Document:

EXHIBIT
      10.1

    

    

    AMENDMENT
      NO. 2 TO THE

    CREDIT
      AGREEMENT

    

    Dated
      as of December 13, 2005

     

    AMENDMENT
      NO. 2 TO THE CREDIT AGREEMENT
      (this
“Amendment”)
      among
      Ceradyne, Inc., a Delaware corporation (“Ceradyne”),
      Ceradyne ESK, LLC, a Delaware limited liability company (“ESK
      LLC”),
      ESK
      Ceramics GmbH & Co. KG (“ESK
      KG”;
      and
      collectively with Ceradyne and ESK LLC, the “Borrowers”),
      the
      banks, financial institutions and other lenders party hereto (collectively,
      the
“Lenders”) and Wachovia Bank, National Association, as collateral agent and
      administrative agent (in such capacity, the “Administrative
      Agent”)
      for
      the Lenders.

     

    PRELIMINARY
      STATEMENTS:

     

    (1)    The
      Borrowers, the Guarantors (as defined therein), the Administrative Agent and
      the
      Lenders have entered into a Credit Agreement dated as of August 18, 2004 (such
      Credit Agreement, as amended by Amendment No. 1 to the Credit Agreement dated
      as
      of December 22, 2004 and as otherwise amended, restated, supplemented or
      modified through the date hereof, the “Credit
      Agreement”).
      Capitalized terms not otherwise defined in this Amendment have the same meanings
      as specified in the Credit Agreement.

     

    (2)    The
      Borrower intends to issue (the “Convertible
      Notes Issuance”)
      up to
      $110 million in senior subordinated convertible notes due 2035 on or about
      December 19, 2005, the proceeds of which will be used to permanently prepay
      amounts owing under the Credit Agreement.

     

    (3)    The
      Borrower, the Administrative Agent and the Required Lenders have agreed to
      amend
      the Credit Agreement to permit the Convertible Notes Issuance and in certain
      other respects as set forth below.

     

    SECTION
      1. Amendments
      to Credit Agreement.
      The
      Credit Agreement is, effective as of the date hereof and subject to the
      satisfaction of the conditions precedent set forth in Section 2 hereof, hereby
      amended as follows:

     

    (a)    Section
      1.01 is amended by inserting the following new definitions in proper
      alphabetical order:

     

    “‘Convertible
      Notes”
      means
      the senior subordinated convertibles notes of the Borrower due 2035 to be issued
      on or about December 19, 2005 on substantially the terms set forth in the
      preliminary prospectus supplement with respect thereto dated December 1, 2005,
      without any amendment or other modification of the terms thereof that is adverse
      to the interests of the Administrative Agent and the Lender Parties that has
      not
      been consented to by the Required Lenders.”

     

    “‘Early
      Termination Date’
      means
      the earlier of (a) the date on which any holder of the Convertible Notes
      delivers a conversion notice or otherwise makes a demand for any payment (other
      than in common stock) in satisfaction of all or a portion of the principal
      amount of the Convertible Notes held by such holder and (b) the date on which
      the Borrower makes any payment (other than in common stock) to any holder of
      the
      Convertible Notes in satisfaction of all or a portion of the principal amount
      of
      the Convertible Notes held by such holder.”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)    The
      definition of “Subordinated Debt” contained in Section 1.01 is hereby amended in
      its entirety to read as follows:

     

    “‘Subordinated
      Debt’
      means,
      collectively, (a) any Debt of any Loan Party subordinated in right and time
      of
      payment to the Obligations under the Loan Documents with a maturity no earlier
      than a date that is six (6) months after the Termination Date and containing
      such other terms and conditions (including, without limitation, subordination
      terms, covenants and defaults), in each case as are satisfactory to the
      Administrative Agent and (b) the Convertible Notes.”

     

    (c)    The
      definition of “Termination Date” contained in Section 1.01 is hereby amended in
      its entirety to read as follows:

     

    “‘Termination
      Date’
      means
      the earliest of (a) the date of termination in whole of the Revolving Credit
      Commitments, the Letter of Credit Commitment and the Term Commitments pursuant
      to Section 2.05 or 6.01, (b)(i) for purposes of the Revolving Credit Facility,
      the Swing Line Facility and the Letter of Credit Facility, August 18, 2009,
      and
      (ii) for purposes of the Term Facility, August 18, 2011 and (c) for purposes
      of
      each Facility, the Early Termination Date.”

     

    SECTION
      2. Conditions
      of Effectiveness.
      This
      Amendment shall become effective when, and only when, and as of the date (the
      “Amendment
      No. 2 Effective Date”)
      on
      which, (a) the Administrative Agent shall have received counterparts of this
      Amendment executed by the Borrowers, the Guarantors and the Required Lenders,
      and dated the date of receipt thereof by the Administrative Agent (unless
      otherwise specified), and (b) the Administrative Agent shall have received
      payment of all accrued expenses of the Administrative Agent (including all
      reasonable and accrued fees of counsel to the Administrative Agent invoiced
      on
      or prior to the date hereof).

