Document:

Exhibit
10.17

 

DIGITAL
IMPACT, INC

1999 DIRECTOR EQUITY PLAN

RESTRICTED STOCK AGREEMENT

FOR OUTSIDE DIRECTORS

 

Digital Impact, Inc. (the “Company”) hereby
grants you (the “Outside
Director”), an award of Restricted Stock under the Company’s
1999 Director Equity Plan (the “Plan”), of the number of shares of Common Stock of the
Company (“Shares”)
effective as of the date (the “Grant Date”) indicated on the Notice of Grant of
Restricted Stock (the “Notice
of Grant”).  The Notice of
Grant and this agreement collectively are referred to as the “Agreement.”  Subject to the provisions of this Agreement
and of the Plan, the purchase price per Share of your Restricted Stock grant is
the par value, $0.001 per Share, as indicated on the Notice of Grant.  Capitalized terms used and not defined in
this Agreement will have the meaning set forth in the Plan.

 

IMPORTANT:

 

Your signature to the Notice of Grant
indicates your agreement and understanding that this grant is subject to all of
the terms and conditions contained in this Agreement and the Plan.  For example, important additional information
on vesting and forfeiture of the Shares covered by this grant is contained in
the Notice of Grant.  PLEASE BE SURE TO
READ ALL OF THE NOTICE OF GRANT, WHICH CONTAINS CERTAIN SPECIFIC TERMS AND
CONDITIONS OF THIS AGREEMENT.

 

TERMS AND CONDITIONS OF RESTRICTED STOCK GRANT

 

1.                                       Grant.  The Company hereby grants to the Outside
Director under the Plan an Award of the number of Shares of Restricted Stock
set forth on the Notice of Grant for past services and as a separate incentive
in connection with his or her service on the Grant Date, subject to all of the
terms and conditions in this Agreement and the Plan.

 

2.                                       Shares
Held in Escrow.  Unless and until the
Shares of Restricted Stock shall have vested in the manner set forth in
paragraph 3 of this Agreement, such Shares shall be issued in the name of
the Outside Director and held by the Secretary of the Company (or its designee)
as escrow agent (the “Escrow
Agent”), and shall not be sold, transferred or otherwise
disposed of, and shall not be pledged or otherwise hypothecated.  The Company may determine to issue the Shares
in book entry form and/or may instruct the transfer agent for its common stock
to place a legend on the certificates representing the Restricted Stock or
otherwise note its records as to the restrictions on transfer set forth in this
Agreement and the Plan.  The certificate
or certificates representing such Shares shall not be delivered by the Escrow
Agent to the Outside Director unless and until the Shares have vested and all
other terms and conditions in this Agreement have been satisfied.  The Shares of Restricted Stock will be
released from escrow as soon as practicable after the Shares vest.

 

3.                                       Vesting
Schedule.  Except as provided in Section 11
of the Plan, the Shares of Restricted Stock awarded by this Agreement shall
vest as to 25% of the Shares on each anniversary of the Grant Date.  Shares scheduled to vest on any date actually
will vest only if the Outside Director continues to serve as a Director on such
date.

 

 

4.                                       Forfeiture.  Notwithstanding any contrary provision of
this Agreement, the balance of the Shares of Restricted Stock that have not
vested pursuant to paragraph 3 of this Agreement or Section 11 of the Plan
at the time the Outside Director ceases to be a Director will be forfeited and
automatically transferred to and reacquired by the Company at no cost to the
Company.  The Outside Director hereby
appoints the Escrow Agent with full power of substitution, as the Outside
Director’s true and lawful attorney-in-fact with irrevocable power and
authority in the name and on behalf of the Outside Director to take any action
and execute all documents and instruments, including, without limitation, stock
powers which may be necessary to transfer the certificate or certificates
evidencing such unvested Shares to the Company upon the Outside Director’s
ceasing to be a Director.

 

5.                                       Assignment
Separate from Certificate.  For
purposes of facilitating the enforcement of the provisions of paragraph 4
above, the Outside Director agrees immediately upon the execution of this
Agreement, to deliver an Assignment Separate from Certificate in the form
attached hereto as Exhibit A, executed by the Outside Director in blank,
to the Secretary of the Company, or the Secretary’s designee, who shall hold
such Assignment in escrow and shall take all such actions and effectuate all
such transfers and/or releases as or in accordance with the terms of this
Agreement.

 

6.                                       Death
of Outside Director.  Any
distribution or delivery to be made to the Outside Director under this
Agreement will, if the Outside Director is then deceased, be made to the
administrator or executor of the Outside Director’s estate.  Any such administrator or executor must
furnish the Company with (a) written notice of his or her status as transferee,
and (b) evidence satisfactory to the Company to establish the validity of the
transfer and compliance with any laws or regulations pertaining to said
transfer.

