Document:

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                        THE NEXMED, INC. STOCK OPTION AND
                      LONG TERM INCENTIVE COMPENSATION PLAN

                Amended and Restated Effective as of May 7, 2001
             Originally Adopted and Effective as of December 4, 1996

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                        THE NEXMED, INC. STOCK OPTION AND
                      LONG TERM INCENTIVE COMPENSATION PLAN

1.  PURPOSE OF THE PLAN.

         This NexMed, Inc. Stock Option and Long-Term Incentive Compensation
Plan is intended to promote the interests of the Company and its shareholders by
providing the Company's employees, on whose judgment, initiative, and efforts
the successful conduct of the business of the Company depends, and who are
responsible for the management, growth, and protection of the business, with
appropriate incentives and rewards to encourage them to continue in the employ
of the Company and to maximize their performance.

2.  DEFINITIONS.

         As used in the Plan, the following definitions apply to the terms
indicated below:

         (a)  "Board" shall mean the Board of Directors of the Company.

         (b) "Cause" shall mean, when used in connection with the termination of
a Participant's employment, "Cause" as defined in any existing employment or
similar agreement between the Participant and the Company, or, in the absence of
such an agreement, the termination of the Participant's employment on account
of: (i) the willful and continued failure by the Participant substantially to
perform his or her duties and obligations to the Company (other than any such
failure resulting from incapacity due to physical or mental illness), (ii) the
willful violation by the Participant of (A) any federal or state law or (B) any
rule of the Company, which violation would materially reflect on the
Participant's character, competence, or integrity, (iii) a breach by a
Participant of the Participant's duty of loyalty to the Company such as
Participant's solicitation of customers or employees of the Company on behalf of
any other person, (iv) the Participant's unauthorized removal from the Company's
premises of any document (in any medium or form) relating to the Company, its
business, or its customers, provided, however, that no such removal shall be
deemed "unauthorized" if it is in furtherance of an individual's duties and
obligations to the Company and such removal is a common practice at the Company,
(v) the Participant's unauthorized disclosure to any person of any confidential
information regarding the Company, (vi) the willful engaging by the Participant
in any other misconduct which is materially injurious to the Company; (vii) the
Participant having been convicted of, or pleaded guilty or no contest to, any
crime involving the property of the Company, or any felony, or (viii) the
failure of the Participant to follow lawful instructions of the Board or his
direct superiors. For purposes of this Section 2(b), no act, or failure to act,
on a Participant's part shall be considered "willful" unless done, or omitted to
be done, by the Participant in bad faith and without

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reasonable belief that the action or omission was in the best interests of the
Company. Any rights the Company may have hereunder in respect of the events
giving rise to Cause shall be in addition to the rights the Company may have
under any other agreement with the participant or at law or in equity. If,
subsequent to the termination of a Participant's employment without Cause, it is
determined that the Participant's employment could have been terminated for
Cause, such Participant's employment shall, at the election of the Committee in
its sole discretion, be deemed to have been terminated for Cause.

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

         (d) "Committee" shall mean the Compensation Committee of the Board;
provided, however, the Compensation Committee shall not take any action under
this Plan unless it is at all times composed solely of not less than three
Directors who qualify as (i) "Non-Employee Directors" within the meaning of Rule
16b-3, as promulgated under the Exchange Act and (ii) "outside directors" as
defined for purposes of the regulations under Section 162(m) of the Code. In the
event the Compensation Committee is not composed solely of not less than three
directors who qualify as Non-Employee Directors when the Company is subject to
the Exchange Act and "outside directors", when Section 162(m) of the Code
applies, or, in the event the Committee is unable to act, the Board shall take
any and all actions required or permitted to be taken by the Committee under
this Plan and shall serve as the Committee.

         (e)  "Company" shall mean NexMed, Inc., a Nevada corporation.

         (f) "Company Stock" shall mean the common stock, par value $.001 per
share, of the Company.

         (g) "Director" shall mean a member of the Board.

         (h) "Disability" shall mean any physical or mental condition as a
result of which a Participant is disabled within the meaning of Section
422(c)(6) of the Code.

         (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         (j) "Fair Market Value" shall mean with respect to a share of Company
Stock the average closing price per share of Company Stock at the end of
business on the trading day immediately prior to the date of determination. The
closing price for such day shall be as reported in the Wall Street Journal, or,
if not reported therein, as reported in another newspaper of national
circulation chosen by the Committee, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices regular way, on the
New York Stock

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Exchange Composite Tape, or if the Company Stock is not then listed or admitted
to trading on the New York Stock Exchange, on the largest principal national
securities exchange, or if the Company Stock is not so listed or admitted to
trading, then the average of the last reported sales prices for such shares in
the over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if on such day the
Company Stock is not quoted on NASDAQ, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization. If the Company Stock is not listed on a national securities
exchange nor quoted in the NASDAQ on a last sale basis, the amount determined by
the Committee to be the fair market value based upon a good faith attempt to
value the Company Stock accurately shall be the "Fair Market Value".

         (k) "Incentive Award" shall mean an Option, a SAR, a Restricted Stock,
or Stock Bonus Award granted pursuant to the terms of the Plan.

         (l) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code and that is
identified as an Incentive Stock Option in the agreement by which it is
evidenced.

         (m) "Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued by
the Company pursuant to the terms of Section 8(d) hereof.

         (n) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.

         (o) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 6 hereof. Each Option, or portion thereof, shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock Option
in the agreement by which such Option is evidenced.

         (p) "Participant" shall mean an officer or employee of the Company
selected to participate in the Plan and to whom an Incentive Award is granted
pursuant to the Plan, and, upon his or her death, that person's successors,
heirs, executors, and administrators, as the case may be.

         (q) "Person" shall mean a "person," such as term is used in Sections
13(d) and 14(d) of the Exchange Act.

         (r) "Plan" shall mean The NexMed, Inc. Stock Option and Long-Term
Incentive Compensation Plan, as it may be amended from time to time.

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         (s) "Restricted Stock" shall mean a share of Company Stock that is
granted pursuant to the terms of Section 8 hereof and that is subject to the
restrictions set forth in Section 8(c) hereof for as long as such restrictions
continue to apply to such share.

         (t) "Retirement" shall mean a Participant's termination of employment
(other than by reason of death or Disability and other than a termination that
is (or is deemed to have been) for Cause) on or after the later of (i) the date
the Participant attains age 65 and (ii) the date the Participant has completed
five years of service with the Company.

         (u) "Securities Act" shall mean the Securities Act of 1933, as amended.

         (v) "SAR" shall mean a stock appreciation right granted pursuant to
Section 7 hereof.

         (w) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Company Stock pursuant to Section 9 hereof.

         (x) "Vesting Date" shall mean the date established by the Committee on
which an Incentive Award may vest, with vesting to be time-based,
performance-based, or a combination, to be determined by the Committee in its
discretion.

3.  STOCK SUBJECT TO THE PLAN.

         (a)      Plan Awards.

                  Under the Plan, the Committee may, in its sole and absolute
discretion, grant any or all of the following types of Incentive Awards to a
Participant: an Option, a SAR, a Restricted Stock, or Stock Bonus Award.

         (b)      Individual Awards.

                  Incentive Awards granted under this Plan may be made up
entirely of one type of Incentive Award or any combination of types of Incentive
Awards available under the Plan, in the Committee's sole discretion. The number
of shares of Company Stock for which Options and SARs may be granted to any
individual Participant in any calendar year shall not exceed 1,000,000.

