Document:

Exhibit 10.1 Executive Cash Incentive Program

 

Exhibit 10.1

FIRSTMERIT CORPORATION

EXECUTIVE CASH INCENTIVE PLAN

	I.  	TERM OF THE PLAN
	 
	   	The FirstMerit Corporation Executive Cash Incentive Plan (the “Plan”) is effective beginning
January 1, 2005, and will remain in effect until terminated by the Compensation Committee of
the Board of Directors of FirstMerit Corporation (“FirstMerit”).
	 
	II.  	PLAN OBJECTIVES
	 
	   	FirstMerit is making available to eligible executive officers of FirstMerit and its
subsidiaries, through this Plan, compensation designed to foster superior financial results
for FirstMerit by encouraging executive officers to meet or exceed stated goals. The
objectives of the Plan are:

	 	1.  	Foster superior financial results, producing a financial
benefit to FirstMerit shareholders;
	 
	 	2.  	Motivate and reward executives toward superior financial
performance by FirstMerit; and
	 
	 	3.  	Retain key executive talent in order to achieve stated
financial objectives and continue long-term growth of FirstMerit.

	III.  	ELIGIBILITY
	 
	   	All employee members of the Executive Committee of officers and certain other employees
approved by the Compensation Committee for eligibility shall be entitled to participate in
the Plan.
	 
	IV.  	PLAN ELEMENTS
	 
	   	Each executive will be required to attain goals in both corporate and individual performance
categories in order to receive compensation under the Plan. Each year in the first quarter
of the calendar year, (i) the Chief Executive Officer will determine the specific individual
performance goals for each participant, and (ii) the Compensation Committee of the Board of
Directors, taking into consideration recommendations by the Chief Executive Officer, will
determine the corporate performance goals, the weighting between the corporate and
individual categories, and the percentage amounts to be paid

 

 

	   	for attainment of all goals, subject to approval by the Board of Directors. Goals and
payment amounts for the Chief Executive Officer will be determined by the Compensation
Committee, subject to approval by the full Board of Directors, with the Chief Executive
Officer abstaining from discussion and voting.
	 
	   	There are five tiers within each of the corporate and individual categories:

	 	•  	threshold
	 
	 	•  	intermediate
	 
	 	•  	target
	 
	 	•  	high
	 
	 	•  	maximum

	   	Each tier within each category will have a stated goal. The corporate category goals will
be aligned with the corporate business plan objectives and defined in terms of FirstMerit’s
earnings per share, including the accrual for Plan payments in the calculation of earnings
per share and calculating the earnings per share in accordance with generally accepted
accounting principles.
	 
	   	The individual category goals will be based upon financial and project goals established for
the individual based on the individual’s area of responsibility.
	 
	   	The corporate category goal must be achieved at the threshold level or better for an
executive to receive any payment under the corporate category, and an executive must attain
his or her individual performance goal at the threshold level or better in order to receive
any payment under the individual category. If performance goals are achieved between tiers
within either category, a prorated payment will be made.
	 
	   	Notwithstanding anything else in this Section IV or elsewhere in the Plan, in its sole
discretion, the Compensation Committee may adjust any one or more award amounts before or
after the calendar year end, change goals or waive any requirements for awards pursuant to
the Plan. The terms of the Plan shall not be deemed to grant any employee an entitlement to
payment under the Plan.
	 
	V.  	PAYMENTS
	 
	   	Payments under the Plan are based on the corporate and individual performance for each
calendar year and will be made within the first quarter of the following calendar year upon
approval by the Compensation Committee.
	 
	VI.  	NEWLY HIRED, TRANSFERRED, PROMOTED AND TERMINATED PARTICIPANTS
	 
	   	If a participant is transferred or promoted or becomes totally disabled before the last day
of the calendar year, the participant will be eligible to receive payment under the Plan if

 

 

	   	the participant is employed on the last day of the calendar
year and if the stated goals have been achieved by the last day of the calendar year, as such goals may be revised for
the individual based upon a change in position. Payment will be prorated based upon the
tenure of the executive in the eligible position.
	 
	   	If the participant’s employment is terminated before the payment date for any reason other
than retirement, the executive will not be eligible for any payment under the Plan.
	 
	   	If the participant retires (as retirement is defined under the FirstMerit benefit plan
providing for the earliest possible retirement) effective before the end of the calendar
year, the participant will not be entitled to payment under the Plan. If the participant
retires effective at any time after the end of the calendar year, the retiring participant
will be entitled to payment in accordance with the terms of the Plan.
	 
	   	FirstMerit reserves the right to withhold payments to any participant under the Plan based
on a participant’s violation of any of FirstMerit’s policies and procedures, as determined
by the Compensation Committee.
	 
	VII.  	OTHER EMPLOYEE BENEFITS
	 
	   	Benefits to executives under other benefit plans will not be affected by payments under this
Plan to the extent benefits under the other plans are based upon base salary, but will be
affected by payments under this Plan to the extent benefits under the other plans are based
upon Form W-2 earnings. FirstMerit retains the right to amend, cancel or change any other
benefit plans.
	 
	VIII.  	AMENDMENT AND ADMINISTRATION OF THE PLAN
	 
	   	The Plan may be terminated or amended by the recommendation of the Compensation Committee,
subject to the approval of the Board of Directors. Any question of interpretation of the
Plan will be determined by the Compensation Committee. The Executive Vice President of
Human Resources and the Manager of Compensation are responsible for administering the Plan
in accordance with the terms of the Plan and the goals and payments determined annually by
the recommendation of the Compensation Committee and approval of the Board of Directors.Exhibit 4.1

                                   VoIP, INC.
                             2004 STOCK OPTION PLAN

1.       ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
         ---------------------------------------

         1.1  Establishment.  The VoIP, Inc. 2004 Stock Option Plan (the "Plan")
is hereby established effective as of March 10, 2004.

