Document:

EX-10.9

    Exhibit
      10.9

    

    

    Naugatuck
      Valley Savings and Loan Change in Control Agreement 

    with
      William C. Nimons

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    

      CHANGE
        IN CONTROL AGREEMENT

      

      

      This
        AGREEMENT
        (“Agreement”) is hereby entered into as of September
        30, 2004, by
        and
        between NAUGATUCK
        VALLEY SAVINGS AND LOAN
        (the
“Bank”), a federally chartered savings bank, with its principal offices at 333
        Church Street, Naugatuck, Connecticut 06770, William
        C. Nimons
        (“Executive”), and NAUGATUCK
        VALLEY FINANCIAL CORPORATION (the
        “Company”), a federally chartered corporation and the holding company of the
        Bank, as guarantor.

      

      WHEREAS,
        the
        Bank recognizes the importance of Executive to the Bank’s operations and wishes
        to protect his position with the Bank in the event of a change in control
        of the
        Bank or the Company for the period provided for in this Agreement;
        and

      

      WHEREAS,
        Executive and the Board of Directors of the Bank desire to enter into an
        agreement setting forth the terms and conditions of payments due to Executive
        in
        the event of a change in control and the related rights and obligations of
        each
        of the parties.

      

      NOW,
        THEREFORE,
        in
        consideration of the promises and mutual covenants herein contained, it is
        hereby agreed as follows:

      

      
        	
                1.

              	
                Term
                  of Agreement.

              

      

      

      a.    The
        term
        of this Agreement shall be (i) the initial term, consisting of the period
        commencing on the date of this Agreement (the “Effective Date”) and ending on
        the third anniversary of the Effective Date, plus (ii) any and all extensions
        of
        the initial term made pursuant to this Section 1.

      

      b.    Commencing
        on the first anniversary of the Effective Date and continuing each anniversary
        date thereafter, the Board of Directors of the Bank (the “Board of Directors”)
        may extend the term of this Agreement for an additional one (1) year period
        beyond the then effective expiration date, provided that Executive shall
        not
        have given at least sixty (60) days’ written notice of his desire that the term
        not be extended.

      

      c.    Notwithstanding
        anything in this Section to the contrary, this Agreement shall terminate
        if
        Executive or the Bank terminates Executive’s employment prior to a Change in
        Control.

      

      
        	
                2.

              	
                Change
                  in Control.

              

      

      

      a.    Upon
        the
        occurrence of a Change in Control of the Bank or the Company followed at
        any
        time during the term of this Agreement by the termination of Executive’s
        employment in accordance with the terms of this Agreement, other than for
        Cause,
        as defined in Section 2c. of this Agreement, the provisions of Section 3
        of this
        Agreement shall apply. Upon the occurrence of a Change in Control, Executive
        shall have the right

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      to
        elect
        to voluntarily terminate his employment at any time during the term of this
        Agreement following an event constituting “Good Reason.” 

      

      “Good
        Reason” means, unless Executive has consented in writing thereto, the occurrence
        following a Change in Control, of any of the following: 

      

      
        	 	
                i.

              	
                the
                  assignment to Executive of any duties materially inconsistent with
                  Executive’s
                  position, including any material diminution in status, title, authority,
                  duties or responsibilities, excluding for this purpose an isolated,
                  insubstantial and inadvertent action not taken in bad faith and
                  that is
                  remedied by the Bank or Executive’s employer reasonably promptly after
                  receipt of notice from Executive;

              

      

      

      
        	 	
                ii.

              	
                a
                  reduction by the Bank or Executive’s employer of Executive’s base salary
                  in effect immediately prior to the Change in
                  Control;

              

      

      

      
        	 	
                iii.

              	
                the
                  relocation of Executive’s office to a location more than twenty-five (25)
                  miles from its location as of the date of this
                  Agreement;

              

      

      

      
        	 	
                iv.

              	
                the
                  taking of any action by the Bank or any of its affiliates or successors
                  that would materially adversely affect Executive’s overall compensation
                  and benefits package, unless such changes to the compensation and
                  benefits
                  package are made on a non-discriminatory basis and affect substantially
                  all employees; or

              

      

      

      

      
        	 	
                v.

              	
                the
                  failure of the Bank or the affiliate of the Bank by which Executive
                  is
                  employed, or any affiliate that directly or indirectly owns or
                  controls
                  any affiliate by which Executive is employed, to obtain the assumption
                  in
                  writing of the Bank’s obligation to perform this Agreement by any
                  successor to all or substantially all of the assets of the Bank
                  or such
                  affiliate within thirty (30) days after a reorganization, merger,
                  consolidation, sale or other disposition of assets of the Bank
                  or such
                  affiliate.

              

      

       

      b.      
 For
        purposes of this Agreement, a “Change in Control” shall be deemed to occur on
        the earliest of any of the following events: 

      

      i.     Merger:
        The
        Company merges into or consolidates with another corporation, or merges another
        corporation into the Company, and as a result less than a majority of the
        combined voting power of the resulting corporation immediately after the
        merger
        or consolidation is held by persons who were stockholders of the Company
        immediately before the merger or consolidation.