         (c)      Aggregate Plan Share Reserve.

                  The total number of shares of Company Stock available for
grants of Incentive Awards under the Plan shall be 6,000,000 subject to
adjustment in accordance with Section 10 of the Plan. These shares may be either
authorized but unissued shares, newly issued shares, or reacquired shares of
Company Stock. If an Incentive Award or portion thereof shall expire or
terminate for any

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reason without having been exercised in full, the unexercised shares covered by
such Incentive Award shall be available for future grants of Incentive Awards
under the Plan.

4.       ADMINISTRATION OF THE PLAN.

         The Plan shall be administered by the Committee. The Committee shall
from time to time designate the officers and employees of the Company who shall
be granted Incentive Awards and the amount and type of such Incentive Awards.

         The majority of the members of the Committee shall constitute a quorum.
The acts of a majority of the members present at any meeting at which a quorum
is present or acts approved in writing by a majority of the Committee shall be
deemed the acts of the Committee. The Committee shall have the full authority
and discretion to administer the Plan, including authority to interpret,
construe, reconcile any inconsistency, correct any defect and/or supply any
omission in any provision of the Plan and the terms of any Incentive Award
issued under the Plan. The Committee may also adopt, suspend, amend or waive any
rules and regulations for administering the Plan as it may deem necessary or
appropriate, and make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Decisions of the Committee shall be final and binding on all parties.

         The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or SAR granted under the Plan
becomes exercisable or otherwise adjust any of the terms of such Option or SAR
(except that no such adjustment shall, without the consent of a Participant,
reduce the Participant's rights under any previously granted and outstanding
Incentive Award), (ii) accelerate the Vesting Date or Issue Date of any share of
Restricted Stock issued under the Plan, or waive any condition imposed
thereunder, and (iii) otherwise adjust or waive any condition imposed on any
Incentive Award made hereunder.

         In addition, the Committee may, in its absolute discretion and without
amendment to the Plan, grant Incentive Awards of any type to Participants on the
condition that such Participants surrender to the Company for cancellation such
other Incentive Awards of the same or any other type (including, without
limitation, Incentive Awards with higher exercise prices or values) as the
Committee specifies. Notwithstanding Sections 3(b) and 3(c) herein, prior to the
surrender of such other Incentive Awards, Incentive Awards granted pursuant to
the preceding sentence of this Section 4 shall not be effective, and shall not
count against the limit set forth in such Sections 3(b) and 3(c).

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         Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee, subject to applicable laws.

         No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company (and any affiliate that may
adopt this Plan), jointly and severally, shall indemnify and hold harmless each
member of the Committee and each other director or employee of the Company (or
affiliate) to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board) arising out of any action, omission, or
determination unless such action, omission or determination was taken or made by
such member, director, or employee in bad faith and without reasonable belief
that it was in the best interests of the Company and its affiliates, as the case
may be.

5.  ELIGIBILITY.

         The persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be the officers and employees of the Company.

6.  STOCK OPTION AWARDS.

         The Committee may grant Options pursuant to the Plan. Such Options
shall be evidenced by written agreements in such form as the Committee shall
from time to time approve. Options shall comply with and be subject to the
following terms and conditions:

                  (a)  Identification of Options.

                  All Options granted under the Plan shall be clearly identified
in the agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options or a combination of both.

                  (b)  Exercise Price.

                  The exercise price of any Non-Qualified Stock Option granted
under the Plan shall be such price as the Committee shall determine which may be
equal to or less than the Fair Market Value of a share of Company Stock on the
date such Non-Qualified Stock Option is granted; provided, that such price may
not be less than (i) 85% of the Fair Market Value on the date of grant, and (ii)
the minimum price required by law. The exercise price of any Incentive Stock
Option granted under the Plan shall be not less than 100% of the Fair Market
Value of a share of Company Stock on the date on which such Incentive Stock
Option is granted.

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                  (c)  Term and Exercise of Options.

                       (i) Each Option shall be exercisable on such date or
dates, during such period, and for such number of shares of Company Stock as
shall be determined by the Committee on the day on which such Option is granted
and set forth in the Option agreement with respect to such Option; provided,
however that no Option shall be exercisable after the expiration of ten years
from the date such Option was granted; and, provided, further, that each Option
shall be subject to earlier termination, expiration, or cancellation as provided
in the agreement evidencing such Option or any other agreement that relates to
such Option or the Plan.

                       (ii) Each Option shall be exercisable in whole or in
part; provided, that no partial exercise of an Option shall be for an aggregate
exercise price of less than $1,000. The partial exercise of an Option shall not
cause the expiration, termination, or cancellation of the remaining portion
thereof. Upon the partial exercise of an Option, the agreement evidencing such
Option, marked with such notations as the Committee may deem appropriate to
evidence such partial exercise, shall be returned to the Participant exercising
such Option together with the delivery of the certificates described in Section
6(c)(v) hereof.

                       (iii) An Option shall be exercised by delivering a
written notice to the Company's principal office to the attention of its
Secretary, no less than three business days in advance of the effective date of
the proposed exercise (unless the Committee waives such advance notice
requirement). Such notice shall be accompanied by the agreement (or agreements)
evidencing the Option, shall specify the number of shares of Company Stock with
respect to which the Option is being exercised, and the effective date of the
proposed exercise, and shall be signed by the Participant. The Participant may
withdraw such notice at any time prior to the close of business on the business
day immediately preceding the effective date of the proposed exercise, in which
case such agreement(s) shall be returned to the Participant. Payment for shares
of Company Stock purchased upon the exercise of an Option shall be made on the
effective date of such exercise in the manner set forth in the applicable Option
agreement or any other agreement that relates to such Option or, if none are set
forth, in any combination of the following:

                             (A) in cash, by certified check, bank cashier's
check, or wire transfer,

                             (B) subject to the approval of the Committee, in
shares of Company Stock in which the Participant has good title, free and clear
of all liens and encumbrances and which have been owned by the Participant for
at least six (6) months or which have been purchased on the open market, or
which meet such other requirements as the Committee may determine

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necessary in order to avoid an accounting earnings charge in respect of the
Option, valued at their Fair Market Value on the effective date of such
exercise, or

                             (C) subject to the approval of the Committee
pursuant to a "cashless exercise" pursuant to procedures adopted by the
Committee whereby the Participant, by a properly written notice, directs (a) an
immediate market sale or margin loan respecting all or a part of the shares of
Company Stock to which the Participant is entitled upon exercise pursuant to an
extension of credit by the Company to the Participant of the exercise price, (b)
the delivery of the shares of the Company Stock from the Company directly to the
brokerage firm, and (c) the delivery of the exercise price from the sale or
margin loan proceeds from the brokerage firm directly to the Company.

Any payments in shares of Company Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any other
documents and evidences as the Secretary of the Company shall require from time,
or by attestation of ownership of sufficient shares of Company Stock in
accordance with procedures established by the Committee.

                  (iv) Certificates for shares of Company Stock purchased upon
the exercise of an Option shall be issued in the name of the Participant or his
or her beneficiary, as the case may be, and delivered to the Participant or his
or her beneficiary, as the case may be, as soon as practicable following the
effective date on which the Option is exercised.

                  (d)  Limitations on Grant of Incentive Stock Options.