         1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating  Company Group and its  stockholders  by providing an incentive to
attract and retain persons  performing  services for the  Participating  Company
Group  and  by  motivating   such  persons  to  contribute  to  the  growth  and
profitability of the Participating Company Group.

         1.3 Term of Plan.  The Plan shall  continue in effect until the earlier
of its  termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all  restrictions  on
such shares under the terms of the Plan and the  agreements  evidencing  Options
granted under the Plan have lapsed. However, all Options shall be granted, if at
all,  within ten (10) years from the  earlier of the date the Plan is adopted by
the  Board  or the date the Plan is duly  approved  by the  stockholders  of the
Company.

2.       DEFINITIONS AND CONSTRUCTION.
         ----------------------------

         2.1 Definitions.  Whenever used herein,  the following terms shall have
their respective meanings set forth below:

                  (a) "Board"  means the Board of Directors  of the Company.  If
         one or more  Committees  have been appointed by the Board to administer
         the Plan, "Board" also means such Committee(s).

                  (b)  "Cause"  shall  mean  any  of  the  following:   (i)  the
         Optionee's   theft  of  Company   property  or   falsification  of  any
         Participating   Company  documents  or  records;  (ii)  the  Optionee's
         improper use or disclosure of a Participating Company's confidential or
         proprietary  information;  (iii) any action by the Optionee which has a
         detrimental effect on a Participating Company's reputation or business;
         (iv) the  Optionee's  failure or  inability  to perform any  reasonable
         assigned duties after written notice from a  Participating  Company of,
         and a reasonable  opportunity to cure,  such failure or inability;  (v)
         any  material  breach by the  Optionee  of any  employment  or  service
         agreement  between the  Optionee  and a  Participating  Company,  which
         breach is not cured  pursuant to the terms of such  agreement;  or (vi)
         the Optionee's  conviction (including any plea of guilty or no contest)
         of any criminal act which impairs the Optionee's ability to perform his
         or her duties with a Participating Company.

                  (c)  "Code"  means  the  Internal  Revenue  Code of  1986,  as
         amended, and any applicable regulations promulgated thereunder.

<PAGE>

                  (d)  "Committee"  means the  Compensation  Committee  or other
         committee of the Board duly appointed to administer the Plan and having
         such powers as shall be  specified  by the Board.  Unless the powers of
         the Committee have been specifically  limited, the Committee shall have
         all of the  powers  of the Board  granted  herein,  including,  without
         limitation,  the  power  to amend or  terminate  the Plan at any  time,
         subject to the terms of the Plan and any applicable limitations imposed
         by law.

                  (e) "Company" means VoIP,  Inc., a Texas  corporation,  or any
         successor corporation thereto.

                  (f) "Consultant"  means a person engaged to provide consulting
         or advisory  services  (other  than as an Employee or a Director)  to a
         Participating  Company,  provided that the identity of such person, the
         nature of such  services  or the  entity  to which  such  services  are
         provided  would not  preclude  the  Company  from  offering  or selling
         securities  to such  person  pursuant to the Plan in reliance on either
         the  exemption  from  registration  provided  by  Rule  701  under  the
         Securities Act or, if the Company is required to file reports  pursuant
         to Section 13 or 15(d) of the Exchange Act,  registration on a Form S-8
         Registration Statement under the Securities Act.

                  (g) "Director"  means a member of the Board or of the board of
         directors of any other Participating Company.

                  (h)  "Disability"  means the permanent and total disability of
         the Optionee within the meaning of Section 22(e)(3) of the Code.

                  (i)  "Employee"  means  any  person  treated  as  an  employee
         (including an officer or a Director who is also treated as an employee)
         in the records of a  Participating  Company  and,  with  respect to any
         Incentive  Stock Option granted to such person,  who is an employee for
         purposes of Section 422 of the Code;  provided,  however,  that neither
         service  as a  Director  nor  payment  of a  director's  fee  shall  be
         sufficient to constitute employment for purposes of the Plan.

                  (j) "Exchange Act" means the Securities  Exchange Act of 1934,
         as amended.

                  (k) "Fair Market Value" means,  as of any date, the value of a
         share of Stock or other  property as  determined  by the Board,  in its
         discretion, or by the Company, in its discretion, if such determination
         is expressly allocated to the Company herein, subject to the following:

                           (i) If,  on such  date,  the  Stock  is  listed  on a
                  national or regional securities exchange or market system, the
                  Fair  Market  Value of a share of Stock  shall be the  closing
                  price of a share of Stock (or the mean of the  closing bid and
                  asked  prices  of a share of Stock if the  Stock is so  quoted
                  instead) as quoted on the Nasdaq National  Market,  The Nasdaq
                  SmallCap Market or such other national or regional  securities
                  exchange or market system  constituting the primary market for
                  the Stock,  as  reported  in The Wall  Street  Journal or such
                  other source as the Company  deems  reliable.  If the relevant
                  date does not fall on a day on which  the Stock has  traded on
                  such securities  exchange or market system,  the date on which

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<PAGE>

                  the Fair Market Value shall be  established  shall be the last
                  day on which the Stock  was so  traded  prior to the  relevant
                  date, or such other  appropriate day as shall be determined by
                  the Board, in its discretion.

                           (ii) If, on such  date,  the Stock is not listed on a
                  national or regional securities exchange or market system, the
                  Fair Market  Value of a share of Stock shall be as  determined
                  by the Board in good faith without  regard to any  restriction
                  other  than a  restriction  which,  by its  terms,  will never
                  lapse.