     

    SECTION
      3. Reference
      to and Effect on the Loan Documents.
      (a) On
      and after the effectiveness of this Amendment, each reference in the Credit
      Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import
      referring to the Credit Agreement, and each reference in the Notes and each
      of
      the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or
      words of like import referring to the Credit Agreement, shall mean and be a
      reference to the Credit Agreement, as amended by this Amendment.

     

    (b)    The
      Credit Agreement, the Notes and each of the other Loan Documents, as
      specifically amended by this Amendment, are and shall continue to be in full
      force and effect and are hereby in all respects ratified and confirmed. Without
      limiting the generality of the foregoing, the Collateral Documents and all
      of
      the Collateral described therein do and shall continue to secure the payment
      of
      all Obligations of the Loan Parties under the Loan Documents, in each case
      as
      amended by this Amendment.

     

    (c)    The
      execution, delivery and effectiveness of this Amendment shall not, except as
      expressly provided herein, operate as a waiver of any right, power or remedy
      of
      any Lender or the Administrative Agent under any of the Loan Documents, nor
      constitute a waiver of any provision of any of the Loan Documents.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    SECTION
      4. Consent.
      Each of
      Ceradyne, ESK LLC and ESK KG, as Guarantors under the Credit Agreement (the
      “Guaranty”)
      in
      favor of the Administrative Agent and the Lenders party to the Credit Agreement,
      hereby consents to this Amendment and hereby confirms and agrees that (a)
      notwithstanding the effectiveness of such Amendment, the Guaranty is, and shall
      continue to be, in full force and effect and is hereby ratified and confirmed
      in
      all respects, except that, on and after the effectiveness of such Amendment,
      each reference in the Guaranty to the “Credit Agreement”, “thereunder”,
“thereof” or words of like import shall mean and be a reference to the Credit
      Agreement, as amended by such Amendment, and (b) each of the Collateral
      Documents to which such Guarantor is a party and all of the Collateral described
      therein do, and shall continue to, secure the payment of all of the obligations
      to be secured thereunder.

     

    SECTION
      5. Costs,
      Expenses.
      The
      Borrower agrees to pay on demand all reasonable costs and expenses of the
      Administrative Agent in connection with the preparation, execution, delivery
      and
      administration, modification and amendment of this Amendment and the other
      instruments and documents to be delivered hereunder and all other accrued fees
      and expenses of the Administrative Agent (including, without limitation, the
      reasonable fees and expenses of counsel for the Administrative Agent) in
      accordance with the terms of Section 9.04 of the Credit Agreement. 

     

    SECTION
      6. Execution
      in Counterparts.
      This
      Amendment may be executed in any number of counterparts and by different parties
      hereto in separate counterparts, each of which when so executed shall be deemed
      to be an original and all of which taken together shall constitute but one
      and
      the same agreement. Delivery of an executed counterpart of a signature page
      to
      this Amendment by telecopier shall be effective as delivery of a manually
      executed counterpart of this Amendment.

     

    SECTION
      7. Governing
      Law.
      This
      Amendment shall be governed by, and construed in accordance with, the laws
      of
      the State of New York.

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
      by
      their respective officers thereunto duly authorized, as of the date first above
      written.

     

    
      	 	 	 
	 	CERADYNE,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/ JERROLD
              J. PELLIZZON
	 	
              

            
	 	
              Name:  
                Jerrold J. Pellizzon

              Title:   
                Chief Financial Officer

            

    

     

    
      
        	 	 	 
	 	CERADYNE
                ESK, LLC.
	 
 	 
 	 
 
	 	By:  	/s/ JERROLD
                J. PELLIZZON
	 	
                

              
	 	
                Name:  
                  Jerrold J. Pellizzon

                Title:   
                  Chief Financial Officer

              

      

       

      
        	 	 	 
	 	ESK
                CERAMICS GMBH & CO. KG
	 
 	 
 	 
 
	 	By:  	/s/ JERROLD
                J. PELLIZZON
	 	
                

              
	 	
                Name:  
                  Jerrold J. Pellizzon

                Title:   
                  Chief Financial
                  Officer

              

      

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    
       

      
        	 	 	 
	 	
                WACHOVIA
                  BANK, NATIONAL ASSOCIATION, 
as Administrative Agent and as a
                  Lender

              
	 
 	 
 	 
 
	 	By:  	/s/ WILLIAM
                F. FOX
	 	
                

              
	 	
                Name:  
                  William F. Fox

                Title:    
                  Director

              

      

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    ARES
      ENHANCED LOAN INVESTMENT STRATEGY, LTD.

    
      
        	 	
              	 

      

      
        	 	 	 

      

      
        	 	
                By:

              	
                Ares
                  Enhanced Loan Management, L.P., Investment
                  Manager

              

      

    

     

     

    
      	 	
              By:
                

            	
              Ares
                Enhanced Loan GP, LLC,

            

    

    Its
      General Partner

     

    By:
       /s/
      Americo Cascella

    
      

    

    Name: 
      Americo Cascella

    Title:  
       Vice
      President

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    Ares
      VII
      CLO Ltd.