                       (i) The aggregate Fair Market Value of shares of Company
Stock with respect to which Incentive Stock Options granted hereunder are
exercisable for the first time by a Participant during any calendar year under
the Plan and any other stock option plan of the Company (or any "subsidiary
corporation" of the Company within the meaning of Section 424 of the Code) shall
not exceed $100,000. Such Fair Market Value shall be determined as of the date
on which each such Incentive Stock Option is granted. In the event that the
aggregate Fair Market Value of shares of Company Stock with respect to such
Incentive Stock Options exceeds $100,000, then Incentive Stock Options granted
hereunder to such Participant shall, to the extent and in the inverse order in
which they were granted, automatically be deemed to be Non-Qualified Stock
Options, but all other terms and provisions of such Incentive Stock Options
shall remain unchanged.

                       (ii) No Incentive Stock Option may be granted to an
individual if, at the time of the proposed grant, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of

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stock of the Company or any of its "subsidiary corporations" (within the meaning
of Section 424 of the Code), unless (I) the exercise price of such Incentive
Stock Option is at least 110% of the Fair Market Value of a share of Company
Stock at the time such Incentive Stock Option is granted and (II) such Incentive
Stock Option is not exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.

                  (e)  Effect of Termination of Employment.

                  Unless otherwise set forth in the applicable Option agreement
or any other agreement that relates to the Option, the following shall apply in
the event of a termination of the employment of a Participant:

                       (i) In the event the employment of a Participant with the
Company shall terminate (as determined by the Committee in its sole discretion)
for any reason other than Retirement, Disability, death or for Cause, (A)
Options granted to such Participant, to the extent that they were exercisable at
the time of such termination, shall remain exercisable until the date that is 90
days after the date of such termination, on which date they shall expire, and
(B) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.

                       (ii) In the event that the employment of a Participant
with the Company (as determined by the Committee in its sole discretion) shall
terminate on account of the Retirement, Disability, or death of the Participant,
(A) Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
date that is one year after the date of such termination and (B) Options granted
to such Participant, to the extent that they were not exercisable at the time of
such termination, shall expire at the close of business on the date of such
termination; provided, however, that no Option shall be exercisable after the
expiration of its term. The effect of exercising any Incentive Stock Option on a
day that is more than 90 days after the date of such termination (or, in the
case of a termination of employment on account of death or Disability, on a day
that is more than one year after the date of such termination) will be to cause
such Incentive Stock Option to be treated as a Non-Qualified Stock Option.

                       (iii) In the event of the termination of a Participant's
employment for Cause (as determined by the Committee in its sole discretion),
all outstanding Options granted to such Participant shall automatically expire
as of the commencement of business on the date of such termination.

7.  SARs.

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         The Committee may grant SARs pursuant to the Plan, which SARs shall be
evidenced by written agreements in such form as the Committee shall from time to
time approve. SARs shall comply with and be subject to the following terms and
conditions:

                  (a) Strike Price.

                  The strike price of any SAR granted under the Plan shall be
determined by the Committee in its discretion at the time of the grant of such
SAR.

                  (b)  Benefit Upon Exercise.

                       (i) The exercise of a SAR with respect to any number of
shares of Company Stock shall entitle a Participant to a cash payment, for each
such share, equal to the excess of (A) the Fair Market Value of a share of
Company Stock on the exercise date over (B) the strike price of the SAR (subject
to applicable withholding payment requirements).

                       (ii) All payments under this Section 7(b) shall be made
as soon as practicable, but in no event later than five business days, after the
effective date of the exercise.

                  (c)  Term and Exercise of SARs.

                       (i) Each SAR shall be exercisable on such date or dates,
during such period, and for such number of shares of Company Stock as shall be
determined by the Committee and set forth in the SAR agreement with respect to
such SAR; provided, however, that no SAR shall be exercisable after the
expiration of ten years from the date such SAR was granted; and provided,
further, however, that each SAR shall be subject to earlier termination,
expiration, cancellation as provided in the SAR agreement or any other agreement
that relates to such SAR or the Plan.

                       (ii) Each SAR may be exercised in whole or in part,
provided, that no partial exercise of a SAR shall be for an aggregate strike
price of less than $1,000. The partial exercise of a SAR shall not cause the
expiration, termination, or cancellation of the remaining portion thereof. Upon
the partial exercise of a SAR, the agreement evidencing such SAR, marked with
such notations as the Committee may deem appropriate to evidence such partial
exercise shall be returned to the Participant exercising such SAR together with
the payment described in Section 7(b)(i) hereof.

                       (iii) A SAR shall be exercised by delivering notice to
the Company's principal office, to the attention of its Secretary. Such notice
shall be accompanied by the applicable agreement evidencing the SAR, and shall

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specify the number of shares of Company Stock with respect to which the SAR is
being exercised, and shall be signed by the Participant.

                  (d) Unless otherwise set forth in the applicable SAR agreement
or any other agreement that relates to the SAR, the following shall apply in the
event of a termination of the employment of a Participant:

                       (i) In the event that the employment of a Participant
with the Company shall terminate (as determined by the Committee in its sole
discretion) for any reason other than Retirement, Disability, death or for
Cause, (A) SARs granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable until the
date that is one month after such termination, on which date they shall expire
and (B) SARs granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination; provided, however, that no SAR shall
be exercisable after the expiration of its term.

                       (ii) In the event that the employment of a Participant
with the Company shall terminate on account of the Retirement, Disability, or
death of the Participant, (A) SARs granted to such Participant, to the extent
that they were exercisable at the time of such termination, shall remain
exercisable until the date that is one year after the date of such termination
and (B) SARs granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination; provided, however, that no SAR shall
be exercisable after the expiration of its term.

                       (iii) In the event of the termination of the
Participant's employment for Cause, all outstanding SARs granted to such
Participant shall automatically expire as of the commencement of business on the
date of such termination.

8.  RESTRICTED STOCK.

         The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Restricted Stock shall comply with and be subject to the
following terms and conditions:

                  (a)  Issue Date and Vesting Date.

                  At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a Vesting Date or

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Vesting Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Issue Date and/or Vesting Date for each
class. Upon the occurrence of the Issue Date with respect to a share of
Restricted Stock, a share of Restricted Stock shall be issued in accordance with
the provisions of Section 8(d) hereof. Provided that all conditions to the
vesting of a share of Restricted Stock imposed pursuant to Section 8(b) hereof
are satisfied, and except as provided in Section 8(f) hereof, upon the
occurrence of the Vesting Date with respect to a share of Restricted Stock, such
share shall vest and the restrictions of Section 8(c) hereof shall cease to
apply to such share.

                  (b)  Conditions to Vesting.

                  At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion, deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any shares of
Restricted Stock, that the Participant or the Company achieve such performance
criteria as the Committee may specify at the time of the grant of such shares.

                  (c)  Restrictions on Transfer Prior to Vesting.

                  Prior to the vesting of a share of Restricted Stock, no
transfer of a Participant's rights to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest, or right in, or with respect to, such share, but immediately upon
any attempt to transfer such rights, such share, and all the rights related
thereto, shall be forfeited by the Participant and the transfer shall be of no
force or effect.

                  (d)  Issuance of Certificates.