                  (l) "Good Reason" shall mean any one or more of the following:

                           (i) without the Optionee's  express written  consent,
                  the  assignment  to  the  Optionee  of  any  duties,   or  any
                  limitation of the Optionee's  responsibilities,  substantially
                  inconsistent   with   the   Optionee's   positions,    duties,
                  responsibilities  and status  with the  Participating  Company
                  Group immediately prior to the date of the Change in Control;

                           (ii) without the Optionee's  express written consent,
                  the  relocation  of the  principal  place  of  the  Optionee's
                  employment  or service  to a location  that is more than fifty
                  (50) miles from the Optionee's  principal  place of employment
                  or  service  immediately  prior to the date of the  Change  in
                  Control,    or   the   imposition   of   travel   requirements
                  substantially  more demanding of the Optionee than such travel
                  requirements  existing  immediately  prior  to the date of the
                  Change in Control;

                           (iii) any failure by the Participating  Company Group
                  to pay, or any material reduction by the Participating Company
                  Group of, (A) the Optionee's base salary in effect immediately
                  prior to the date of the Change in Control (unless  reductions
                  comparable  in amount and duration are  concurrently  made for
                  all other  employees of the  Participating  Company Group with
                  responsibilities, organizational level and title comparable to
                  the Optionee's), or (B) the Optionee's bonus compensation,  if
                  any, in effect  immediately prior to the date of the Change in
                  Control (subject to applicable  performance  requirements with
                  respect to the actual amount of bonus  compensation  earned by
                  the Optionee); or

                           (iv) any failure by the  Participating  Company Group
                  to (A) continue to provide the Optionee  with the  opportunity
                  to  participate,  on terms  no less  favorable  than  those in
                  effect for the  benefit of any  employee  or service  provider
                  group  which   customarily   includes  a  person  holding  the
                  employment  or  service  provider  position  or  a  comparable
                  position with the Participating Company Group then held by the
                  Optionee,  in any benefit or compensation  plans and programs,
                  including,  but not  limited  to,  the  Participating  Company
                  Group's life, disability,  health, dental,  medical,  savings,
                  profit sharing,  stock purchase and retirement  plans, if any,
                  in which the Optionee was  participating  immediately prior to
                  the date of the Change in Control, or their equivalent, or (B)
                  provide the Optionee with all other fringe  benefits (or their
                  equivalent) from time to time in effect for the benefit of any
                  employee group which customarily includes a person holding the

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<PAGE>

                  employment  or  service  provider  position  or  a  comparable
                  position with the Participating Company Group then held by the
                  Optionee.

                  (m)  "Incentive  Stock Option" means an Option  intended to be
         (as set  forth in the  Option  Agreement)  and  which  qualifies  as an
         incentive  stock  option  within the  meaning of Section  422(b) of the
         Code.

                  (n) "Insider" means an officer or a Director of the Company or
         any other person whose  transactions in Stock are subject to Section 16
         of the Exchange Act.

                  (o)  "Nonstatutory  Stock Option" means an Option not intended
         to be (as set forth in the Option  Agreement) or which does not qualify
         as an Incentive Stock Option.

                  (p)  "Option"  means a right to  purchase  Stock  (subject  to
         adjustment  as  provided  in  Section  4.2)  pursuant  to the terms and
         conditions  of the Plan.  An Option  may be either an  Incentive  Stock
         Option or a Nonstatutory Stock Option.

                  (q) "Option  Agreement" means a written  agreement between the
         Company  and an  Optionee  setting  forth  the  terms,  conditions  and
         restrictions  of the  Option  granted  to the  Optionee  and any shares
         acquired upon the exercise thereof.  An Option Agreement may consist of
         a form of "Notice of Grant of Stock Option" and a form of "Stock Option
         Agreement"  incorporated  therein by  reference,  or such other form or
         forms as the Board may approve from time to time.

                  (r) "Optionee" means a person who has been granted one or more
         Options.

                  (s) "Parent  Corporation"  means any present or future "parent
         corporation" of the Company, as defined in Section 424(e) of the Code.

                  (t)  "Participating  Company"  means the Company or any Parent
         Corporation or Subsidiary Corporation.

                  (u) "Participating Company Group" means, at any point in time,
         all corporations collectively which are then Participating Companies.

                  (v) "Rule 16b-3"  means Rule 16b-3 under the Exchange  Act, as
         amended from time to time, or any successor rule or regulation.

                  (w)  "Securities  Act" means the  Securities  Act of 1933,  as
         amended.

                  (x) "Service"  means an Optionee's  employment or service with
         the  Participating  Company  Group,  whether  in  the  capacity  of  an
         Employee,  a Director or a Consultant.  An Optionee's Service shall not
         be deemed to have terminated merely because of a change in the capacity
         in which the  Optionee  renders  Service to the  Participating  Company
         Group or a change in the  Participating  Company for which the Optionee
         renders  such  Service,  provided  that  there  is no  interruption  or
         termination  of the  Optionee's  Service.  Furthermore,  an  Optionee's
         Service  with the  Participating  Company  Group shall not be deemed to
         have terminated if the Optionee takes any military  leave,  sick leave,

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<PAGE>

         or other bona fide leave of absence approved by the Company;  provided,
         however,  that if any such  leave  exceeds  ninety  (90)  days,  on the
         ninety-first  (91st) day of such leave the Optionee's  Service shall be
         deemed to have  terminated  unless  the  Optionee's  right to return to
         Service with the  Participating  Company Group is guaranteed by statute
         or contract. Notwithstanding the foregoing, unless otherwise designated
         by the  Company or  required  by law,  a leave of absence  shall not be
         treated  as Service  for  purposes  of  determining  vesting  under the
         Optionee's Option Agreement.  The Optionee's Service shall be deemed to
         have  terminated  either upon an actual  termination of Service or upon
         the corporation for which the Optionee performs Service ceasing to be a
         Participating  Company.  Subject to the foregoing,  the Company, in its
         discretion,   shall  determine  whether  the  Optionee's   Service  has
         terminated and the effective date of such termination.