    
      
        	 	 	 

      

      
        	 	
                By:

              	
                Ares
                  CLO Management VII, L.P., 

              

      

    

    Investment
      Manager

     

     

    
      	 	
              By:
                

            	
              Ares
                CLO GP VII, LLC,

            

    

    Its
      General Partner

     

    By:
       /s/
      Americo Cascella

    
      

    

    Name:
      Americo Cascella

    Title:  
Vice
      President

     

    
 

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    Ares
      VIII
      CLO Ltd.

    
      
        	 	 	 

      

      
        	 	
                By:

              	
                Ares
                  CLO Management VIII, L.P., 

              

      

    

    Investment
      Manager

     

     

    
      	 	
              By:
                

            	
              Ares
                CLO GP VIII, LLC

            

    

    Its
      General Partner

     

    By:
       /s/
      Americo Cascella

    
      

    

    Name: 
      Americo Cascella

    Title:   
Vice
      President

     

    
 

    
 

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    Ares
      IX
      CLO Ltd.

    
      
        	 	 	 

      

      
        	 	
                By:

              	
                Ares
                  CLO Management IX, L.P.,

              

      

    

    Investment
      Manager

     

     

    
      	 	
              By:
                

            	
              Ares
                CLO GP IX, LLC,

            

    

    Its
      General Partner

     

    By:
       /s/
      Americo Cascella

    
      

    

    Name:  
      Americo Cascella

    Title:    
      Vice President

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    280
      Funding I

     

     

    By:
      GSO
      Capital Partners LP

     

     

    By:
       /s/
      George Pan

    
      

    

    Name:  
      George Pan

    Title:    
      MD

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

     

    BABSON
      CLO LTD. 2004-1

    BABSON
      CLO LTD. 2004-II

    BABSON
      CLO LTD. 2005-I

    SUFFIELD
      CLO, LIMITED

    By
      Babson
      Capital Management LLC as Collateral Manager

     

    By:
      
      
        

      

    

    Name:

    Title:

     

     

    MAPLEWOOD
      (CAYMAN) LIMITED

    By
      Babson
      Capital Management LLC as Investment Manager

     

    By:
      
      
        

      

    

    Name:

    Title:

     

     

    MASSACHUSETTS
      MUTUAL LIFE INSURANCE COMPANY

    By
      Babson
      Capital Management LLC as Collateral Manager

     

    By:

    
      

    

    Name:

    Title:

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    Gale
      Force 1 CLO, Ltd.

    By:  
      GSO Capital Partners LP as Collateral Manager

     

     

    By:
       /s/
      Lee
      M. Susman

    
      

    

    Name:   
      Lee M. Susman

    Title:    
      Authorized Signatory

     

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    GENERAL
      ELECTRIC CAPITAL CORPORATION

     

     

    By: 
      /s/
      Brian
      P. Schwimm

    
      

    

    Name:  
      Brian P. Schwimm

    Title:    
      Duly Authorized Signatory

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    HUDSON
      STRAITS CLO 2004, LTD.

    By:  
      GSO Capital Partners LP

     

    By:  
      /s/
      Lee
      M. Shaiman

    
      

    

    Name:  
      Lee M. Shaiman

    Title:   
      Authorized Signatory

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    ING
      PRIME
      RATE TRUST

    By:  
      ING
      Investment Management Co.

    as
      its
      Investment Manager

     

     

    By: 
      /s/
      Mark
      F. Haak

    
      

    

    Name: 
      Mark F. Haak

    Title:   
      Vice President

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    ING
      SENIOR INCOME FUND

    By: 
      ING
      Investment Management Co.

    as
      its
      Investment Manager

     

    By:  
      Mark
      F.
      Haak 
      
        

      

    

    Name:  
      Mark F. Haak

    Title:    
      Vice President

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

     

    LightPoint
      CLO 2004-1, Ltd.

    Premium
      Loan Trust I, Ltd.

     

    By:  
      /s/
      Thomas A. Kramer

    
      

    

    Name:  
      Thomas A. Kramer

    Title:    
      Senior Managing Director &Chief
      Executive Officer

     

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    MORGAN
      STANLEY PRIME INCOME TRUST

     

    By:  
      /s/
      Jinny
      K. Kim

    
      

    

    Name:  
      Jinny K. Kim

    Title:   
      Vice President

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    THE
      NORTHERN TRUST COMPANY

     

    By:  
      /s/
      John
      E. Burda 
      
        

      

    

    Name:  
      John E. Burda

    Title:    
      Vice President

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    U.S.
      BANK
      NATIONAL ASSOCIATION

     

    By: 
      /s/
      Janet
      E. Jordan

    
      

    

    Name:  
      Janet E. Jordan

    Title:   
      Vice President

     