      

      ii.     Acquisition
        of Significant Share Ownership:
        There
        is filed, or is required to be filed, a report on Schedule 13D or another
        form
        or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d)
        of
        the Securities Exchange

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       Act
        of 1934, if the schedule discloses that the filing person or persons acting
        in
        concert has or have become the beneficial owner of 25% or more of a class
        of the
        Company’s voting securities, but this clause (b) shall not apply to beneficial
        ownership of Company voting shares held in a fiduciary capacity by an entity
        of
        which the Company directly or indirectly beneficially owns 50% or more of
        its
        outstanding voting securities.

      

      iii.     Change
        in Board Composition:
        During
        any period of two consecutive years, individuals who constitute the Company’s
        Board of Directors at the beginning of the two-year period cease for any
        reason
        to constitute at least a majority of the Company’s Board of Directors; provided,
        however, that for purposes of this clause (iii), each director who is first
        elected by the board (or first nominated by the board for election by the
        stockholders) by a vote of at least two-thirds (2/3) of the directors who
        were
        directors at the beginning of the two-year period shall be deemed to have
        also
        been a director at the beginning of such period; or

      

      iv.     Sale
        of
        Assets:
        The
        Company sells to a third party all or substantially all of its
        assets.

      

      Notwithstanding
        anything in this Agreement to the contrary, in no event shall the reorganization
        of the Bank from the mutual holding company form of organization to the full
        stock holding company form of organization (including the elimination of
        the
        mutual holding company) constitute a “Change in Control” for purposes of this
        Agreement.

      

      c.     Executive
        shall not have the right to receive termination benefits pursuant to Section
        3
        hereof upon termination for “Cause.” Termination for Cause shall mean
        termination of employment because of Executive’s personal dishonesty,
        incompetence, willful misconduct, any breach of fiduciary duty involving
        personal profit, intentional failure to perform stated duties, willful violation
        of any law, rule, regulation (other than traffic violations or similar
        offenses), final cease and desist order, or any material breach of any provision
        of this Agreement. Notwithstanding the foregoing, Executive shall not be
        deemed
        to have been terminated for Cause unless and until there shall have been
        delivered to him a copy of a resolution duly adopted by the affirmative vote
        of
        a majority of the entire membership of the Board of Directors at a meeting
        of
        the Board of Directors called and held for that purpose (after reasonable
        notice
        to Executive and an opportunity for him, together with counsel, to be heard
        before the Board of Directors), finding that, in the good faith opinion of
        the
        Board of Directors, Executive was guilty of conduct justifying termination
        for
        Cause and specifying the particulars thereof in detail. Executive shall not
        have
        the right to receive compensation or other benefits for any period after
        termination for Cause. During the period beginning on the date of the Notice
        of
        Termination for Cause pursuant to Section 4 hereof through the Date of
        Termination (as defined in Section 4), stock options granted to Executive
        under
        any stock option plan shall not be exercisable nor shall any unvested stock
        awards granted to Executive under any stock benefit plan of the Bank, the
        Company or any 

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      subsidiary
        or affiliate thereof, vest. At the Date of Termination, such stock options
        and
        any such unvested stock awards shall become null and void and shall not be
        exercisable by or delivered to Executive at any time subsequent to such
        termination for Cause.

      

      
        	
                3.

              	
                Termination
                  Benefits.

              

      

      

      a.     If
        Executive’s employment is voluntarily (in accordance with Section 2a. of this
        Agreement) or involuntarily terminated within three (3) years
        of
        a Change in Control, Executive shall receive:

      

      
        	 	
                i.

              	
                a
                  lump sum cash payment equal to three (3) times the Executive’s “base
                  amount,” within the meaning of Section 280G(b)(3) of the Internal Revenue
                  Code of 1986, as amended (the “Code”). Such payment shall be made not
                  later than five (5) days following Executive’s termination of employment
                  under this Section 3.

              

      

      

      
        	 	
                ii.

              	
                Continued
                  benefit coverage under all Bank health and welfare plans (as defined
                  in
                  accordance with Section (3)(1) of the Employee Retirement Income
                  Security
                  Act of 1974 (“ERISA”), 29 U.S.C. Sec. 1002(1), and applicable regulations
                  thereunder) which Executive participated in as of the date of the
                  Change
                  in Control (collectively, the “Employee Benefit Plans”) for a period of
                  thirty-six (36) months
                  following Executive’s termination of employment. Said coverage shall be
                  provided under the same terms and conditions in effect on the date
                  of
                  Executive’s termination of employment. Solely for purposes of benefits
                  continuation under the Employee Benefit Plans, Executive shall
                  be deemed
                  to be an active employee. To the extent that benefits required
                  under this
                  Section 3a. cannot be provided under the terms of any Employee
                  Benefit
                  Plan, the Bank shall enter into alternative arrangements that will
                  provide
                  Executive with comparable benefits.

              

      

      

      b.     Notwithstanding
        the preceding provisions of this Section 3, in no event shall the aggregate
        payments or benefits to be made or afforded to Executive under said paragraphs
        (the “Termination Benefits”) constitute an “excess parachute payment” under
        Section 280G of the Code or any successor thereto, and to avoid such a result,
        Termination Benefits will be reduced, if necessary, to an amount (the
“Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an
        amount equal to three (3) times Executive’s “base amount,” as determined in
        accordance with said Section 280G. The allocation of the reduction required
        hereby among the Termination Benefits provided by this Section 3 shall be
        determined by Executive.

       

      
        	
                4.

              	
                Notice
                  of Termination.