                  (y) "Stock" means the common stock of the Company, as adjusted
         from time to time in accordance with Section 4.2.

                  (z)  "Subsidiary  Corporation"  means  any  present  or future
         "subsidiary  corporation" of the Company,  as defined in Section 424(f)
         of the Code.

                  (aa) "Ten Percent  Owner  Optionee"  means an Optionee who, at
         the time an Option is granted to the  Optionee,  owns stock  possessing
         more than ten percent (10%) of the total  combined  voting power of all
         classes  of stock of a  Participating  Company  within  the  meaning of
         Section 422(b)(6) of the Code.

                  (bb)  "Termination  After Change in Control" shall mean either
         of the  following  events  occurring  within twelve (12) months after a
         Change in Control (as defined in Section 8):

                           (i) termination by the Participating Company Group of
                  the Optionee's  Service with the  Participating  Company Group
                  for any reason other than for Cause; or

                           (ii) the Optionee's  resignation for Good Reason from
                  all capacities in which the Optionee is then rendering Service
                  to the Participating  Company Group within a reasonable period
                  of time following the event constituting Good Reason.

Notwithstanding  any provision herein to the contrary,  Termination After Change
in Control shall not include any termination of the Optionee's  Service with the
Participating  Company  Group  which  (1) is for  Cause;  (2) is a result of the
Optionee's  death or  disability;  (3) is a result of the  Optionee's  voluntary
termination  of Service  other than for Good Reason;  or (4) occurs prior to the
effectiveness of a Change in Control.

         2.2  Construction.   Captions  and  titles  contained  herein  are  for
convenience  only and shall not affect  the  meaning  or  interpretation  of any
provision of the Plan.  Except when  otherwise  indicated  by the  context,  the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not  intended to be  exclusive,  unless the context  clearly
requires otherwise.

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<PAGE>

3.       ADMINISTRATION.
         --------------

         3.1  Administration by the Board. The Plan shall be administered by the
Board.  All  questions of  interpretation  of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option.

         3.2 Authority of Officers. Any officer of a Participating Company shall
have the  authority  to act on behalf of the Company with respect to any matter,
right,  obligation,  determination or election which is the responsibility of or
which is  allocated  to the Company  herein,  provided  the officer has apparent
authority  with  respect to such matter,  right,  obligation,  determination  or
election.

         3.3 Powers of the Board.  In addition to any other  powers set forth in
the Plan and  subject to the  provisions  of the Plan,  the Board shall have the
full and final power and authority, in its discretion:

                  (a) to determine the persons to whom, and the time or times at
         which, Options shall be granted and the number of shares of Stock to be
         subject to each Option;

                  (b)  to  designate  Options  as  Incentive  Stock  Options  or
         Nonstatutory Stock Options;

                  (c) to  determine  the Fair Market Value of shares of Stock or
         other property;

                  (d)  to  determine  the  terms,  conditions  and  restrictions
         applicable to each Option (which need not be identical)  and any shares
         acquired upon the exercise thereof, including,  without limitation, (i)
         the exercise price of the Option, (ii) the method of payment for shares
         purchased  upon the  exercise  of the  Option,  (iii)  the  method  for
         satisfaction  of any tax withholding  obligation  arising in connection
         with  the  Option  or such  shares,  including  by the  withholding  or
         delivery of shares of stock,  (iv) the timing,  terms and conditions of
         the  exercisability of the Option or the vesting of any shares acquired
         upon  the  exercise  thereof,  (v) the  time of the  expiration  of the
         Option,  (vi) the effect of the Optionee's  termination of Service with
         the Participating Company Group on any of the foregoing,  and (vii) all
         other terms,  conditions and  restrictions  applicable to the Option or
         such shares not inconsistent with the terms of the Plan;

                  (e) to approve one or more forms of Option Agreement;

                  (f) to amend, modify, extend, cancel or renew any Option or to
         waive any  restrictions  or conditions  applicable to any Option or any
         shares acquired upon the exercise thereof;

                  (g)   to   accelerate,   continue,   extend   or   defer   the
         exercisability of any Option or the vesting of any shares acquired upon
         the exercise thereof, including with respect to the period following an
         Optionee's termination of Service with the Participating Company Group;

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<PAGE>

                  (h) to  prescribe,  amend or  rescind  rules,  guidelines  and
         policies  relating  to  the  Plan,  or  to  adopt  supplements  to,  or
         alternative versions of, the Plan,  including,  without limitation,  as
         the Board deems  necessary  or desirable to comply with the laws of, or
         to accommodate the tax policy or custom of, foreign jurisdictions whose
         citizens may be granted Options; and

                  (i) to correct any defect,  supply any  omission or  reconcile
         any  inconsistency  in the Plan or any Option Agreement and to make all
         other  determinations  and take such other  actions with respect to the
         Plan or any  Option as the Board may deem  advisable  to the extent not
         inconsistent with the provisions of the Plan or applicable law.