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    VAN
      KAMPEN

    SENIOR
      LOAN FUND

    By:  
      Van Kampen Asset Management

     

    By:  
      /s/
      Robert P. Drobny

    
      

    

    Name:  
      Robert P. Drobny

    Title:    
      Vice President

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    VAN
      KAMPEN

    SENIOR
      INCOME TRUST

    By:
      Van
      Kampen Asset Management

     

     

    By:   
      /s/
      Robert P. Drobny

    
      

    

    Name:  
      Robert P. Drobny

    Title:    
      Vice President

    
      	 	 	 	 
	 	 	 	 
	
              -22-VSUS
        TECHNOLOGIES INCORPORATED

       

      2003
        STOCK OPTION PLAN

       

      (As
        Amended and Restated on December 12, 2005)

       

      1.    Purpose

       

      The
        purpose of this plan (this "Plan") is to secure for VSUS TECHNOLOGIES
        INCORPORATED (the "Company") and its shareholders the benefits arising from
        capital stock ownership by employees, officers, directors, consultants and
        other
        service providers of the Company or any parent or subsidiary of the Company
        (each an "Affiliate") who are expected to contribute to the Company's future
        growth and success. This Plan is also designed to attract and retain other
        persons who will provide services to the Company. Those provisions of this
        Plan
        which make express reference to Section 422 of the Internal Revenue Code
        of
        1986, as amended or replaced from time to time (the "Code"), shall apply
        only to
        Incentive Stock Options (as that term is defined herein).

       

      2.    Type
        of Options and Administration

       

      (a)    Types
        of Options.
        Options
        granted pursuant to the Plan shall be authorized by action of the Board of
        Directors (the "Board") of the Company (or the committee appointed by the
        Board
        in accordance with Section 2(b) below) and may be either incentive stock
        options
        ("Incentive Stock Options") intended to meet the requirements of Section
        422 of
        the Code or non-statutory options which are not intended to meet the
        requirements of Section 422 of the Code ("Non-Qualified Options").

       

      (b)    Administration.
        The
        Plan will be administered by the Board or by a committee consisting of two
        or
        more directors each of whom shall be a "non-employee director," within the
        meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
        as
        amended (the "Exchange Act"), or any successor rule ("Rule 16b-3"), and an
        "outside director", within the meaning of Treasury Regulation Section
        1.162-27(e)(3) promulgated under Section 162(m) of the Code, (the "Committee")
        appointed by the Board, in each case whose construction and interpretation
        of
        the terms and provisions of the Plan shall be final, conclusive and binding
        upon
        the optionee and all other persons interested or claiming interests under
        the
        Plan. If the Board determines to create a Committee to administer the Plan,
        the
        delegation of powers to the Committee shall be consistent with applicable
        laws
        or regulations (including, without limitation, applicable state law and Rule
        16b-3). The Board or the Committee may in its sole discretion grant options
        to
        purchase any class of the Company’s shares (the "Shares"), and issue Shares upon
        exercise of such options as provided herein. The Board or the Committee shall
        have authority, subject to the express provisions of the Plan, to construe
        the
        respective option agreements and the Plan; to prescribe, amend and rescind
        rules
        and regulations relating to the Plan; to determine the terms and provisions
        of
        the respective option agreements, which need not be identical; and to make
        all
        other determinations in the judgment of the Board or the Committee necessary
        or
        desirable for the administration of the Plan. The Board or the Committee
        may
        correct any defect or supply any omission or reconcile any inconsistency
        herein
        or in any option agreement in the manner and to the extent it shall deem
        expedient to carry the Plan into effect and it shall be the sole and final
        judge
        of such expediency. No director or person acting pursuant to authority delegated
        by the Board shall be liable for any action or determination under the Plan
        made
        in good faith.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      3.    Eligibility

       

      Options
        may be granted to persons who are, at the time of grant, employees, officers,
        directors, consultants or other service providers of the Company or any
        Affiliate, provided
        that
        Incentive Stock Options may only be granted to individuals who are employees
        (within the meaning of Section 3401(c) of the Code) of the Company or any
        Affiliate. Options may also be granted to other persons, provided
        that
        such options shall be Non-Qualified Options. A person who has been granted
        an
        option may, if he or she is otherwise eligible, be granted additional options
        if
        the Board or the Committee shall so determine.

       

      4.    Stock
        Subject to Plan

       

      The
        Shares subject to options granted under the Plan shall be authorized but
        unissued Shares or reacquired Shares. Subject to adjustment as provided in
        Section 15 below, the maximum number of Shares of the Company which may be
        issued and sold under the Plan is 35,000,000. If an option granted under
        the
        Plan shall expire, terminate or is cancelled for any reason without having
        been
        exercised in full, the unpurchased Shares subject to such option shall again
        be
        available for subsequent option grants under the Plan.

       

      5.    Forms
        of Option Agreements

       

      As
        a
        condition to the grant of an option under the Plan, each recipient of an
        option
        shall execute an option agreement in such form not inconsistent with the
        Plan
        and as may be approved by the Board or the Committee. The terms of such option
        agreements may differ among recipients.