              

      

      

      a.     Any
        purported termination by the Bank or by Executive shall be communicated by
        Notice of Termination to the other party hereto. For purposes of this Agreement,
        a “Notice of Termination” shall mean a written notice which shall indicate the
        specific termination provision in this Agreement relied upon and shall set
        forth
        in detail the facts and circumstances claimed to

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      provide
        a
        basis for termination of Executive’s employment under the provision so
        indicated.

      

      b.     “Date
        of
        Termination” shall mean the date specified in the Notice of Termination (which,
        in the case of a termination for Cause, shall not be less than thirty (30)
        days
        from the date such Notice of Termination is given).

      

      
        	
                5.

              	
                Source
                  of Payments.

              

      

      

      All
        payments provided in this Agreement shall be timely paid in cash or check
        from
        the general funds of the Bank. The Company, however, unconditionally guarantees
        payment and provision of all amounts and benefits due hereunder to Executive
        and, if such amounts and benefits due from the Bank are not timely paid or
        provided by the Bank, such amounts and benefits shall be paid or provided
        by the
        Company. 

      

      6.     Effect
        on Prior Agreements and Existing Benefit Plans.

      

      This
        Agreement contains the entire understanding between the parties hereto and
        supersedes any prior agreement between the Bank and Executive, except that
        this
        Agreement shall not affect or operate to reduce any benefit or compensation
        inuring to Executive of a kind elsewhere provided. No provision of this
        Agreement shall be interpreted to mean that Executive is subject to receiving
        fewer benefits than those available to him without reference to this Agreement.
        Nothing in this Agreement shall confer upon Executive the right to continue
        in
        the employ of the Bank or shall impose on the Bank any obligation to employ
        or
        retain Executive in its employ for any period.

      

      7.     No
        Attachment.

      

      a.     Except
        as
        required by law, no right to receive payments under this Agreement shall
        be
        subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
        charge, pledge, or hypothecation or to execution, attachment, levy or similar
        process or assignment by operation of law, and any attempt, voluntary or
        involuntary, to affect any such action shall be null, void and of no
        effect.

      

      b.     This
        Agreement shall be binding upon, and inure to the benefit of, Executive,
        the
        Bank and their respective successors and assigns.

      

      8.     Modification
        and Waiver.

      

      a.     This
        Agreement may not be modified or amended except by an instrument in writing
        signed by the parties hereto.

      

      b.     No
        term
        or condition of this Agreement shall be deemed to have been waived, nor shall
        there be any estoppel against the enforcement of any provision of this
        Agreement, except by written instrument of the party charged with such waiver
        or
        estoppel. No such written waiver shall be deemed a continuing waiver unless
        specifically stated therein, and each such waiver shall operate only as to
        the
        specific term or condition waived and shall not constitute a waiver of

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      such
        term
        or condition for the future or as to any act other than that specifically
        waived.

      

      9.     Severability.

      

      If,
        for
        any reason, any provision of this Agreement, or any part of any provision,
        is
        held invalid, such invalidity shall not affect any other provision of this
        Agreement or any part of such provision not held so invalid, and each such
        other
        provision and part thereof shall to the full extent consistent with law continue
        in full force and effect.

      

      
        	
                10.

              	
                Headings
                  for Reference Only.

              

      

      

      The
        headings of sections and paragraphs herein are included solely for convenience
        of reference and shall not control the meaning or interpretation of any of
        the
        provisions of this Agreement. In addition, references herein to the masculine
        shall apply to both the masculine and the feminine.

      

      
        	
                11.

              	
                Governing
                  Law.

              

      

      

      Except
        to
        the extent preempted by federal law, the validity, interpretation, performance,
        and enforcement of this Agreement shall be governed by the laws of the State
        of
        Connecticut, without regard to principles of conflicts of law of that State.
        

      

      
        	
                12.

              	
                Arbitration.

              

      

      

      Any
        dispute or controversy arising under or in connection with this Agreement
        shall
        be settled exclusively by arbitration, conducted before a panel of three
        arbitrators sitting in a location selected by Executive within fifty (50)
        miles
        from the location of the Bank, in accordance with the rules of the American
        Arbitration Association then in effect. Judgment may be entered on the
        arbitrator’s award in any court having jurisdiction; provided, however, that
        Executive shall be entitled to seek specific performance of his right to
        be paid
        until the Date of Termination during the pendency of any dispute or controversy
        arising under or in connection with this Agreement.

      

      
        	
                13.

              	
                Payment
                  of Legal Fees.

              

      

      

      All
        reasonable legal fees and expenses paid or incurred by Executive pursuant
        to any
        dispute or question of interpretation relating to this Agreement shall be
        paid
        or reimbursed by the Bank, only if Executive is successful pursuant to a
        legal
        judgment, arbitration or settlement.

      

      14.          
        Indemnification.

      

      The
        Company or the Bank shall provide Executive (including his heirs, executors
        and
        administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense and shall indemnify Executive (and
        his
        heirs, executors and administrators) to the fullest extent permitted under
        applicable law against all expenses and liabilities reasonably incurred by
        him
        in connection with or arising out of any action, suit or proceeding in which
        he

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      may
        be
        involved by reason of his having been a director or officer of the Company
        or
        the Bank (whether or not he continues to be a director or officer at the
        time of
        incurring such expenses or liabilities), such expenses and liabilities to
        include, but not be limited to, judgments, court costs, attorneys’ fees and the
        costs of reasonable settlements.