         3.4   Administration   with  Respect  to  Insiders.   With  respect  to
participation  by  Insiders  in the  Plan,  at any time that any class of equity
security of the  Company is  registered  pursuant to Section 12 of the  Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

         3.5   Indemnification.   In   addition   to  such   other   rights   of
indemnification  as they  may  have as  members  of the  Board  or  officers  or
employees  of the  Participating  Company  Group,  members  of the Board and any
officers or employees of the  Participating  Company Group to whom  authority to
act for the  Board or the  Company  is  delegated  shall be  indemnified  by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily  incurred in  connection  with the  defense of any  action,  suit or
proceeding,  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 right  granted  hereunder,  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  person  is liable  for  gross  negligence,  bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the  institution  of such action,  suit or  proceeding,  such person shall
offer to the Company,  in writing,  the opportunity at its own expense to handle
and defend the same.

4.       SHARES SUBJECT TO PLAN.
         ----------------------

         4.1  Maximum  Number of  Shares  Issuable.  Subject  to  adjustment  as
provided in Section  4.2, the maximum  aggregate  number of shares of Stock that
may be issued under the Plan shall be Four Million (4,000,000) and shall consist
of  authorized  but unissued or  reacquired  shares of Stock or any  combination
thereof.  If an  outstanding  Option for any reason  expires or is terminated or
canceled  or if shares  of Stock are  acquired  upon the  exercise  of an Option
subject to a Company repurchase option and are repurchased by the Company at the
Optionee's  exercise  price,  the shares of Stock  allocable to the  unexercised
portion  of such  Option  or such  repurchased  shares of Stock  shall  again be
available for issuance under the Plan.

         4.2 Adjustments for Changes in Capital  Structure.  In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification  or similar  change in the capital  structure  of the  Company,
appropriate  adjustments shall be made in the number and class of shares subject
to the Plan and to any  outstanding  Options and in the exercise price per share
of any  outstanding  Options.  If a majority of the shares which are of the same

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class as the shares that are subject to  outstanding  Options are exchanged for,
converted  into,  or otherwise  become  (whether or not pursuant to an Ownership
Change Event, as defined in Section 8.1) shares of another corporation (the "New
Shares"),  the Board may unilaterally  amend the outstanding  Options to provide
that such  Options  are  exercisable  for New  Shares.  In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the  outstanding  Options  shall be adjusted in a fair and  equitable  manner as
determined by the Board, in its discretion.  Notwithstanding the foregoing,  any
fractional share resulting from an adjustment pursuant to this Section 4.2 shall
be rounded down to the nearest  whole  number,  and in no event may the exercise
price of any Option be decreased  to an amount less than the par value,  if any,
of the stock  subject to the Option.  The  adjustments  determined  by the Board
pursuant to this Section 4.2 shall be final, binding and conclusive.

5.       ELIGIBILITY AND OPTION LIMITATIONS.
         ----------------------------------

         5.1  Persons  Eligible  for  Options.  Options  may be granted  only to
Employees,  Consultants,  and Directors. For purposes of the foregoing sentence,
"Employees,"  "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection  with written  offers of an employment or other service  relationship
with the Participating  Company Group. Eligible persons may be granted more than
one (1) Option.

         5.2 Option Grant Restrictions. Any person who is not an Employee on the
effective  date of the grant of an Option to such  person may be granted  only a
Nonstatutory  Stock Option.  An Incentive  Stock Option granted to a prospective
Employee upon the condition  that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company,  with an exercise price  determined as of such date in accordance  with
Section 6.1. In no case shall a company, corporation, trust, family trust or any
other entity which would  invalidate the Subchapter S election of the Company or
Participating Company Group be an Eligible person.

         5.3 Fair Market Value Limitation. To the extent that options designated
as  Incentive  Stock  Options  (granted  under  all  stock  option  plans of the
Participating  Company  Group,  including  the Plan)  become  exercisable  by an
Optionee  for the first time during any  calendar  year for stock  having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000),  the portions
of such options which exceed such amount shall be treated as Nonstatutory  Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair  Market  Value of stock shall be  determined  as of the time the option
with  respect to such stock is granted.  If the Code is amended to provide for a
different  limitation  from that set forth in this Section 5.3,  such  different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such  amendment to the Code.
If an  Option  is  treated  as an  Incentive  Stock  Option  in  part  and  as a
Nonstatutory  Stock Option in part by reason of the limitation set forth in this
Section  5.3,  the  Optionee  may  designate  which  portion of such  Option the
Optionee is exercising.  In the absence of such designation,  the Optionee shall
be deemed to have  exercised  the Incentive  Stock Option  portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

                                       8
<PAGE>

6.       TERMS AND CONDITIONS OF OPTIONS.
         -------------------------------

         Options shall be evidenced by Option  Agreements  specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time  establish.  No Option or  purported  Option  shall be a valid and  binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option  Agreements  may  incorporate  all or any of the  terms  of the  Plan  by
reference  and shall  comply  with and be  subject  to the  following  terms and
conditions:

         6.1  Exercise  Price.  The  exercise  price  for each  Option  shall be
established  in the  discretion of the Board;  provided,  however,  that (a) the
exercise  price per share for an Option  shall be not less than the Fair  Market
Value of a share of Stock on the effective date of grant of the Option,  and (b)
no Incentive  Stock Option granted to a Ten Percent Owner Optionee shall have an
exercise  price per share less than one hundred  ten percent  (110%) of the Fair
Market Value of a share of Stock on the  effective  date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory  Stock Option) may be granted with an exercise price lower than the
minimum  exercise price set forth above if such Option is granted pursuant to an
assumption or substitution  for another option in a manner  qualifying under the
provisions of Section 424(a) of the Code.