       

      6.    Purchase
        Price

       

      (a)    General.
        The
        purchase price per Share issuable upon the exercise of an option shall be
        determined by the Board or the Committee at the time of grant of such option,
        provided, however,
        that
        such exercise price in the case of Incentive Stock Options, shall not be
        less
        than 100% of the Fair Market Value (as hereinafter defined) of such Shares
        at
        the time of grant of such option, and for Incentive Stock Options granted
        to a
        "10% Shareholder" (as defined in Section 11(b)), shall not be less than 110%
        of
        such Fair Market Value. "Fair Market Value" of a Share as of a specified
        date
        for purposes of the Plan shall mean the closing price of a Share on the
        principal securities exchange (including, but not limited to, the Nasdaq
        SmallCap Market or the Nasdaq National Market) on which such Shares are traded
        on the day immediately preceding the date as of which Fair Market Value is
        being
        determined, or on the next preceding date on which such Shares are traded
        if no
        Shares were traded on such immediately preceding day, or if the Shares are
        not
        traded on a securities exchange, Fair Market Value shall be deemed to be
        the
        average of the high bid and low asked prices of the Shares in the
        over-the-counter market on the day immediately preceding the date as of which
        Fair Market Value is being determined or on the next preceding date on which
        such high bid and low asked prices were recorded. If the Shares are not publicly
        traded, Fair Market Value of a Share (including, in the case of any repurchase
        of Shares, any distributions with respect thereto which would be repurchased
        with the Shares) shall be determined in good faith by the Board taking into
        consideration prices at which the Company has issued Shares during the preceding
        six months. In no case shall Fair Market Value be determined with regard
        to
        restrictions other than restrictions which, by their terms, will never
        lapse.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (b)    Payment
        of Purchase Price.
        Options
        granted under the Plan may provide for the payment of the exercise price
        by
        delivery of cash or a check to the order of the Company in an amount equal
        to
        the exercise price of such options, or by any other means which the Board
        determines are consistent with the purpose of the Plan and with applicable
        laws
        and regulations (including, without limitation, the provisions of Rule
        16b-3).

       

      7.    Option
        Exercise Period

       

      Subject
        to earlier termination as provided herein, each option and all rights thereunder
        shall expire on such date as determined by the Board or the Committee and
        set
        forth in the applicable option agreement, provided
        that
        such date shall not be later than ten (10) years after the date on which
        the
        option is granted, or as prescribed by Section 11(b) hereinbelow.

       

      8.    Exercise
        of Options

       

      Each
        option granted under the Plan shall be exercisable either in full or in
        installments at such time or times and during such period as shall be set
        forth
        in the option agreement evidencing such option, subject to the provisions
        of the
        Plan. Subject to the requirements in the immediately preceding sentence,
        if an
        option is not at the time of grant immediately exercisable, the Board or
        the
        Committee may (i) in the agreement evidencing such option, provide for the
        acceleration of the exercise date or dates of the subject option upon the
        occurrence of specified events and/or (ii) at any time prior to the complete
        termination of an option, accelerate the exercise date or dates of such
        option.

       

      9.    Nontransferability
        of Options

       

      No
        option
        granted under this Plan shall be assignable or otherwise transferable by
        the
        optionee, except by will or by the laws of descent and distribution. An option
        may be exercised during the lifetime of the optionee only by the
        optionee.

       

      10.   Effect
        of Termination of Employment or Other Relationship

       

      (a)    Except
        as
        provided in Section 11(b) with respect to Incentive Stock Options and except
        as
        may otherwise be determined by the Board or the Committee at the date of
        grant
        of an option, and subject to the provisions of the Plan, an optionee may
        exercise an option at any time within three (3) months following the termination
        of the optionee's employment or other relationship with the Company and its
        Affiliates or within one (1) year if such termination was due to the death
        or
        disability (within the meaning of Section 22(e)(3) of the Code or any successor
        provisions thereto) of the optionee (to the extent such option is otherwise
        exercisable at the time of such termination) but in no event later than the
        expiration date of the option.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (b)    Notwithstanding
        the foregoing and except as may otherwise be determined by the Board or the
        Committee, if the termination of the optionee's employment or other relationship
        with the Company and/or its Affiliate is for cause, the option shall expire
        immediately upon such termination. The Board or the Committee shall have
        the
        power to determine, in its sole discretion, what constitutes a termination
        for
        cause, whether an optionee has been terminated for cause, and the date upon
        which such termination for cause occurs. Any such determinations shall be
        final
        and conclusive and binding upon the optionee and all other persons interested
        or
        claiming interests under the Plan.

       

      11.   Incentive
        Stock Options

       

      Options
        granted under the Plan which are intended to be Incentive Stock Options shall
        be
        subject to the following additional terms and conditions:

       

      (a)    Express
        Designation.
        All
        Incentive Stock Options granted under the Plan shall, at the time of grant,
        be
        specifically designated as such in the option agreement covering such Incentive
        Stock Options.