                       (i) Reasonably promptly after the Issue Date with respect
to shares of Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such shares were
granted, evidencing such shares, provided, that the Company shall not cause to
be issued such stock certificate unless it has received a stock power duly
endorsed in blank with respect to such shares. Each such stock certificate shall
bear the following legend:

         THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
         REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS, AND
         CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST
         TRANSFER) CONTAINED IN THE NEXMED, INC. STOCK OPTION AND LONG-TERM
         INCENTIVE

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         COMPENSATION PLAN AND INCENTIVE AWARD AGREEMENT ENTERED INTO BETWEEN
         THE REGISTERED OWNER OF SUCH SHARES AND NEXMED, INC. A COPY OF THE PLAN
         AND AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF NEXMED,
         INC., 350 CORPORATE BOULEVARD, ROBBINSVILLE, NEW JERSEY 08691.

Such legend shall not be removed from the certificate evidencing such shares
until such shares vest pursuant to the terms hereof.

                       (ii) Each certificate issued pursuant to Section 8(d)(i)
hereof, together with the stock powers relating to the shares of Restricted
Stock evidenced by such certificate, shall be deposited by the Company with a
custodian designated by the Company. The Company shall cause such custodian to
issue to the Participant a receipt evidencing the certificates held by it which
are registered in the name of the Participant.

                  (e)  Consequences Upon Vesting.

                  Upon the vesting of a share of Restricted Stock pursuant to
the terms hereof, the restrictions of Section 8(c) hereof shall cease to apply
to such share. Reasonably promptly after a share of Restricted Stock vests
pursuant to the terms hereof, the Company shall cause to be issued and delivered
to the Participant to whom such shares were granted, a certificate evidencing
such share, free of the legend set forth in Section 8(d)(i) hereof, together
with any other property of the Participant held by the custodian pursuant to
Section 8(d)(ii) hereof.

                  (f)  Effect of Termination of Employment.

                  Unless otherwise set forth in the applicable Restricted Stock
agreement or any other agreement that relates to such Restricted Stock, the
following shall apply in the event of a termination of the employment of a
Participant:

                       (i) In the event that the employment of a Participant
with the Company shall terminate for any reason other than Cause prior to the
vesting of shares of Restricted Stock granted to such Participant, a proportion
of such shares, to the extent not forfeited or cancelled on or prior to such
termination pursuant to any provision hereof, shall vest on the date of such
termination. The proportion referred to in the preceding sentence shall
initially be determined by the Committee at the time of the grant of such shares
of Restricted Stock and may be based on the achievement of any conditions
imposed by the Committee with respect to such shares pursuant to Section 8(b).
Such proportion may be equal to zero. All shares of Restricted Stock granted to
such Participant which have not vested (including, without limitation, pursuant
to this subsection) as of

                                       13
<PAGE>

the date of such termination shall be forfeited at the end of business on the
date of such termination.

                       (ii) In the event of the termination of a Participant's
employment for Cause, all shares of Restricted Stock granted to such Participant
which have not vested as of the date of such termination shall immediately be
forfeited.

9.  STOCK BONUSES.

         The Committee may grant Stock Bonuses in such amounts as it shall
determine from time to time. A Stock Bonus shall be paid at such time and
subject to such conditions as the Committee shall determine at the time of the
grant of such Stock Bonus. Certificates for shares of Company Stock granted as a
Stock Bonus shall be issued in the name of the Participant to whom such grant
was made and delivered to such Participant as soon as practicable after the date
on which such Stock Bonus is required to be paid.

10.  ADJUSTMENT UPON CHANGES IN COMPANY STOCK.

                  (a)  Shares Available for Grants.

                  In the event of any change in the number of shares of Company
Stock outstanding by reason of any stock dividend or split, reverse stock split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum number of shares of Company Stock with
respect to which the Committee may grant (i) Options, SARs, shares of Restricted
Stock, and Stock Bonuses to all Participants in the aggregate and (ii) Options
and SARs to each individual Participant, both as set forth under Section 3
hereof shall be appropriately adjusted by the Committee. In the event of any
change in the number of shares of Company Stock outstanding by reason of any
other event or transaction, the Committee may, but need not, make such
adjustments in the number of shares of Company Stock with respect to which (i)
Options, SARs, shares of Restricted Stock, and Stock Bonuses may be granted to
all Participants in the aggregate and (ii) Options and SARs may be granted to
each individual Participant, both as set forth under Section 3 hereof as the
Committee may deem appropriate. Any adjustment pursuant to the preceding two
sentences to the individual limits shall be made in a manner designed to
preserve the exception from Section 162(m) of the Code of certain Options and
SARs granted under the Plan.

                  (b)  Outstanding Restricted Stock.

                  Unless the Committee in its absolute discretion otherwise
determines, any securities or other property (including dividends paid in cash)
received by a Participant with respect to a share of Restricted Stock, the Issue

                                       14
<PAGE>

Date with respect to which occurs prior to such event, but which has not vested
as of the date of such event, as a result of any dividend, stock split, reverse
stock split, recapitalization, merger, consolidation, combination, exchange of
shares, or similar corporate exchange will not vest and be paid out until such
share of Restricted Stock vests and shall be promptly deposited with the
custodian designated pursuant to Section 8(d)(ii) hereof.

                  The Committee may, in its absolute discretion, adjust any
grant of shares of Restricted Stock, the Vesting Date with respect to which has
not occurred as of the date of the occurrence of any of the following events, to
reflect any dividend, stock split, reverse stock split, recapitalization,
merger, consolidation, combination, exchange of shares, or similar corporate
change as the Committee may deem appropriate to prevent the enlargement or
dilution of rights of Participants under the grant.

                  (c)  Outstanding Options and SARs - Increase or Decrease
                       in Issued Shares Without Consideration.

                  Subject to any required action by the shareholders of the
Company (as determined by the Committee), in the event of any increase or
decrease in the number of issued shares of Company Stock resulting from a
subdivision or consolidations of shares of Company Stock or the payment of a
stock dividend on the shares of Company Stock, or any other increase or decrease
in the number of such shares effected without receipt of consideration by the
Company, the Company shall proportionally adjust the number of shares of Company
Stock subject to each outstanding Option and SAR, the exercise price per share
of Company Stock of each such Option and the strike price per share of each SAR.

                  (d)  Outstanding Options and SARs - Certain Mergers.

                  Subject to any required action by the shareholders of the
Company (as determined by the Committee), in the event that the Company shall be
the surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Company Stock
receive securities of another corporation), each Option and SAR outstanding on
the date of such merger or consolidation shall pertain to and apply to the
securities which a holder of the number of shares of Company Stock subject to
such Option or SAR would have received in such merger or consolidation; and the
exercise price or strike price thereof shall be equitably adjusted by the
Committee as it may deem appropriate to prevent the enlargement or dilution of
rights of Participants.

                  (e)  Outstanding Options and SARs - Certain Other
Transactions.