         6.2 Exercisability and Term of Options. Options shall be exercisable at
such time or times,  or upon such event or events,  and  subject to such  terms,
conditions,  performance criteria and restrictions as shall be determined by the
Board and set forth in the Option  Agreement  evidencing such Option;  provided,
however,  that (a) no Option shall be  exercisable  after the  expiration of ten
(10) years after the  effective  date of grant of such Option,  (b) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall be exercisable  after
the  expiration  of five (5)  years  after the  effective  date of grant of such
Option,  and  (c) no  Option  granted  to a  prospective  Employee,  prospective
Consultant or prospective  Director may become  exercisable prior to the date on
which such person commences Service with a Participating Company. Subject to the
foregoing,  unless  otherwise  specified by the Board in the grant of an Option,
any Option granted  hereunder shall terminate ten (10) years after the effective
date of grant of the Option,  unless earlier  terminated in accordance  with its
provisions.

         6.3 Payment of Exercise Price.

                  (a) Forms of  Consideration  Authorized.  Except as  otherwise
         provided below,  payment of the exercise price for the number of shares
         of Stock being  purchased  pursuant to any Option  shall be made (i) in
         cash, by check or cash  equivalent,  (ii) by tender to the Company,  or
         attestation to the ownership,  of shares of Stock owned by the Optionee
         having a Fair Market Value (as determined by the Company without regard
         to any  restrictions  on  transferability  applicable  to such stock by
         reason  of  federal  or state  securities  laws or  agreements  with an
         underwriter for the Company) not less than the exercise price, (iii) by
         delivery  of a  properly  executed  notice  together  with  irrevocable
         instructions to a broker providing for the assignment to the Company of

                                       9
<PAGE>

         the  proceeds  of a sale or  loan  with  respect  to some or all of the
         shares  being  acquired  upon the  exercise  of the Option  (including,
         without  limitation,  through an exercise complying with the provisions
         of  Regulation  T as  promulgated  from  time to time by the  Board  of
         Governors of the Federal Reserve System) (a "Cashless Exercise"),  (iv)
         provided  that the  Optionee is an Employee and in the  Company's  sole
         discretion  at the time the Option is  exercised,  by  delivery  of the
         Optionee's  promissory  note in a form  approved by the Company for the
         aggregate exercise price, provided that, if the Company is incorporated
         in the State of Delaware,  the Optionee  shall pay in cash that portion
         of the  aggregate  exercise  price  not less  than the par value of the
         shares  being  acquired,  (v) by  such  other  consideration  as may be
         approved  by the Board  from time to time to the  extent  permitted  by
         applicable  law, or (vi) by any combination  thereof.  The Board may at
         any time or from time to time,  by approval of or by  amendment  to the
         standard forms of Option Agreement  described in Section 7, or by other
         means,  grant Options which do not permit all of the foregoing forms of
         consideration  to be used in  payment  of the  exercise  price or which
         otherwise restrict one or more forms of consideration.

                  (b) Limitations on Forms of Consideration.

                           (i) Tender of Stock.  Notwithstanding  the foregoing,
                  an Option may not be exercised  by tender to the  Company,  or
                  attestation to the ownership, of shares of Stock to the extent
                  such tender or attestation would constitute a violation of the
                  provisions of any law, regulation or agreement restricting the
                  redemption of the Company's stock.  Unless otherwise  provided
                  by the Board,  an Option may not be exercised by tender to the
                  Company,  or attestation to the ownership,  of shares of Stock
                  unless such shares  either have been owned by the Optionee for
                  more than six (6)  months or were not  acquired,  directly  or
                  indirectly, from the Company.

                           (ii) Cashless Exercise.  The Company reserves, at any
                  and all times,  the right,  in the Company's sole and absolute
                  discretion, to establish,  decline to approve or terminate any
                  program or procedures  for the exercise of Options by means of
                  a Cashless Exercise.

                           (iii) Payment by Promissory  Note. No promissory note
                  shall be permitted in the exercise of an Option.

         6.4 Tax  Withholding.  The  Company  shall have the right,  but not the
obligation,  to deduct from the shares of Stock issuable upon the exercise of an
Option,  or to accept from the  Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company,  equal to all
or any part of the federal,  state, local and foreign taxes, if any, required by
law to be  withheld  by the  Participating  Company  Group with  respect to such
Option or the shares  acquired upon the exercise  thereof.  Alternatively  or in
addition,  in its  discretion,  the Company  shall have the right to require the
Optionee, through payroll withholding,  cash payment or otherwise,  including by
means  of a  Cashless  Exercise,  to make  adequate  provision  for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the  shares  acquired  upon the  exercise  thereof.  The Fair

                                       10
<PAGE>

Market Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum  statutory  withholding  rates.  The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option  Agreement  until the  Participating  Company Group's tax
withholding obligations have been satisfied by the Optionee.

         6.5 Reserved.

         6.6 Effect of Termination of Service.

                  (a) Option  Exercisability.  Subject to earlier termination of
         the Option as otherwise  provided herein and unless otherwise  provided
         by the  Board in the grant of an  Option  and set  forth in the  Option
         Agreement,   an  Option  shall  be  exercisable   after  an  Optionee's
         termination  of  Service  only  during  the   applicable   time  period
         determined in  accordance  with this Section 6.6 and  thereafter  shall
         terminate:

                           (i)  Disability.  If the Optionee's  Service with the
                  Participating   Company  Group   terminates   because  of  the
                  Disability  of  the  Optionee,   the  Option,  to  the  extent
                  unexercised   and   exercisable  on  the  date  on  which  the
                  Optionee's  Service  terminated,   may  be  exercised  by  the
                  Optionee (or the Optionee's guardian or legal  representative)
                  at any time prior to the  expiration of twelve (12) months (or
                  such other period of time as determined  by the Board,  in its
                  discretion)  after  the date on which the  Optionee's  Service
                  terminated,  but in any  event  no  later  than  the  date  of
                  expiration  of the  Option's  term as set forth in the  Option
                  Agreement  evidencing  such  Option  (the  "Option  Expiration
                  Date").