       

      (b)    10%
        Shareholder.
        If any
        employee to whom an Incentive Stock Option is to be granted under the Plan
        is,
        at the time of the grant of such option, the owner of stock possessing more
        than
        10% of the total combined voting power of all classes of stock of the Company
        (after taking into account the attribution of stock ownership rules of Section
        424(d) of the Code), then the following special provisions shall be applicable
        to the Incentive Stock Option granted to such individual:

       

      (i)    the
        purchase price per Share subject to such Incentive Stock Option shall not
        be
        less than 110% of the Fair Market Value of one Share at the time of grant;
        and

       

      (ii)    the
        option exercise period shall not exceed five (5) years from the date of
        grant.

       

      (c)    Dollar
        Limitation.
        For so
        long as the Code shall so provide, options granted to any employee under
        the
        Plan (and any other incentive stock option plans of the Company) which are
        intended to constitute Incentive Stock Options shall not constitute Incentive
        Stock Options to the extent that such options, in the aggregate, become
        exercisable for the first time in any one calendar year for Shares with an
        aggregate Fair Market Value, as of the respective date or dates of grant,
        of
        more than $100,000.

       

      (d)    Termination
        of Employment, Death or Disability.
        No
        Incentive Stock Option may be exercised unless, at the time of such exercise,
        the optionee is, and has been continuously since the date of grant of his
        or her
        option, employed by the Company or an Affiliate, except that:

       

      (i)    an
        Incentive Stock Option may be exercised within the period of three (3) months
        after the date the optionee ceases to be an employee of the Company or an
        Affiliate (or within such lesser period as may be specified in the applicable
        option agreement), to the extent it is otherwise exercisable at the time
        of such
        cessation,

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (ii)    if
        the
        optionee dies while in the employ of the Company or an Affiliate, or within
        three (3) months after the optionee ceases to be such an employee, the Incentive
        Stock Option may be exercised by the person to whom it is transferred by
        will or
        the laws of descent and distribution within the period of one (1) year after
        the
        date of death (or within such lesser period as may be specified in the
        applicable option agreement), to the extent it is otherwise exercisable at
        the
        time of the optionee's death, and

       

      (iii)   if
        the
        optionee becomes disabled (within the meaning of Section 22(e)(3) of the
        Code or
        any successor provisions thereto) while in the employ of the Company or an
        Affiliate, the Incentive Stock Option may be exercised within the period
        of one
        (1) year after the date the optionee ceases to be such an employee because
        of
        such disability (or within such lesser period as may be specified in the
        applicable option agreement), to the extent it is otherwise exercisable at
        the
        time of such cessation.

       

      For
        all
        purposes of the Plan and any option granted hereunder, "employment" shall
        be
        defined in accordance with the provisions of Section 1.421-7(h) of the Income
        Tax Regulations (or any successor regulations). Notwithstanding the foregoing
        provisions, no Incentive Stock Option may be exercised after its expiration
        date.

       

      12.   Additional
        Provisions

       

      (a)    Additional
        Option Provisions.
        The
        Board or the Committee may, in its sole discretion, include additional
        provisions in option agreements covering options granted under the Plan,
        including without limitation, restrictions on transfer, repurchase rights,
        rights of first refusal, commitments to pay cash bonuses or to make, arrange
        for
        or guaranty loans or to transfer other property to optionees upon exercise
        of
        options, or such other provisions as shall be determined by the Board or
        the
        Committee, provided
        that
        such additional provisions shall not be inconsistent with the requirements
        of
        applicable law and such additional provisions shall not cause any Incentive
        Stock Option granted under the Plan to fail to qualify as an Incentive Stock
        Option within the meaning of Section 422 of the Code.

       

      (b)    Acceleration,
        Extension, Etc.
        The
        Board or the Committee may, in its sole discretion (i) accelerate the date
        or
        dates on which all or any particular option or options granted under the
        Plan
        may be exercised, or (ii) extend the dates during which all, or any particular,
        option or options granted under the Plan may be exercised, provided,
        however,
        that no
        such acceleration or extension shall be permitted if it would (i) cause any
        Incentive Stock Option granted under the Plan to fail to qualify as an Incentive
        Stock Option within the meaning of Section 422 of the Code, or (ii) cause
        the
        Plan or any option granted under the Plan to fail to comply with Rule 16b-3
        (if
        applicable to the Plan or such option).