                                       15
<PAGE>

                  In the event of a dissolution or liquidation of the Company; a
sale of all of the Company's Common Stock; a sale of substantially all of the
Company's assets, a merger or consolidation involving the Company in which the
Company is not the surviving corporation; or a merger or consolidation involving
the Company in which the Company is the surviving corporation but the holders of
shares of Company Stock receive securities of another corporation and/or other
property, including cash, the Committee shall, in its absolute discretion, have
the power to:

                       (i) cancel, effective immediately prior to the occurrence
of such event, each Option and SAR outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Option or SAR was granted an
amount in cash, for each share of Company Stock subject to such Option or SAR,
respectively, equal to the excess of (A) the value, as determined by the
Committee in its absolute discretion, of the property (including cash) received
by the holder of a share of Company Stock as a result of such event over (B) the
exercise price or strike price of such Option or SAR (subject to applicable
withholding payment requirements); or

                       (ii) provide for the exchange of each Option and SAR
outstanding immediately prior to such event (whether or not then exercisable)
for an option on or stock appreciation right with respect to, as appropriate,
some or all of the property for which such Option or SAR is exchanged and,
incident thereto, make an equitable adjustment as determined by the Committee in
its absolute discretion in the exercise price or strike price of the option or
stock appreciation right, or, if appropriate, provide for a cash payment to the
Participant to whom such Option or SAR was granted in partial consideration for
the exchange of the Option or SAR; to prevent any substantial dilution or
enlargement of the rights granted to, or available for, the Participant.

                  (f)  Outstanding Options and SARs - Other Changes.

                  In the event of any change in the capitalization of the
Company or a corporate change other than those specifically referred to in
Section 10(c), (d) or (e) hereof, the Committee may in its absolute discretion,
make such adjustments in the number of shares subject to Options or SARs
outstanding on the date on which such change occurs and in the per share
exercise price or strike price of each such Option and SAR as the Committee may
consider appropriate to prevent dilution or enlargement of rights.

                  (g)  No Other Rights.

                   Except as expressly provided in the Plan, no Participant
shall have any rights by reason of any subdivision or consolidation of Company
Stock, the payment of any dividend, any increase or decrease in the number of
shares of

                                       16
<PAGE>

Company Stock or any dissolution, liquidation, merger, or consolidation of the
Company or any other corporation. Except as expressly provided in the Plan, no
issuance by the Company of Company Stock, or securities convertible into shares
of Company Stock, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares of Company Stock subject to an
Incentive Award or the exercise price or strike price of any Option or SAR.

11.  RIGHTS AS A STOCKHOLDER.

         No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Incentive Award granted
pursuant to this Plan until the date the person becomes the owner of record with
respect to such shares. Except as otherwise expressly provided in Section 10
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date the person
becomes the owner of record and the related stock certificate is issued.

12.  NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHTS TO INCENTIVE AWARD.

         Nothing contained in the Plan or any Incentive Award shall confer upon
any Participant any right with respect to the continuation of his or her
employment by the Company or interfere in any way with the right of the Company,
subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of an Incentive Award.

         No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.

13.  SECURITIES MATTERS.

         (a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any shares of
Company Stock to be issued hereunder or to effect similar compliance under any
state laws. Notwithstanding anything herein to the contrary, the Company shall
not be obligated to cause to be issued or delivered any certificates evidencing
shares of Company Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority, and
the requirements of NASDAQ and any other securities exchange on which shares of
Company Stock are traded. The Committee may require, as a

                                       17
<PAGE>

condition of the issuance and delivery of certificates evidencing shares of
Company Stock pursuant to the terms hereof, that the recipient of such shares
make such covenants, agreements, and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems necessary or
desirable.

         (b) The exercise of any Option granted hereunder shall be effective
only at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Company Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authority, and
the requirements of NASDAQ and any other securities exchange on which shares of
Company Stock are traded. The Committee may, in its sole discretion, defer the
effectiveness of any exercise of an Option granted hereunder in order to allow
the issuance of shares of Company Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for compliance
available under federal or state securities laws. The Committee shall inform the
Participant in writing of its decision to defer the effectiveness of the
exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain a refund of any amount
paid with respect thereto.

         (c) All Company Stock issued pursuant to the terms of this Plan shall
constitute "restricted securities," as that term is defined in Rule 144
promulgated pursuant to the Securities Act, and may not be transferred except in
compliance with the registration requirements of the Securities Act or an
exemption therefrom.

         (d) Certificates for shares of Company Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:

         THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
         SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
         TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
         EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
         ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
         THAT SUCH OFFER SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
         VIOLATE APPLICABLE FEDERAL OR STATE LAWS.

                                       18
<PAGE>

         This legend shall not be required for shares of Company Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.

14.  INCOME TAX WITHHOLDING AND PAYROLL TAXES.

                  (a)  Cash Remittance.

                  Whenever shares of Company Stock are to be issued upon the
exercise of an Option, the occurrence of the Issue Date or Vesting Date with
respect to a share of Restricted Stock or the payment of a Stock Bonus, the
Company shall have the right to require the Participant to remit to the Company
in cash an amount sufficient to satisfy federal, state, and local income tax
withholding and payroll tax requirements, if any, attributable to such exercise,
occurrence, or payment prior to the delivery of any certificate or certificates
for such shares. In addition, upon the exercise of a SAR, the Company shall have
the right to withhold from any cash payment required to be made pursuant thereto
an amount sufficient to satisfy the federal state, and local income tax
withholding and payroll tax requirements, if any, attributable to such exercise
or grant.

                  (b)  Stock Remittance.

                  At the election of the Participant, subject to the approval of
the Committee, when shares of Company Stock are to be issued upon the exercise
of an Option, the occurrence of the Issue Date or the Vesting Date with respect
to a share of Restricted Stock, or the grant of a Stock Bonus, in lieu of the
remittance required by Section 14(a) hereof, the Participant may tender to the
Company a number of shares of Company Stock in which the Participant has good
title, free and clear of all liens and encumbrances and have been owned by the
Participant for at least six (6) months or which have been purchased on the open
market, or which meet such other requirements as the Committee may determine
necessary in order to avoid an accounting earnings charge in respect of the
Option, valued at the Fair Market Value on the effective date of such exercise,
the Fair Market Value of which at the tender date the Committee determines to be
sufficient to satisfy the federal, state, and local income tax withholding and
payroll tax requirements, if any, attributable to such exercise, occurrence, or
grant and not greater than the Participant's estimated total federal, state, and
local tax obligations associated with such exercise, occurrence, or grant.

                  (c)  Stock Withholding.

                  The Company shall have the right, when shares of Company Stock
are to be issued upon the exercise of an Option, the occurrence of the Issue
Date or the Vesting Date with respect to a share of Restricted Stock or the
grant

                                       19
<PAGE>

of a Stock Bonus, in lieu of requiring the remittance required by Section 14(a)
hereof, to withhold a number of such shares, the Fair Market Value of which at
the withholding date the Committee determines to be sufficient to satisfy the
minimum, but not more than the minimum; federal, state, and local income tax
withholding and payroll tax requirements, if any, attributable to such exercise,
occurrence, or grant.

                  (d) The exercise of an Option or SAR, and the occurrence of an
Issue Date or Vesting Date with respect to a share of Restricted Stock or the
payment of a Stock Bonus shall be contingent upon the satisfaction of the
withholding obligations described in this Section 14.

15.  AMENDMENT OR TERMINATION OF THE PLAN.

         The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part, or amend it in such respects as the Board may deem
appropriate. No amendment, suspension or termination of this Plan shall, without
a Participant's consent, alter or impair any of the rights or obligations under
any Incentive Award theretofore granted to the Participant under the Plan.
Further, no such amendment, suspension or termination shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the Plan (including as necessary to prevent
Options or SARs granted under the Plan from failing to qualify for purposes of
Section 162 of the Code).

16.  NO OBLIGATION TO EXERCISE.

         The grant to a Participant of an Option or a SAR shall impose no
obligation upon such Participant to exercise such Option or SAR.