                           (ii)  Death.  If  the  Optionee's  Service  with  the
                  Participating Company Group terminates because of the death of
                  the  Optionee,  the  Option,  to the  extent  unexercised  and
                  exercisable  on the  date  on  which  the  Optionee's  Service
                  terminated,   may  be  exercised  by  the   Optionee's   legal
                  representative  or other  person  who  acquired  the  right to
                  exercise the Option by reason of the  Optionee's  death at any
                  time prior to the  expiration  of twelve  (12) months (or such
                  other  period  of  time as  determined  by the  Board,  in its
                  discretion)  after  the date on which the  Optionee's  Service
                  terminated,  but  in  any  event  no  later  than  the  Option
                  Expiration  Date.  The  Optionee's  Service shall be deemed to
                  have  terminated  on  account  of death if the  Optionee  dies
                  within  three  (3)  months  (or such  other  period of time as
                  determined  by  the  Board,  in  its  discretion)   after  the
                  Optionee's  termination of Service (unless the termination was
                  for Cause).

                           (iii)  Termination  After  Change in Control.  If the
                  Optionee's Service with the Participating Company Group ceases
                  as a result of Termination  After Change in Control,  then (1)
                  the Option,  to the extent  unexercised and exercisable on the
                  date  on  which  the  Optionee's  Service  terminated,  may be
                  exercised by the Optionee (or the Optionee's guardian or legal
                  representative) at any time prior to the expiration of six (6)
                  months  after  the  date  on  which  the  Optionee's   Service
                  terminated,  but  in  any  event  no  later  than  the  Option
                  Expiration Date, and (2) the exercisability and vesting of the

                                       11
<PAGE>

                  Option and any shares acquired upon the exercise thereof shall
                  be  accelerated  in full effective as of the date on which the
                  Optionee's Service terminated.

                           (iv) Other Termination of Service.  If the Optionee's
                  Service with the  Participating  Company Group  terminates for
                  any reason,  except  Disability,  death or  Termination  After
                  Change in Control,  the Option, to the extent  unexercised and
                  exercisable   by  the  Optionee  on  the  date  on  which  the
                  Optionee's  Service  terminated,   may  be  exercised  by  the
                  Optionee  at any time  prior to the  expiration  of three  (3)
                  months  (or such  other  period of time as  determined  by the
                  Board,  in  its  discretion)  after  the  date  on  which  the
                  Optionee's Service terminated,  but in any event no later than
                  the Option Expiration Date.

                  (b)  Extension if Exercise  Prevented by Law.  Notwithstanding
         the foregoing,  if the exercise of an Option within the applicable time
         periods set forth in Section  6.6(a) is prevented by the  provisions of
         Section 10 below, the Option shall remain  exercisable  until three (3)
         months (or such longer period of time as  determined  by the Board,  in
         its discretion)  after the date the Optionee is notified by the Company
         that the  Option is  exercisable,  but in any  event no later  than the
         Option Expiration Date.

                  (c)   Extension   if  Optionee   Subject  to  Section   16(b).
         Notwithstanding  the foregoing,  if a sale within the  applicable  time
         periods  set  forth in  Section  6.6(a)  of  shares  acquired  upon the
         exercise of the Option would subject the Optionee to suit under Section
         16(b) of the Exchange  Act, the Option shall remain  exercisable  until
         the earliest to occur of (i) the tenth (10th) day following the date on
         which a sale of such shares by the Optionee  would no longer be subject
         to such suit, (ii) the one hundred and ninetieth  (190th) day after the
         Optionee's termination of Service, or (iii) the Option Expiration Date.

         6.7 Transferability of Options. During the lifetime of the Optionee, an
Option shall be exercisable  only by the Optionee or the Optionee's  guardian or
legal  representative.  No Option shall be  assignable  or  transferable  by the
Optionee,   except  by  will  or  by  the  laws  of  descent  and  distribution.
Notwithstanding  the  foregoing,  to the extent  permitted by the Board,  in its
discretion,  and set forth in the Option  Agreement  evidencing  such Option,  a
Nonstatutory  Stock Option shall be  assignable or  transferable  subject to the
applicable limitations,  if any, described in Rule 701 under the Securities Act,
and the  General  Instructions  to Form S-8  Registration  Statement  under  the
Securities Act.

7.       STANDARD FORMS OF OPTION AGREEMENT.
         ----------------------------------

         7.1 Option  Agreement.  Unless  otherwise  provided by the Board at the
time the Option is granted,  an Option  shall  comply with and be subject to the
terms and conditions set forth in the form of Option  Agreement  approved by the
Board  concurrently  with its  adoption of the Plan and as amended  from time to
time.

         7.2 Authority to Vary Terms.  The Board shall have the  authority  from
time  to time to  vary  the  terms  of any  standard  form of  Option  Agreement
described in this Section 7 either in connection  with the grant or amendment of

                                       12
<PAGE>

an individual  Option or in connection with the  authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised  or  amended  standard  form  or  forms  of  Option  Agreement  are  not
inconsistent with the terms of the Plan.

8.       CHANGE IN CONTROL.
         -----------------

         8.1 Definitions.

                  (a) An  "Ownership  Change  Event"  shall  be  deemed  to have
         occurred if any of the  following  occurs with  respect to the Company:
         (i) the direct or  indirect  sale or  exchange in a single or series of
         related  transactions  by the  stockholders of the Company of more than
         fifty percent  (50%) of the voting stock of the Company;  (ii) a merger
         or  consolidation  in which  the  Company  is a party;  (iii) the sale,
         exchange,  or transfer of all or substantially all of the assets of the
         Company; or (iv) a liquidation or dissolution of the Company.