       

      13.    General
        Restrictions

       

      (a)    Investment
        Representations.
        The
        Board or the Committee may require any person to whom an option is granted,
        as a
        condition of exercising such option or award, to give written assurances
        in
        substance and form satisfactory to the Board or the Committee to the effect
        that
        such person is acquiring the Shares subject to the option or award for his
        or
        her own account for investment and not with any present intention of selling
        or
        otherwise distributing the same, and to such other effects as the Board or
        the
        Committee deems necessary or appropriate in order to comply with applicable
        federal and state securities laws, or with covenants or representations made
        by
        the Company in connection with any public offering of its Shares, including
        any
        "lock-up" or other restriction on transferability.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      (b)    Compliance
        With Securities Law.
        Each
        option shall be subject to the requirement that if, at any time, counsel
        to the
        Company shall determine that the listing, registration or qualification of
        the
        Shares subject to such option or award upon any securities exchange or automated
        quotation system or under any state or federal law, or the consent or approval
        of any governmental or regulatory body, or that the disclosure of non-public
        information or the satisfaction of any other condition, is necessary as a
        condition of, or in connection with the issuance or purchase of Shares
        thereunder, except to the extent expressly permitted by the Board, such option
        or award may not be exercised, in whole or in part, unless such listing,
        registration, qualification, consent or approval or satisfaction of such
        condition shall have been effected or obtained on conditions acceptable to
        the
        Board or the Committee. Nothing herein shall be deemed to require the Company
        to
        apply for or to obtain such listing, registration, qualification, consent
        or
        approval, or to satisfy such condition. In addition, Shares issued upon the
        exercise of options may bear such legends as the Company may deem advisable
        to
        reflect restrictions which may be imposed by law, including, without limitation,
        the Securities Act of 1933, as amended, any state "blue sky" or other applicable
        federal or state securities law.

       

      14.   Rights
        as a Shareholder

       

      The
        holder of an option shall have no rights as a shareholder with respect to
        any
        shares covered by the option (including, without limitation, any right to
        vote
        or to receive dividends or non-cash distributions with respect to such shares)
        until the effective date of exercise of such option and then only to the
        extent
        of the Shares so purchased. No adjustment shall be made for dividends or
        other
        rights for which the record date is prior to the date of exercise.

       

      15.    Adjustment
        Provisions for Recapitalizations, Reorganizations
        and Related Transactions

       

      (a)    Recapitalizations,
        Reorganizations and Related Transactions. If, through or as a result of any
        recapitalization, reclassification, stock dividend, stock split, reverse
        stock
        split or other similar transaction (i) the outstanding Shares are increased,
        decreased or exchanged for a different number or kind of shares or other
        securities of the Company, or (ii) additional Shares or new or different
        shares
        or other non-cash assets are distributed with respect to such Shares or other
        securities, an appropriate and proportionate adjustment shall be made in
        (x) the
        maximum number and kind of Shares reserved for issuance under or otherwise
        referred to herein, (y) the number and kind of Shares or other securities
        subject to any then-outstanding options under the Plan, and (z) the price
        for
        each Share subject to any then-outstanding options under the Plan, without
        changing the aggregate purchase price as to which such options remain
        exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant
        to this Section 15 if such adjustment (A) would cause any Incentive Stock
        Option
        granted under the Plan to fail to qualify as an Incentive Stock Option within
        the meaning of Section 422 of the Code, (B) would cause the Plan or any option
        granted under the Plan to fail to comply with Rule 16b-3 (if applicable to
        the
        Plan or such option), or (C) would be considered as the adoption of a new
        plan
        requiring shareholder approval.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      (b)    Board
        Authority to Make Adjustments.
        Any
        adjustments under this Section 15 will be made by the Board or the Committee,
        whose determination as to what adjustments, if any, will be made and the
        extent
        thereof will be final, binding and conclusive. No fractional shares will
        be
        issued under the Plan on account of any such adjustments.

       

      16.    No
        Employment Rights

       

      Nothing
        contained herein or in any option agreement shall confer upon any optionee
        any
        right with respect to the continuation of his or her employment or other
        relationship with the Company or an Affiliate or interfere in any way with
        the
        right of the Company or an Affiliate at any time to terminate such employment
        or
        relationship or to increase or decrease the compensation of the
        optionee.

       

      17.   Amendment,
        Modification or Termination of the Plan

       

      (a)    The
        Board
        may at any time modify, amend or terminate the Plan, provided
        that to
        the extent required by applicable law, any such modification, amendment or
        termination shall be subject to the approval of the shareholders of the
        Company.

       

      (b)    The
        modification, amendment or termination of the Plan shall not, without the
        consent of an optionee, affect his or her rights under an option previously
        granted to him or her. With the consent of the optionee affected, the Board
        or
        the Committee may amend or modify outstanding option agreements in a manner
        not
        inconsistent with the Plan. Notwithstanding the foregoing, the Board shall
        have
        the right (but not the obligation), without the consent of the optionee
        affected, to amend or modify (i) the terms and provisions of the Plan and
        of any
        outstanding Incentive Stock Option agreements to the extent necessary to
        qualify
        any or all such options for such favorable federal income tax treatment
        (including deferral of taxation upon exercise) as may be afforded incentive
        stock options under Section 422 of the Code, (ii) the terms and provisions
        of
        the Plan and the option agreements entered into in connection with any
        outstanding options to the extent necessary to ensure the qualification of
        the
        Plan and such options under Rule 16b-3 (if applicable to the Plan and such
        options), and (iii) the terms and provisions of the Plan and the option
        agreements entered into in connection with any outstanding options to the
        extent
        that the Board determines necessary to preserve the deduction of compensation
        paid to certain optionees who are "covered employees," within the meaning
        of
        Treasury Regulation Section 1.162-27(c)(2), as a result of the grant or exercise
        of options under the Plan.