      

      15.         
         Successors
        to the Bank and the Company.

      

      The
        Bank
        and the Company shall require any successor or assignee, whether direct or
        indirect, by purchase, merger, consolidation or otherwise, to all or
        substantially all of the business or assets of the Bank or the Company,
        expressly and unconditionally to assume and agree to perform the Bank’s and the
        Company’s obligations under this Agreement, in the same manner and to the same
        extent that the Bank and the Company would be required to perform if no such
        succession or assignment had taken place.

      

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      

      SIGNATURES

      

      IN
        WITNESS WHEREOF, Naugatuck Valley Savings and Loan and Naugatuck Valley
        Financial Corporation have caused this Agreement to be executed and their
        seals
        to be affixed hereunto by their duly authorized officers, and Executive has
        signed this Agreement, on the 30th day of September, 2004.

      

      

      
        	
                ATTEST:

              	 	
                NAUGATUCK
                  VALLEY SAVINGS AND LOAN

              
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
                /s/
                  Bernadette A. Mole

              	 	
                By:

              	
                /s/
                  John C. Roman

              
	
                Corporate
                  Secretary

              	 	 	
                For
                  the Entire Board of Directors

              
	 	 	 	 
	 	 	 	 
	
                ATTEST:

              	 	
                NAUGATUCK
                  VALLEY FINANCIAL CORPORATION

              
	 	 	
                (Guarantor)

              
	 	 	 	 
	
                /s/
                  Bernadette A. Mole

              	 	
                By:

              	
                /s/
                  John C. Roman

              
	
                Corporate
                  Secretary

              	 	 	
                For
                  the Entire Board of Directors

              
	 	 	 	 
	
                [SEAL]

              	 	 	 
	 	 	 	 
	 	 	 	 
	
                WITNESS:

              	 	
                EXECUTIVE

              
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
                /s/
                  Bernadette A. Mole

              	 	
                /s/
                  William C. Nimons

              
	
                Corporate
                  Secretary

              	 	
                William
                  C. Nimons

              

      

      

      

      

      

      8sec document

                                                                     Exhibit 4.4

                             1997 STOCK OPTION PLAN
                                       OF
                             THE QUIGLEY CORPORATION
                (as amended on May 2001, July 2002 and June 2005)

            1. PURPOSE OF THE PLAN.

            This  1997  Stock  Option  Plan  (the  "Plan")  is  intended  as  an
incentive,  to retain in the employ or as directors,  of The Quigley Corporation
(the "Company") and any Subsidiary of the Company (within the meaning of Section
424(f) of the Internal  Revenue Code of 1986, as amended (the "Code")),  persons
of training,  experience and ability,  to attract new  employees,  and directors
whose services are considered valuable, to encourage the sense of proprietorship
and to  stimulate  the active  interest of such persons in the  development  and
financial success of the Company and its Subsidiaries.

            It is further  intended that certain options granted pursuant to the
Plan shall constitute  incentive stock options within the meaning of Section 422
of the Code  ("Incentive  Options") while certain other options granted pursuant
to the Plan  shall  be  nonqualified  stock  options  ("Nonqualified  Options").
Incentive  Options  and the  Nonqualified  Options are  hereinafter  referred to
collectively as "Options."

            The  Company  intends  that the Plan meet the  requirements  of Rule
16b-3 ("Rule 16b-3")  promulgated under the Securities  Exchange Act of 1934, as
amended (the  "Exchange  Act") and that  transactions  of the type  specified in
subparagraphs  (c) to (f)  inclusive of Rule 16b-3 by officers and  directors of
the Company  pursuant to the Plan will be exempt from the  operation  of Section
16(b) of the Exchange Act. In all cases, the terms,  provisions,  conditions and
limitations of the Plan shall be construed and  interpreted  consistent with the
Company's intent as stated in this Section 1.

            2. ADMINISTRATION OF THE PLAN.

            The Plan shall be administered by a committee  initially  consisting
of  Mr.  Guy  J.  Quigley,  and  Mr.  Charles  A.  Phillips  (the  "Committee").
Replacements  on the  Committee  shall be appointed by the Board of Directors of
the  Company  (the  "Board").  The members of the  Committee  shall serve at the
pleasure  of the  Board.  Notwithstanding  the  foregoing,  with  respect to any
Options  granted to directors  and  "officers"  (as such term is defined in Rule
16a-1 of the Securities and Exchange  Commission ("Rule 16a-1"),  if and as Rule
16b-3 is then in effect) of the Company,  the Plan shall be  administered by the
entire  Board,  unless  the  Committee  at the  time of  grant,  award  or other
acquisition under the Plan of Options to any such person consists of two or more
directors  of the Company  that are  "Non-Employee  Directors"  (as such term is
defined in Rule 16b-3 of the Securities and Exchange  Commission ("Rule 16b-3"),
if and as Rule 16b-3 is then in effect).

            The  Committee,  subject to Section 3 hereof,  shall have full power
and  authority to designate  recipients  of Options,  to determine the terms and
conditions of respective  Option agreements (which need not be identical) and to
interpret the provisions and supervise the  administration of the Plan.  Subject
to Section 7 hereof, the Committee shall have the authority, without limitation,
to designate which Options granted under the Plan shall be Incentive Options and
which shall be Nonqualified  Options.  To the extent any Option does not qualify
as an Incentive Option, it shall constitute a separate Nonqualified Option.

            Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all  Options  granted  under the Plan  shall  make such rules as it
deems  necessary  for the  proper  administration  of the  Plan,  make all other
determinations  necessary or advisable  for the  administration  of the Plan and
correct any defects or supply any omission or reconcile any inconsistency in the
Plan or in any  Options  granted  under the Plan in the manner and to the extent
that the Committee deems desirable to carry the Plan or any Options into effect.
The act or  determination  of a majority of the Committee  shall be deemed to be
the act or  determination  of the Committee and any decision  reduced to writing
and signed by all of the members of the Committee shall be fully effective as if
it had been made by a majority at a meeting duly held. Subject to the provisions
of the Plan, any action taken or determination made by the Committee pursuant to
this and the other paragraphs of the Plan shall be conclusive on all parties.

            In the event that for any reason the  Committee  is unable to act or
if the Committee at the time of any grant,  award or other acquisition under the
Plan of Options or Stock as hereinafter  defined does not consist of two or more
Non-Employee  Directors,  or if there shall be no such Committee,  then the Plan
shall  be  administered  by the  Board  and  any  such  grant,  award  or  other
acquisition  may be approved or ratified  in any other  manner  contemplated  by
subparagraph (d) of Rule 16b-3.

            Notwithstanding anything herein to the contrary, any options granted
to the Company's Chief  Executive  Officer or to any of the Company's other four
most   highly   compensation   officers   that  are   intended   to  qualify  as
performance-based  compensation  under  Section  162(m)  of the Code may only be
granted by a Committee  consisting of two or more  directors of the Company that
are "Outside Directors" (as such term is defined in Section 162(m) of the Code).

            3. DESIGNATION OF OPTIONEES.

            The persons eligible for  participation in the Plan as recipients of
Options ("Optionees") shall include full-time and part-time employees,  officers
and directors of the Company or any Subsidiary;  provided that Incentive Options
may only be  granted  to  employees  of the  Company  and the  Subsidiaries.  In
selecting  Optionees,  and in determining  the number of shares to be covered by
each Option  granted to  Optionees,  the  Committee  may  consider the office or
position held by the Optionee,  the Optionee's degree of responsibility  for and
contribution  to the growth and  success of the Company or any  Subsidiary,  the
Optionee's length of service, promotions, potential and any other facts to which
the Committee may consider relevant.  Subject to the next sentence,  an employee
who has been granted an Option hereunder may be granted an additional  Option or
Options, if the Committee shall so determine.

            4. STOCK RESERVED FOR THE PLAN.

            Subject to  adjustment  as provided in Section 7 hereof,  a total of
four million five hundred thousand  (4,500,000)  shares of common stock,  $.0005
par value ("Stock"),  of the Company shall be subject to the Plan. The shares of
Stock subject to the Plan shall consist of unissued shares or previously  issued
shares reacquired and held by the Company or any Subsidiary of the Company,  and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock which may remain unsold and which are not subject to
outstanding  Options at the  termination  of the Plan shall cease to be reserved
for the purpose of the Plan, but until termination of the Plan the Company shall
at all  times  reserve  a  sufficient  number  of  shares  of  Stock to meet the
requirements  of the Plan.  Should any Option expire or be canceled prior to its
exercise  in full or should the number of shares of Stock to be  delivered  upon
the  exercise  in full of any Option be reduced  for any  reason,  the shares of
Stock theretofore subject to such Option may again be subject to an Option under
the Plan.

            Notwithstanding the foregoing,  with respect to any options that are
intended to qualify as  performance-based  compensation  under Section 162(m) of
the Code,  the maximum  number of shares of stock that may be subject to options
granted  under the Plan to any  individual in any calendar year shall not exceed
500,000,   and  the  method  of  counting  such  shares  shall  conform  to  any
requirements  applicable to performance-based  compensation under Section 162(m)
of the Code.

            5. TERMS AND CONDITIONS OF OPTIONS.

            Options  granted  under the Plan shall be  subject to the  following
conditions  and  shall  contain  such  additional  terms  and  conditions,   not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

                        (a) OPTION  PRICE.  The purchase  price of each share of
            Stock  purchasable  under  an  Option  shall  be  determined  by the
            Committee  at the time of grant  but  shall not be less than 100% of
            the Fair Market  Value (as defined  below) of such share of Stock on
            the date the Option is granted  in the case of an  Incentive  Option
            and not less than  100% of the fair  market  value of such  share of
            Stock  on  the  date  the  Option  is  granted  in  the  case  of  a
            non-Incentive  Option;  PROVIDED,  HOWEVER,  that with respect to an
            Incentive  Option,  in the case of an Optionee who, at the time such
            Option is granted, owns (within the meaning of Section 424(d) of the
            Code)  more  than  10% of the  total  combined  voting  power of all
            classes  of  stock of the  Company  or of any  Subsidiary,  then the
            purchase price per share of stock shall be at least 110% of the Fair
            Market  Value  per  share of Stock at the time of  grant,  provided,
            however,  that if an option granted to the Company's Chief Executive
            Officer  or  to  any  of  the  Company's   other  four  most  highly
            compensation  officers is  intended to qualify as  performance-based
            compensation under Section 162(m) of the Code, the exercise price of
            such Option  shall not be less than 100% of the Fair Market Value of
            such share of Stock on the date the Option is granted.  The purchase
            price of each share of Stock purchasable under a Nonqualified Option
            shall not be less than 100% of the Fair  Market  Value of such share
            of Stock on the date the Option is granted.  The exercise  price for
            each  incentive  stock  option  shall be  subject to  adjustment  as
            provided in Section 7 below.  The fair market  value  ("Fair  Market
            Value")  means (i) the closing  price of publicly  traded  shares of
            Stock on the national  securities  exchange on which shares of Stock
            are  listed  (if the shares of Stock are so listed) or on the Nasdaq
            National Market (if the shares of stock are regularly  quoted on the