                  (b) A "Change in Control" shall mean an Ownership Change Event
         or a  series  of  related  Ownership  Change  Events  (collectively,  a
         "Transaction")  wherein the  stockholders  of the  Company  immediately
         before the Transaction do not retain immediately after the Transaction,
         in  substantially  the same proportions as their ownership of shares of
         the Company's voting stock immediately  before the Transaction,  direct
         or indirect  beneficial  ownership of more than fifty  percent (50%) of
         the total combined voting power of the outstanding  voting stock of the
         Company or the  corporation or  corporations to which the assets of the
         Company were transferred (the "Transferee Corporation(s)"), as the case
         may be. For purposes of the  preceding  sentence,  indirect  beneficial
         ownership shall include, without limitation, an interest resulting from
         ownership of the voting stock of one or more  corporations  which, as a
         result  of  the   Transaction,   own  the  Company  or  the  Transferee
         Corporation(s),  as the case may be, either  directly or through one or
         more  subsidiary  corporations.  The  Board  shall  have  the  right to
         determine  whether  multiple  sales or exchanges of the voting stock of
         the Company or multiple  Ownership  Change Events are related,  and its
         determination shall be final, binding and conclusive.

         8.2 Effect of Change in Control on Options. In the event of a Change in
Control,  the surviving,  continuing,  successor,  or purchasing  corporation or
parent corporation  thereof,  as the case may be (the "Acquiring  Corporation"),
may either assume the Company's rights and obligations under outstanding Options
or substitute for outstanding Options  substantially  equivalent options for the
Acquiring Corporation's stock. In the event the Acquiring Corporation elects not
to assume or substitute for  outstanding  Options in connection with a Change in
Control,  any unexercisable or unvested portions of outstanding  Options and any
shares  acquired upon the exercise  thereof held by Optionees  whose Service has
not terminated prior to such date shall be immediately exercisable and vested in
full as of the date ten (10) days  prior to the date of the  Change in  Control.
The exercise or vesting of any Option and any shares  acquired upon the exercise
thereof  that was  permissible  solely by reason  of this  Section  8.2 shall be
conditioned  upon the  consummation of the Change in Control.  Any Options which
are  neither  assumed  or  substituted  for  by  the  Acquiring  Corporation  in
connection with the Change in Control nor exercised as of the date of the Change

                                       13
<PAGE>

in Control shall terminate and cease to be outstanding  effective as of the date
of the Change in Control.  Notwithstanding  the foregoing,  shares acquired upon
exercise  of an Option  prior to the  Change in  Control  and any  consideration
received  pursuant to the Change in Control  with  respect to such shares  shall
continue  to be subject to all  applicable  provisions  of the Option  Agreement
evidencing such Option except as otherwise provided in such Option Agreement.

9.       PROVISION OF INFORMATION.
         ------------------------

         Each  Optionee  shall be given  access to  information  concerning  the
Company equivalent to that information generally made available to the Company's
common stockholders.

10.      COMPLIANCE WITH SECURITIES LAW.
         ------------------------------

         The grant of Options and the issuance of shares of Stock upon  exercise
of Options shall be subject to compliance  with all applicable  requirements  of
federal, state and foreign law with respect to such securities.  Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable  federal,  state or foreign securities laws or other
law or  regulations or the  requirements  of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration  statement  under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares  issuable upon
exercise  of the Option or (b) in the opinion of legal  counsel to the  Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable  exemption from the registration  requirements of the
Securities  Act. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company's legal counsel
to be necessary to the lawful  issuance and sale of any shares  hereunder  shall
relieve the Company of any  liability in respect of the failure to issue or sell
such shares as to which such requisite  authority  shall not have been obtained.
As a  condition  to the  exercise  of any  Option,  the  Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate,  to
evidence  compliance  with  any  applicable  law or  regulation  and to make any
representation  or warranty  with  respect  thereto as may be  requested  by the
Company.

11.      TERMINATION OR AMENDMENT OF PLAN.
         --------------------------------

         The Board may terminate or amend the Plan at any time. However, subject
to changes in applicable law,  regulations or rules that would permit otherwise,
without  the  approval  of the  Company's  stockholders,  there  shall be (a) no
increase in the maximum  aggregate  number of shares of Stock that may be issued
under the Plan (except by operation of the  provisions of Section  4.2),  (b) no
change in the class of persons eligible to receive Incentive Stock Options,  and
(c) no other amendment of the Plan that would require  approval of the Company's
stockholders  under any  applicable  law,  regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding  Option unless expressly
provided by the Board. In any event, no termination or amendment of the Plan may
adversely  affect  any  then  outstanding  Option  without  the  consent  of the
Optionee,  unless such  termination or amendment is required to enable an Option
designated as an Incentive  Stock Option to qualify as an Incentive Stock Option
or is necessary to comply with any applicable law, regulation or rule.

                                       14
<PAGE>

12.      STOCKHOLDER APPROVAL.
         --------------------

         The Plan or any increase in the maximum  aggregate  number of shares of
Stock issuable  thereunder as provided in Section 4.1 (the "Authorized  Shares")
shall be approved by the  stockholders  of the Company within twelve (12) months
of the  date  of  adoption  thereof  by the  Board.  Options  granted  prior  to
stockholder  approval  of  the  Plan  or in  excess  of  the  Authorized  Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder  approval of the Plan or such increase in the Authorized
Shares,  as the case may be. The Plan was  originally  approved  by the Board of
Directors on March 10, 2004 and will be submitted to  Stockholders  for approval
at the next Annual Meeting of Stockholders.

                                       15

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