       

      18.   Withholding

       

      (a)    The
        Company shall have the right to deduct and withhold from payments or
        distributions of any kind otherwise due to the optionee any federal, state
        or
        local taxes of any kind required by law to be so deducted and withheld with
        respect to any Shares issued upon exercise of options under the Plan. Subject
        to
        the prior approval of the Company, which may be withheld by the Company in
        its
        sole discretion, the optionee may elect to satisfy such obligations, in whole
        or
        in part by (i) causing the Company to withhold Shares otherwise issuable
        pursuant to the exercise of an option, (ii) delivering to the Company Shares
        already owned by the optionee, or (iii) delivering to the Company cash or
        a
        check to the order of the Company in an amount equal to the amount required
        to
        be so deducted and withheld. The Shares delivered in accordance with method
        (ii)
        above or withheld in accordance with method (i) above shall have a Fair Market
        Value equal to such withholding obligation as of the date that the amount
        of tax
        to be withheld is to be determined. An optionee who has made (with the Company's
        approval) an election pursuant to method (i) or (ii) of this Section 18(a)
        may
        only satisfy his or her withholding obligation with Shares which are not
        subject
        to any repurchase, forfeiture, unfulfilled vesting or other similar
        requirements.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      (b)    The
        acceptance of Shares upon exercise of an Incentive Stock Option shall constitute
        an agreement by the optionee (i) to notify the Company if any or all of such
        Shares are disposed of by the optionee within two (2) years from the date
        the
        option was granted or within one (1) year from the date the shares were issued
        to the optionee pursuant to the exercise of the option, and (ii) if required
        by
        law, to remit to the Company, at the time of and in the case of any such
        disposition, an amount sufficient to satisfy the Company's federal, state
        and
        local withholding tax obligations with respect to such disposition, whether
        or
        not, as to both (i) and (ii), the optionee is in the employ of the Company
        or an
        Affiliate at the time of such disposition.

       

      19.   Cancellation
        and New Grant of Options, etc.

       

      The
        Board
        or the Committee shall have the authority to effect, at any time and from
        time
        to time, with the consent of the affected optionee(s) the (i) cancellation
        of
        any or all outstanding options under the Plan and the grant in substitution
        therefor of new options under the Plan (or any successor stock option plan
        of
        the Company) covering the same or different numbers of Shares and having
        an
        option exercise price per Share which may be lower or higher than the exercise
        price per share of the cancelled options, or (ii) amendment of the terms
        of the
        option agreements entered into in connection with any and all outstanding
        options under the Plan to provide an option exercise price per share which
        is
        higher or lower than the then-current exercise price per Share of such
        outstanding options.

       

      20.    Effective
        Date and Duration of the Plan

       

      (a)    Effective
        Date.
        The
        Plan shall become effective when adopted by the Board, but no Incentive Stock
        Option granted under the Plan shall become exercisable unless and until the
        Plan
        shall have been approved by the Company's shareholders. If such shareholder
        approval is not obtained within twelve (12) months after the date of the
        Board's
        adoption of the Plan, no options previously granted under the Plan shall
        be
        deemed to be Incentive Stock Options and no Incentive Stock Options shall
        be
        granted thereafter. Amendments to the Plan shall become effective as of the
        latest of (i) the date of adoption by the Board, (ii) the date set forth
        in the
        amendments or (iii) in the case of any amendment requiring shareholder approval
        (as set forth in Section 17), the date such amendment is approved by the
        Company's shareholders. Notwithstanding the foregoing, no Incentive Stock
        Option
        granted on or after the effective date of such amendment shall become
        exercisable unless and until such amendment shall have been approved by the
        Company's shareholders. If such shareholder approval is not obtained within
        twelve (12) months of the Board's adoption of such amendment, no options
        granted
        on or after the effective date of such amendment shall be deemed Incentive
        Stock
        Options and no Incentive Stock Options shall be granted thereafter. Subject
        to
        above limitations, options may be granted under the Plan at any time after
        the
        effective date of the Plan and before the date fixed for termination of the
        Plan.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      (b)    Termination.
        Unless
        sooner terminated by the Board, the Plan shall terminate upon the close of
        business on the day next preceding the tenth anniversary of the date of its
        adoption by the Board. After termination of the Plan, no further options
        may be
        granted under the Plan; provided,
        however,
        that
        such termination will not affect any options granted prior to termination
        of the
        Plan.

       

      21.    Governing
        Law

       

      The
        provisions of this Plan shall be governed and construed in accordance with
        the
        laws of the State of Delaware without regard to the principles thereof relating
        to the conflicts of laws.

       

       

       

      
        
           

        

        
          9

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