                                      -2-

            Nasdaq National Market) on the grant date, or, (ii) if not so listed
            or  regularly  quoted,  the mean  between  the closing bid and asked
            prices of publicly  traded  shares of Stock in the  over-the-counter
            market on the grant  date,  or,  (iii) if such bid and asked  prices
            shall not be  available,  as reported by any  nationally  recognized
            quotation service selected by the Company,  or (iv) as determined by
            the  Committee in a manner  consistent  with the  provisions  of the
            Code. Anything in this Section 5(a) to the contrary notwithstanding,
            in no event  shall  the  purchase  price of a share of Stock be less
            than the minimum price permitted under the rules and policies of the
            securities  exchange  or  automated  quotation  system  on which the
            shares of Stock are listed.

                        (b) OPTION TERM.  The term of each Option shall be fixed
            by the Committee,  but no Option shall be exercisable  more than ten
            years after the date such Option is granted; provided, however, that
            in the case of an Optionee  who, at the time such Option is granted,
            owns more than 10% of the total combined voting power of all classes
            of stock of the Company or any Subsidiary, then such Incentive Stock
            Option  shall not be  exercisable  with respect to any of the shares
            subject to such Incentive  Stock Option later than the date which is
            five years after the date of grant.

                        (c)  EXERCISABILITY.  Subject to  paragraph  (j) of this
            Section 5, Options  shall be  exercisable  at such time or times and
            subject to such terms and  conditions  as shall be determined by the
            Committee at or after grant.

                        (d) METHOD OF  EXERCISE.  Options  may be  exercised  in
            whole or in part at any time  during  the option  period,  by giving
            written notice to the Company  specifying the number of shares to be
            purchased,  accompanied by payment in full of the purchase price, in
            cash, by check or such other  instrument as may be acceptable to the
            Committee,  including  a cashless  exercise.  As  determined  by the
            Committee,  in its sole  discretion,  at or after grant,  payment in
            full or in part may  also be made in the form of Stock  owned by the
            Optionee  (based on the Fair Market  Value of the Stock owned by the
            Optionee (based on the Fair Market Value of the Stock on the trading
            day before the Option is exercised); provided, however, that if such
            Stock was issued  pursuant to the  exercise of an  Incentive  Option
            under the Plan,  the holding  requirements  for such Stock under the
            Code shall first have been  satisfied.  An  Optionee  shall have the
            rights to dividends or other rights of a shareholder with respect to
            shares  subject  to the  Option  after  the  Optionee  (i) has given
            written notice of exercise and (ii) has paid in full for such shares
            and becomes a shareholder of record.

                        (e)   TRANSFERABILITY  OF  OPTIONS.  No  Option  granted
            hereunder shall be transferable otherwise than by (i) will, (ii) the
            laws of descent and  distribution  or (iii)  pursuant to a qualified
            domestic  relations order as defined by the Internal Revenue Code or
            Title 1 of the Employee  Retirement  Income Security Act of 1986, as
            amended,  or  the  rules  and  regulations  promulgated  thereunder;
            provided however, that to the extent the option agreement provisions
            do not disqualify  such option for exemption  under Rule 16b-3 under
            the  Act  of  1934,   as  amended,   Nonqualified   Options  may  be
            transferable  during an  Optionee's  lifetime  to  immediate  family
            members of an optionee,  partnerships in which the only partners are
            members of the Optionee's  immediate family,  and trusts established
            solely for the benefit of such  immediate  family  members  with the
            prior written consent of the Committee.

                        (f) TERMINATION BY DEATH. Unless otherwise determined by
            the  Committee  at  grant,  if any  Optionee's  employment  with the
            Company or any Subsidiary  terminates by reason of death, the Option
            may  thereafter  be  immediately  exercised,   to  the  extent  then
            exercisable  (or on such  accelerated  basis as the Committee  shall
            determine at or after  grant),  by the legal  representative  of the
            estate  or by the  legatee  or the  Optionee  under  the will of the
            Optionee,  for a period of one year  from the date of such  death or
            until the  expiration  of the stated term of such Option as provided
            under the Plan, whichever period is shorter.

                        (g)   TERMINATION  BY  REASON  OF   DISABILITY.   Unless
            otherwise  determined by the Committee at grant,  if any  Optionee's
            employment  with the Company or any Subsidiary  terminates by reason
            of total and permanent  disability as determined under the Company's
            long term disability policy ("Disability"),  any Option held by such
            Optionee  may  thereafter  be  exercised,   to  the  extent  it  was
            exercisable at the time of termination due to Disability (or on such
            accelerated  basis  as the  Committee  shall  determine  at or after
            grant),  but may not be  exercised  after  one year from the date of
            such  termination of employment or the expiration of the stated term
            of such  Option,  whichever  period is shorter;  provided,  however,
            that,  if  the  Optionee  dies  within  such  one-year  period,  any
            unexercised  Option  held  by  such  Optionee  shall  thereafter  be
            exercisable to the extent to which it was exercisable at the time of
            death for a period  of one year  from the date of such  death or for
            the stated term of such Option, whichever period is shorter.