17.  TRANSFERS UPON DEATH.

         Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executors or administrators of
the Participant's estate or by any person or persons who shall have acquired
such right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award. Except as provided in this Section and in Section 18, no

                                       20
<PAGE>

Incentive Award shall be assignable or transferable, and shall be exercisable
only by a Participant during the Participant's lifetime.

18.      NONTRANSFERABILITY.

         (A) Notwithstanding the foregoing provisions of Section 17, the
Committee may in the applicable Incentive Award agreement or at any time after
the Grant Date in an amendment to an Incentive Award agreement provide that
options which are not intended to qualify as Incentive Stock Options may be
transferred by a Participant without consideration, subject to such rules as the
Committee may adopt consistent with any applicable Incentive Award agreement to
preserve the purposes of the Plan, to:

         (i) Any person who is a "family member" of the Participant, as such
term is used in the instructions to Form S-8 (collectively, the "Immediate
Family Members");

         (ii) a trust solely for the benefit of the Participant and his or her
Immediate Family Members;

         (iii) a partnership or limited liability company whose only partners or
shareholders are the Participant and his or her Immediate Family Members; or

         (iv) any other transferee as may be approved either (a) by the Board or
the Committee in its sole discretion, or (b) as provided in the applicable Award
agreement; (each transferee described in clauses (i), (ii), (iii) and (iv) above
is hereinafter referred to as a "Permitted Transferee"); provided that the
Participant gives the Committee advance written notice describing the terms and
conditions of the proposed transfer and the Committee notifies the Participant
in writing that such a transfer would comply with the requirements of the Plan
and any applicable Incentive Award agreement evidencing the option.

         (B) The terms of any option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted Transferee and any
reference in the Plan or in an Incentive Award agreement to an Optionee or
Participant shall be deemed to refer to the Permitted Transferee, except that
(i) Permitted Transferees shall not be entitled to transfer any options, other
than by will or the laws of descent and distribution; (ii) Permitted Transferees
shall not be entitled to exercise any transferred options unless there shall be
in effect a registration statement on an appropriate form covering the shares to
be acquired pursuant to the exercise of such option if the Committee determines,
consistent with any applicable Incentive Award agreement, that such a
registration statement is necessary or appropriate, (iii) the Committee or the
Company shall not be required to provide any notice to a Permitted Transferee,
whether or not such notice is or would otherwise have been required to be given
to the Participant under the Plan or otherwise, and (iv) the consequences of
termination

                                       21
<PAGE>

of the Participant's employment by, or services to, the Company, a subsidiary or
an affiliate under the terms of the Plan and the applicable Incentive Award
agreement shall continue to be applied with respect to the Participant,
following which the options shall be exercisable by the Permitted Transferee
only to the extent, and for the periods, specified in the Plan and the
applicable Incentive Award agreement.

19.  EXPENSES AND RECEIPTS.

         The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general purposes.

20.  FAILURE TO COMPLY.

         In addition to the remedies of the Company elsewhere provided for
herein, a failure by a Participant (or beneficiary) to comply with any of the
terms and conditions of the Plan or the agreement executed by such Participant
(or beneficiary) evidencing an Incentive Award, unless such failure is remedied
by such Participant (or beneficiary) within ten days after having been notified
of such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion may determine.

21.  ADOPTION AND EFFECTIVE DATE OF PLAN.

         The Plan, as amended and restated, was adopted by [unanimous written
consent] of the Board, in lieu of a meeting of the Board, effective as of March
5, 2001 pursuant to Nevada law. The Plan, as amended and restated, was
subsequently ratified and approved by the shareholders of the Company at the
Annual Shareholders Meeting on May 7, 2001.

         The Plan was originally adopted by unanimous written consent of the
Board of Directors of the Company, in lieu of a meeting of the Board, effective
as of December 4, 1996 and the Plan was subsequently ratified and approved
through action taken by the written consent of a majority of the shareholders of
the Company dated effective as of December 4, 1996, in lieu of a meeting of such
shareholders, all as permitted under Nevada law.

22.  TERM OF THE PLAN.

         The right to grant Incentive Awards under the Plan will terminate upon
the expiration of ten years from the date the Plan was initially adopted.

23.  APPLICABLE LAW.

                                       22
<PAGE>

         The Plan will be construed and administered in accordance with the laws
of the State of Nevada, without reference to the principles of conflicts of law.

24.  RELATIONSHIP TO OTHER BENEFITS.

         No payment under the Plan shall be taken into account in determining
any benefits under any pension, retirement, profit sharing, group insurance or
other benefit plan of the Company except as otherwise specifically provided in
such other Plan.

25.  PRONOUNS.

         Masculine pronouns and other words of masculine gender shall refer to
both men and women.

26.  SEVERABILITY.

         If any provision of the Plan or any Incentive Award agreement is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any person or Incentive Award, or would disqualify the
Plan or any Incentive Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed applicable by the Committee, such
provision shall be construed or deemed amended without, in the determination of
the Committee, materially altering the intent of the Plan or the Incentive
Award, such provision shall be stricken as to such jurisdiction, person or
Incentive Award and the remainder of the Plan and any such Incentive Awards
shall remain in full force and effect.

                                       23<PAGE>

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT, dated as of April 10, 2001, between AMERICAN
TECHNICAL CERAMICS CORP., a Delaware corporation having its principal place of
business at One Norden Lane, Huntington Station, New York 11746 (the "Company"),
and DAVID OTT, who resides at One Ethan Allen Court, South Setauket, New York
11720 ("Employee").

                              W I T N E S S E T H :

         WHEREAS, Employee is currently employed as the Senior Vice President -
New York Operations Manufacturing of the Company;

         WHEREAS, the Company desires to provide for Employee's continued
performance of services for the Company and any present or future parent,
subsidiary, or affiliate of the Company, and Employee desires to continue to
perform such services, on the terms and conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt, adequacy, and
sufficiency of which are hereby acknowledged, the Company and Employee hereby
agree as follows:

         1. Term. The Company agrees to employ Employee, and Employee agrees to
serve as Senior Vice President - New York Manufacturing of the Company, upon the
terms and conditions hereinafter set forth, for a period commencing on January
1, 2001 and ending on December 31, 2003, or for such shorter period as may be
provided for herein. The period during which Employee is employed hereunder is
hereinafter referred to as the "Employment Period."

<PAGE>

         2. Duties. Employee agrees to use his best efforts, skills, and
abilities to perform faithfully all duties consistent with his position (or any
other position of a similar nature) assigned to him from time to time by the
Company in accordance with all Company policies and procedures and to devote his
full business time, labor, energies, and attention to the performance of such
duties. Employee shall not to become involved in any personal investment or
other matters which may detract from the performance of his duties or otherwise
adversely affect the Company or any present or future parent, subsidiary, or
affiliate of the Company. In the performance of his duties, Employee shall be
subject to the direction of the Board of Directors, the Chief Executive Officer
of the Company, and any officer of the Company designated by the Board or the
Chief Executive Officer of the Company.

         3. Place of Performance. In connection with his employment by the
Company, Employee shall be based at the Company's offices in Huntington Station,
New York. Employee shall be available to travel at such times and to such places
as may be necessary in connection with the performance of his duties hereunder.

