Shareholders within twelve (12) months after the Effective Date, then the Plan
shall terminate and all Options theretofore granted under the Plan shall
terminate and be null and void.

 

17.           Termination of the Plan.  This Plan shall terminate as of the
expiration of ten (10) years from the Effective Date.  Options may be granted under this Plan at any
time and from time to time prior to its termination.  Any Option outstanding under the Plan at the
time of its termination shall remain in effect until the Option shall have been
exercised or shall have expired.

 

18.           Amendment of the Plan.  The Plan may be terminated at any time by the
Board of Directors of the Company.  The
Board of Directors may at any time and from time to time without obtaining the
approval of the Shareholders of the Company or a Subsidiary, modify or amend
the Plan (including such form of Option Agreement as hereinabove mentioned) in
such respects as it shall deem advisable in order that the Incentive Options
granted under the Plan shall be “Incentive Stock Options” as defined in Section 422
of the Code or to conform to any change in the law, or in any other respect
which shall not change: (a) the maximum number of shares for which Options
may be granted under the Plan, except as provided in Section 12 hereof; or
(b) the periods during which Options may be granted or exercised; or (c) the
provisions relating to the determination of persons to whom Options shall be
granted and the number of shares to be covered by such Options; or (d) the
provisions relating to adjustments to be made upon changes in
capitalization.  The termination or any modification
or amendment of 

 

21

 

the Plan shall
not, without the consent of the person to whom any Option shall theretofore
have been granted, affect that person’s rights under an Option theretofore
granted to such person.  With the consent
of the person to whom such Option was granted, an outstanding Option may be
modified or amended by the Committee in such manner as it may deem appropriate
and consistent with the requirements and purpose of this Plan applicable to the
grant of a new Option on the date of modification or amendment.

 

19.           Withholding.  Whenever an optionee shall recognize
compensation income as a result of the exercise of any Option granted under the
Plan, the optionee shall remit in cash to the Company or Subsidiary the minimum
amount of federal income and employment tax withholding, if any, which the
Company or Subsidiary is required to remit to the United States Internal
Revenue Service in accordance with the then current provisions of the
Code.  The full amount of such
withholding shall be paid by the optionee simultaneously with the award or
exercise of an Option, as applicable.

 

20.           Indemnification of Committee.  In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of 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 action, suit or proceedings, or
in connection with any appeal therein, 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 Option 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 action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee

 

22

 

member is liable
for gross negligence or wilful misconduct in the performance of his duties;
provided that within sixty (60) days after institution of any such action, suit
or proceeding a Committee member shall in writing offer the Company the
opportunity, at its own expense, to pursue and defend the same.

 

21.           Application of Funds.  The proceeds received by the Company from the
sale of Common Stock pursuant to Options granted hereunder will be used for
general corporate purposes.

 

22.           Governing Law.  This Plan shall be governed by and construed
in accordance with the laws of the jurisdiction of incorporation of the
Company.

 

EXECUTED effective this      day
of            , 2006.

 

	
   

  	
   

  	
  MESA LABORATORIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ LUKE R. SCHMIEDER

  
	
   

  	
   

  	
   

  	
  Luke R. Schmieder

  
	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

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