                                      -3-

                        (h) OTHER  TERMINATION.  Unless otherwise  determined by
            the  Committee  at  grant,  if any  Optionee's  employment  with the
            Company  or any  Subsidiary  terminates  for any  reason  other than
            death,  or  disability,   any  Option  held  by  such  Optionee  may
            thereafter be exercised to the extent it was exercisable at the time
            of such termination of employment (or on such  accelerated  basis as
            the Committee  shall  determine at or after  grant),  but may not be
            exercised  after  one  year  from the  date of such  termination  of
            employment  or the  expiration  of the stated  term of such  Option,
            whichever period is shorter.  Notwithstanding the foregoing,  if any
            Optionee's  employment with the Company or any Subsidiary terminates
            for Cause,  such Option may not be exercised on or after the date of
            such  termination  of  employment.   "Cause"  shall  mean  a  felony
            conviction or the failure of an Optionee to contest  prosecution for
            a felony or, an Optionee's material dishonesty, or material theft by
            an Optionee from the Company or its Subsidiaries. The transfer of an
            Optionee  from the employ of the  Company to a  Subsidiary,  or vice
            versa,  or from one  Subsidiary  to another,  shall not be deemed to
            constitute a termination of employment for purposes of the Plan.

                        (i) LIMIT ON VALUE OF INCENTIVE  OPTION.  The  aggregate
            Fair Market Value,  determined as of the date the Option is granted,
            of the Stock for which  Incentive  Options are  exercisable  for the
            first time by any Optionee  during any calendar  year under the Plan
            (and/or  any  other  stock  option  plans  of  the  Company  or  any
            Subsidiary) shall not exceed $100,000.

                        (j)  DISPOSITION OF INCENTIVE  OPTION SHARES.  The stock
            option agreement evidencing any Incentive Options granted under this
            Plan shall provide that if the Optionee makes a disposition,  within
            the  meaning  of  Section   424(c)  of  the  Code  and   regulations
            promulgated  thereunder,  of any share or shares of Stock  issued to
            him pursuant to his exercise of an Incentive  Option  granted  under
            the Plan within the two-year period  commencing on the day after the
            date of the grant of such  Incentive  Option  or  within a  one-year
            period commencing on the day after the date of transfer of the share
            or shares to him pursuant to the exercise of such Incentive  option,
            he shall,  within ten days of such  disposition,  notify the Company
            thereof and immediately deliver to the Company any amount of federal
            income tax withholding required by law.

            6. TERM OF PLAN.

            No Option shall be granted pursuant to the Plan on or after December
2, 2007, but Options granted may extend beyond that date.

            7. CAPITAL CHANGE OF THE COMPANY.

            In the event of any merger,  reorganization  or consolidation of the
Company  with one or more  corporations  as a result of which the Company is not
the surviving  corporation,  or upon a sale of substantially all of the property
or more  than 80% of the  then-outstanding  shares  of Stock of the  Company  to
another corporation,  all Options granted under the Plan shall immediately vest.
In the event of a stock  dividend  or  recapitalization,  a change in  corporate
structure  affecting  the Stock in a manner other than as set forth in the first
sentence  of this  Section  7 or in the  event of a  merger,  reorganization  or
consolidation where the Optionee has not held the Option for at last six months,
the Committee shall make an appropriate  and equitable  adjustment in the number
and kind of shares  reserved for  issuance  under the Plan and in the number and
option price of shares subject to outstanding Options granted under the Plan, to
the end that after such event each Optionees's  proportionate  interest shall be
maintained as immediately  before the occurrence of such event.  The adjustments
described  above  will be made only to the  extent  consistent  with  continuted
qualification  of the  Option  under  Section  422 of the  Code  (in the case of
Incentive Options) or as provided in Section 162 (m) and 409A of the Code.

            8. PROPORTIONATE ADJUSTMENTS.

            If the outstanding shares of Stock are increased, decreased, changed
into or  exchanged  into a  different  number  or kind of  shares  of  Stock  or
securities   of   the   Company   through   reorganization,    recapitalization,
reclassification,  stock  dividend,  stock split,  reverse  stock split or other
similar transaction,  an appropriate and proportionate  adjustment shall be made
to the  maximum  number and kind of shares of Stock as to which  Options  may be
granted under this Plan. A corresponding  adjustment changing the number or kind
of shares of Stock allocated to unexercised  Options or portions thereof,  which
shall have been granted prior to any such change,  shall  likewise be made.  Any
such adjustment in the  outstanding  Options shall be made without change in the
purchase  price  applicable  to the  unexercised  portion of the  Option  with a
corresponding adjustment in the exercise price of the shares of Stock covered by
the Option.  Notwithstanding the foregoing, there shall be no adjustment for the
issuance of shares of Stock on conversion of notes,  preferred stock or exercise
of warrants or shares of Stock issued by the Board for such consideration as the
Board deems  appropriate.  The adjustments  described above will be made only to
the extent consistent with continuted  qualification of the Option under Section
422 of the Code (in the case of Incentive Options) or as provided in Section 162
(m) and 409A of the Code.