         4. Annual Compensation.

            (a) Salary. During the Employment Period, Employee shall receive a
base salary at the annual rate of $150,000 commencing on the date hereof, plus
such other amounts, if any, as the Board of Directors, in its sole discretion,
may from time to time determine. Employee's salary shall be payable in weekly
installments or at such other frequency as the Company may from time to time
determine (but not less frequently than monthly).

            (b) Bonus. During the Employment Period, Employee shall also be
entitled to participate in the Company's Manager's Profit Bonus Plan (the
"Plan"). Employee hereby acknowledges that bonuses under the Plan are awarded in
the sole discretion of the Board of

                                       2
<PAGE>

Directors of the Company and are generally paid on a quarterly basis, if at all.
Nothing contained herein shall require the Company to maintain the Plan.

            (c) Deductions. The Company shall deduct from all amounts payable to
Employee all taxes and other amounts which the Company is now or may hereafter
become obligated to deduct under any applicable law.

         5. Benefits.

            (a) Employee shall be entitled to participate in such employee
benefit plans established by the Company from time to time and generally made
available to employees at levels similar to Employee's for which he meets the
eligibility requirements. Nothing contained herein shall require the Company to
establish or maintain any employee benefit plan.

            (b) During the Employment Period, the Company shall provide Employee
with the use of an automobile and shall pay the expenses associated with the
maintenance and operation thereof.

         6. Termination.

            (a) Notwithstanding anything herein contained to the contrary, if on
or after the date hereof and prior to the end of the Employment Period, (i)
either (A) Employee shall be physically or mentally incapacitated or disabled or
otherwise unable fully to discharge his duties hereunder ("Disabled") for a
period of 90 consecutive days or for an aggregate of 90 days within any period
of twelve consecutive months, (B) Employee shall be convicted of a felony or
other crime of moral turpitude, (C) Employee shall commit any act or omit to
take any action in bad faith to the detriment of the Company or any present or
future parent, subsidiary, or affiliate of the Company, (D) Employee shall
willfully fail or refuse to perform any duties consistent with his position (or
any other position of a similar nature) assigned to him from time to time,

                                       3
<PAGE>

or (E) Employee shall breach any other term of this Agreement and fail to
correct such breach within 10 days after receiving notice of the same, or if
such breach is not capable of correction within such 10 day period, Employee
shall fail to take substantial steps necessary to correct such breach within
such 10 day period and shall not have corrected such beach within 30 days after
receiving such notice, then, and in each such case, the Company shall have the
right to give notice of termination of Employee's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on the
date so specified, or (ii) Employee shall die, then this Agreement shall
terminate on the date of Employee's death.

            (b) If this Agreement is terminated by the Company for any of the
reasons set forth in Paragraph 6(a) hereof, Employee shall be entitled to
receive only his salary at the rate provided in Paragraph 4(a) hereof through
and including the date upon which termination shall take effect.

            (c) If Employee's employment by the Company pursuant to this
Agreement is terminated for any reason other than any of the reasons set forth
in Paragraph 6(a), or for no reason, then, provided Employee continues to abide
by the provisions of Section 7, 8 and 9 of this Agreement, the Company shall
continue to pay to Employee his base salary at the rate and at the times
provided in Section 4(a) hereof for a period equal to the lesser of (i) one year
from the date upon which such termination shall take effect, and (ii) the
remainder of the Employment Period.

         7. Confidentiality.

            (a) Employee acknowledges and agrees that he has been and, during
the Employment Period, will continue to be, privy to confidential proprietary
and secret information relating to the Company, its present or future parents,
subsidiaries and affiliates and

                                       4
<PAGE>

their respective customers, clients and suppliers. Employee hereby agrees that,
beginning on the date hereof, and at any time hereafter, Employee shall treat as
strictly confidential any proprietary, confidential or secret information
relating to the business or interests of the Company or any present or future
parent, subsidiary or affiliate of the Company, or any customer, client or
supplier of any of them, including, but without limitation, the organizational
structure, operations, business plans or projects of the Company or any present
or future parent, subsidiary or affiliate of the Company, or any customer,
client or supplier of any of them, and any research datum or result, invention,
trade secret, customer list or customer information, process or other work
product developed by or for the Company or any present or future parent,
subsidiary or affiliate of the Company, or any customer, client or supplier of
any of them, whether on the premises of the Company or elsewhere ("Confidential
Information"). Employee hereby agrees that, beginning on the date hereof, and at
any time hereafter, the Employee shall not disclose to any person or entity,
utilize for his own purposes or for the benefit of any other person or entity or
make accessible to any person or entity, in any manner or in any form, any
Confidential Information other than in connection with performing the services
required of him under this Agreement, without the prior written consent of the
Company.

            (b) Employee agrees that the provisions of this Paragraph 7 shall
survive the termination of his employment and of this Agreement.

         8. Assignment of Intellectual Property Rights.

            (a) If at any time or times during his employment by the Company and
during the six month period following his termination for any reason (or for no
reason) Employee shall (either alone or with others) make, conceive, discover or
reduce to practice any Intellectual Property (as hereinafter defined) whatsoever
or any interest therein ("Intellectual

                                       5
<PAGE>

Property Rights"), whether or not patentable or registrable under copyright or
similar statutes or subject to analogous protection (herein called
"Developments"), that (i) relates to the business of the Company or any present
or future parent, subsidiary or affiliate of the Company or any of their
respective customers, clients or suppliers or any of the products or services
being developed, manufactured, sold or provided by any of them which may be used
in connection therewith, (ii) results from tasks assigned to Employee by the
Company or any present or future parent, subsidiary or affiliate of the Company,
or (iii) results from the use of premises or personal property (whether tangible
or intangible) owned, leased or contracted for by the Company or any present or
future parent, subsidiary or affiliate of the Company, such Developments and the
benefits thereof shall immediately become the sole and absolute property of the
Company and its assigns, and Employee shall promptly disclose to the Company (or
any persons designated by it) each such Development and hereby assigns any
rights Employee may have or acquire in the Developments and benefits and/or
rights resulting therefrom to the Company and its assigns without further
compensation and shall communicate, without cost or delay, and without
publishing the same, all available information relating thereto (with all
necessary plans and models) to the Company. As used herein, the term
"Intellectual Property" shall mean all industrial and intellectual property,
including, without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, copyright applications or registrations, databases,
algorithms, computer programs and other software, know-how, trade secrets,
proprietary processes and formulae, inventions, trade dress, logos, design and
all documentation and media constituting, describing or relating to the above.

                                       6
<PAGE>

            (b) Upon disclosure of each Development to the Company, Employee
will, during his employment and at any time thereafter, at the request and cost
of the Company, sign, execute, make and do all such deeds, documents, acts and
things as the Company and its duly authorized agents may reasonably require to
(i) apply for, obtain and vest in the name of the Company alone (unless the
Company otherwise directs) letters, patents, copyrights or other analogous
protection in any country throughout the world and when so obtained or vested to
renew and restore the same, (ii) defend any actions or opposition proceedings in
respect of such applications and any opposition proceedings or petitions or
applications for revocation of such letters, patents, copyrights or other
analogous protection, and (iii) bring any action to enforce any rights in any
Developments.

            (c) The Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as the Employee's agent and
attorney-in-fact, to act for and in the Employee's behalf and stead to execute
and file any such application or applications and to do all other lawfully
permitted acts to further the prosecution and issuance of any such letters,
patents, copyrights and other analogous protection thereon with the same legal
force and effect as if executed by Employee.