                                       -4-

            9. TAXES.

               The Company may make such provisions as it may deem  appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any taxes or any other tax matters.

            10. EFFECTIVE DATE OF PLAN.

               The Plan shall be effective on December 2, 1997 (the date that it
was approved by the Board), provided,  however, that the Plan shall subsequently
be  approved  by  majority  vote of the  Company's  shareholders  not later than
December 1, 1998.

            11. AMENDMENT AND TERMINATION.

               The Board may amend,  suspend, or terminate the Plan, except that
no amendment  shall be made which would  impair the right of any Optionee  under
any Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the shareholders, would:

                (a)    materially  increase  the  number of shares  which may be
            issued under the Plan, except as is provided in Sections 7 and 8;

                (b)    materially   increase  the   benefits   accruing  to  the
            Optionees under the Plan;

                (c)    materially  modify the requirements as to eligibility for
            participation in the Plan;

                (d)    decrease  the exercise  price of an  Incentive  Option to
            less than 100% of the Fair Market Value on the date of grant thereof
            or the exercise price of a Nonqualified  option to less than 100% of
            the Fair Market Value on the date of grant thereof; or

                (e)    extend the Option term provided for in Section 5(b).

            The Committee may also substitute new Options for previously granted
Options,   including  options  granted  under  other  plans  applicable  to  the
participant  and previously  granted  Options having higher option prices,  upon
such terms as the Committee may deem appropriate.

            Except to the extent expressly required or permitted by the Plan, no
amendment  of  the  Plan  or  an  Option  will,  without  the  approval  of  the
stockholders of the Company,  effectuate a change for which stockholder approval
is required in order for the Plan or Option to continue to qualify for the award
of incentive  stock  options  under  Section 422 of the Code or for the award of
performance-based compensation under Section 162(m) of the Code.

            It is the intention of the Board that the Plan comply  strictly with
the  provisions of Section 409A of the Code and Treasury  Regulations  and other
Internal  Revenue  Service  guidance  promulgated  thereunder (the "Section 409A
Rules") and the Committee  shall  exercise its  discretion  in granting  Options
hereunder (and the terms of such Options) accordingly. The Plan and any grant of
an Option hereunder may be amended from time to time (without, in the case of an
Option,  the consent of the  Optionee)  as may be necessary  or  appropriate  to
comply with the Section 409A Rules.

            12. GOVERNMENT REGULATIONS.

            The Plan,  and the granting and exercise of Options  hereunder,  and
the  obligation  of the Company to sell and deliver  shares under such  Options,
shall be subject to all  applicable  laws,  rules and  regulations,  and to such
approvals by any governmental  agencies or national securities  exchanges as may
be required.

            13. GENERAL PROVISIONS.

                  (a)  CERTIFICATES.   All  certificates  for  shares  of  Stock
            delivered  under the Plan shall be  subject  to such stock  transfer
            orders and other  restrictions  as the Committee may deem  advisable
            under  the  rules,  regulations,   and  other  requirements  of  the
            Securities  and Exchange  Commission,  any stock exchange upon which
            the  Stock  is then  listed,  and any  applicable  Federal  or state
            securities  law, and the  Committee may cause a legend or legends to
            be placed on any such certificates to make appropriate  reference to
            such restrictions.

                                      -5-

                  (b)  EMPLOYMENT  MATTERS.  The  adoption of the Plan shall not
            confer upon any Optionee of the Company or any Subsidiary, any right
            to  continued  employment  (or,  in  case  the  Optionee  is  also a
            director,

            continued retention as a director) with the Company or a Subsidiary,
            as the case may be, nor shall it interfere in any way with the right
            of the Company or any  Subsidiary to terminate the employment of any
            of its employees at any time.

                  (c)  LIMITATION  OF  LIABILITY.  No member of the Board or the
            Committee,  or any  officer or  employee  of the  Company  acting on
            behalf of the Board or the Committee, shall be personally liable for
            any action,  determination,  or interpretation taken or made in good
            faith with respect to the Plan,  and all members of the Board of the
            Committee and each and any officer or employee of the Company acting
            on their  behalf  shall,  to the extent  permitted  by law, be fully
            indemnified  and  protected  by the  Company  in respect of any such
            action, determination or interpretation.

                  (d)  REGISTRATION   OF   STOCK.   Notwithstanding   any  other
            provision in the Plan,  no Option may be exercised  unless and until
            the Stock to be issued upon the exercise thereof has been registered
            under the Securities Act and applicable  state  securities  laws, or
            are,  in the  opinion of counsel to the  Company,  exempt  from such
            registration.  The  Company  shall  not be under any  obligation  to
            register under applicable federal or state securities laws any Stock
            to be issued upon the exercise of any Option granted  hereunder,  or
            to comply with an appropriate exemption from registration under such
            laws in order to permit the  exercise of an Option and the  issuance
            and sale of the Stock subject to such Option,  however,  the Company
            may in its sole  discretion  register such Stock at such time as the
            Company shall determine.  If the Company chooses to comply with such
            an exemption from registration, the Stock issued under the Plan may,
            at the direction of the Committee, bear an a appropriate restrictive
            legend  restricting the transfer or pledge of the Stock  represented
            thereby,  and the Committee may also give appropriate  stop-transfer
            instructions to the transfer agent to the Company.

                                       -6-

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