            (d) In the event of the termination of Employee's employment for any
reason (or no reason), Employee agrees to deliver to the Company all documents,
notes, drawings, blueprints, formulae, specifications, computer programs, data
and other materials of any nature pertaining to any proprietary information or
Intellectual Property of the Company or to Employee's work with the Company, and
the Employee will not take any of the foregoing or any reproduction of any of
the foregoing that is embodied in a tangible medium of expression.

            (e) The obligations of Employee pursuant to this Paragraph 8 shall
survive termination of his employment and of this Agreement.

                                       7
<PAGE>

         9. Non-Competition.

            (a) Employee acknowledges and agrees that the retention of
Confidential Information is essential to the continued existence of the Company,
and that such information constitutes trade secrets, disclosure of which would
irreparably harm the business of the Company. Employee further acknowledges that
the Company would find it extremely difficult to replace Employee. Accordingly,
Employee agrees that he will not during the period he is employed by the Company
or any present or future parent, subsidiary or affiliate of the Company, under
this Agreement or otherwise, and for a period of 12 months thereafter (i) engage
in, or otherwise directly or indirectly be employed by, or act as a consultant,
advisor or lender to, or be a director, officer, employee, stockholder, owner,
or partner of, any other Competitive Business (as hereinafter defined), (ii)
assist others in engaging in any Competitive Business, (iii) induce any employee
of the Company or any present or future parent, subsidiary or affiliate of this
Company to terminate his employment with the Company or such parent, subsidiary
or affiliate, or engage in any Competitive Business, within a period of one year
after such person is no longer employed by the Company or any present or future
parent, subsidiary or affiliate of the Company, or (iv) induce any entity or
person with which the Company or any of present or future parent, subsidiary or
affiliate has a business relationship to terminate or alter such business
relationship. As used herein "Competitive Business" means and includes the
business of designing, developing, manufacturing and marketing
RF/Microwave/Millimeter/ Wave ceramic capacitors, thin film products and other
passive components and any other business that provides services and/or products
which are comparable to the services and/or products provided or contemplated to
be provided by the Company or any present or future

                                       8
<PAGE>

parent, subsidiary or affiliate of the Company. Notwithstanding anything
contained herein to the contrary, the provisions of this Paragraph 9 will not be
deemed breached merely because Employee owns not more than 1% of the outstanding
common stock of a corporation, if, at the time of its acquisition by Employee,
such stock is listed on a national securities exchange, is reported on NASDAQ,
or is regularly traded in the over-the-counter market by a member of a national
securities exchange.

            (b) Employee understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to that of the Company or
any present or future parent, subsidiary or affiliate of the Company, but he
nevertheless believes that he has received and will receive sufficient
consideration and other benefits as an employee of the Company and as otherwise
provided hereunder to justify such restrictions which, in any event (given his
education, skills and ability), Employee does not believe would prevent him from
earning a livelihood.

            (c) The obligations of Employee pursuant to this Paragraph 9 shall
survive the termination of his employment and of this Agreement.

         10. Scope of Agreement. Employee acknowledges that the restrictions
contained in Paragraphs 7, 8 and 9 are a condition of his employment by the
Company. Employee further acknowledges that such restrictions are reasonable in
view of the nature of the business in which the Company is engaged and his
knowledge of the Company's business, and that any breach of his obligations
under Paragraphs 7, 8 and 9 hereof will cause the Company irreparable harm for
which the Company will have no adequate remedy at law. As a result, the Company
shall be entitled to the issuance by a court of competent jurisdiction of an
injunction, restraining order or other equitable relief in favor of itself
restraining Employee from

                                       9
<PAGE>

committing or continuing any such violation. Any right to obtain an injunction,
restraining order or other equitable relief hereunder will not be deemed a
waiver of any right to assert any other remedy the Company may have under this
Agreement or otherwise at law or in equity.

         11. Representations and Warranties. Employee represents and warrants
that the execution and delivery of this Agreement and the performance of all the
terms of this Agreement do not and will not breach any agreement to which he is
a party, including, without limitation, any agreement to keep in confidence
proprietary information acquired by Employee in confidence or trust. Employee
has not entered into and shall not enter into any agreement, either written or
oral, in conflict with this Agreement. Employee further represents and warrants
that he has not brought and will not bring with him to the Company or use at the
Company any materials or documents of an employer or a former employer that are
not generally available to the public, unless express written authorization from
such employer for their possession and use has been obtained. Employee further
understands that he is not to breach any obligation of confidentiality that he
has to any employer or former employer and agrees to fulfill all such
obligations during the period of his affiliation with the Company.

         12. Assignment. Under no circumstances shall Employee assign, pledge or
otherwise dispose of any of his rights or obligations under this Agreement, and
any such attempted assignment, pledge, or disposition shall be void and shall
relieve the Company of all its obligations under this Agreement. The Company may
assign any of its rights or obligations under this Agreement to any present or
future parent, subsidiary, affiliate, or successor.

                                       10
<PAGE>

         13. Entire Agreement. This Agreement is the entire agreement between
the Company and Employee with respect to the subject matter hereof and
supersedes all other agreements, written or oral, concerning the subject matter
hereof.

         14. Waivers and Further Agreements. Any waiver of any breach of any
terms or conditions of this Agreement shall not operate as a waiver of any other
breach of such terms or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof on any one occasion operate as a waiver
of such provision or of any other provision hereof or a waiver of the right to
enforce such provision or any other provision on any subsequent occasion.

         15. Amendments. This Agreement may not be amended, nor shall any
waiver, change, modification, consent, or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any such amendment, waiver, change, modification, consent, or
discharge is sought.

         16. Severability

            (a) If any provision of this Agreement shall be held or deemed to be
invalid, inoperative, or unenforceable as written, it shall be construed, to the
greatest extent possible, in a manner which shall render it valid and
enforceable, and any limitation on the scope or duration of any such provision
necessary to make it valid and enforceable shall be deemed to be part thereof.

            (b) If any provision of this Agreement shall be held or deemed to be
invalid, inoperative, or unenforceable as applied to any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because
of the conflict or any provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance

                                       11
<PAGE>

shall not have the effect of rendering the provision or provisions in question
invalid, inoperative, or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute, or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative, or
unenforceable provision had never been contained herein, and such provision
reformed so that it would be valid, operative, and enforceable to the maximum
extent permitted in such jurisdiction or in such case.

         17. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to rules governing conflicts of law.

         18. Courts. Any action to enforce any of the provisions of this
Agreement shall be brought in the courts of the State of New York. The parties
hereby consent to the jurisdiction of the courts of the State of New York.

         19. Notices. Any notices required or permitted by this Agreement shall
be in writing and personally delivered or mailed by certified or registered
mail, return receipt requested, addressed to the parties at their addresses set
forth above, or to such other addresses as one party may specify to the other
party, from time to time, in writing. Any notice personally delivered shall be
deemed given at the time of receipt thereof, and any notice given by certified
or registered mail shall be deemed given at the time of certification or
registration thereof.

                                       12
<PAGE>

         20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

                                       AMERICAN TECHNICAL CERAMICS CORP.

                                       By:
                                           ----------------------------------
                                           Kathleen M. Kelly
                                           Vice President, Administration and
                                           Corporate Secretary

                                       --------------------------------------
                                           David Ott

                                       13

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