 

7.                                       Withholding
of Taxes.  The Company will assess
its requirements regarding tax, social insurance and any other payroll tax
withholding and reporting in connection with this Restricted Stock, including
the grant, vesting or purchase of the Restricted Stock or sale of Shares
acquired pursuant to this grant of Restricted Stock (“tax-related items”).  These requirements may change from time to
time as laws or interpretations change. 
Regardless of the Company’s actions in this regard, the Outside Director
hereby acknowledges and agrees that the ultimate liability for any and all
tax-related items is and remains his or her responsibility and liability and
that the Company (1) makes no representations or undertaking regarding
treatment of any tax-related items in connection with any aspect of this
Restricted Stock grant, including the issuance, vesting or purchase of
Restricted Stock covered by this grant and the subsequent sale of Shares
acquired pursuant to this grant of Restricted Stock; and (2) does not commit to
structure the terms of the grant or any aspect of this Restricted Stock grant
to reduce or eliminate the Outside Director’s liability regarding tax-related
items.  Notwithstanding any contrary
provision of this Agreement, no Restricted Stock will be issued unless and
until satisfactory arrangements (as determined by the Committee) will have been
made by the Outside Director with respect to the payment of any income and
other taxes which the Company determines must be withheld or collected with
respect to such Shares.  The Outside
Director authorizes the Company to withhold all applicable withholding taxes
from the Outside Director’s compensation. 
Furthermore, the Outside Director agrees to pay the Company any amount
of taxes the Company Affiliate may be required to withhold or collect as a
result of the Outside Director’s participation in the Plan that cannot be
satisfied by deduction from the Outside Director’s cash compensation paid to
the Outside Director by the Company.

 

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8.                                       Rights
as a Stockholder. Neither the Outside Director nor any person claiming
under or through the Outside Director will have any of the rights or privileges
of a stockholder of the Company in respect of any Shares deliverable hereunder
unless and until certificates representing such Shares will have been issued,
recorded on the records of the Company or its transfer agents or registrars,
and delivered to the Outside Director or the Escrow Agent.  Subject to Section 11 of the Plan, after
such issuance, recordation and delivery, the Outside Director will have all the
rights of a stockholder of the Company with respect to voting such Shares and
receipt of dividends and distributions on such Shares.

 

9.                                       Address
for Notices.  Any notice to be given
to the Company under the terms of this Agreement will be addressed to the
Company, in care of its General Counsel, at Digital Impact, Inc., 177 Bovet
Road, Suite 200, San Mateo, CA 94402, or at such other address as the Company
may hereafter designate in writing.

 

10.                                 Section 83(b)
Election. The Outside Director may elect to be taxed (and commence his or
her capital gains holding period for the Restricted Shares) at the time the
Restricted Shares are granted rather than upon vesting by filing an election
under Section 83(b) of the Code with the United States Internal Revenue
Service within thirty (30) days from the Grant Date.  The form for making this election is attached
as Exhibit B hereto.  THE OUTSIDE
DIRECTOR ACKNOWLEDGES THAT IT IS THE OUTSIDE DIRECTOR’S SOLE RESPONSIBILITY AND
NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE OUTSIDE DIRECTOR REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS
FILING ON HIS OR HER BEHALF.  If the
Outside Director files an election under Section 83(b), the Outside
Director must pay the applicable income tax. 
However, if the Outside Director’s service with the Company subsequently
terminates before the Restricted Shares vest, the Outside Director will not be
entitled to any refund of the taxes paid on the unvested Restricted Shares.

 

The Outside Director should review with the
Outside Director’s own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this Agreement.  The Outside Director should rely solely on
such advisors and not on any statements or representations of the Company or
any of its agents.  The Outside Director
(and not the Company) shall be responsible for all of the Outside Director’s
own tax liability that may arise as a result of the transactions contemplated
by this Agreement.

 

11.                                 Limited
Transferability.  Except to the
limited extent provided in paragraph 6 above, this grant and the rights and
privileges conferred hereby will not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and will not
be subject to sale under execution, attachment or similar process; provided, however,
that the Outside Director may transfer the Shares of Restricted Stock (i) to
one or more Family Members, as such term is defined in Section 10 of the
Plan, and (ii) under a domestic relations order in settlement of marital
property rights.  Except as permitted by
this Agreement, upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this grant, or any right or privilege conferred hereby, or
upon any attempted sale under any execution, attachment or similar process,
this grant and the rights and privileges conferred hereby immediately will become
null and void.

 

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12.                                 Binding
Agreement.  Subject to the limitation
on the transferability of this grant contained herein, this Agreement will be
binding upon and inure to the benefit of the heirs, legatees, legal
representatives, successors and assigns of the parties hereto.

 

13.                                 Additional
Conditions to Issuance of Certificates for Shares and Release from Escrow.  The Company shall not be required to issue
any certificate or certificates for Shares hereunder or release such Shares
from the escrow established pursuant to paragraph 2 of this Agreement prior to
fulfillment of all the following conditions: 
(a) the admission of such Shares to listing on all stock exchanges
on which such class of stock is then listed; (b) the completion of any
registration or other qualification of such Shares under any state or federal
law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, which the Committee
shall, in its absolute discretion, deem necessary or advisable; (c) the
obtaining of any approval or other clearance from any state or federal
governmental agency, which the Administrator shall, in its absolute discretion,
determine to be necessary or advisable; and (d) the lapse of such
reasonable period of time following the date of grant of the Restricted Stock
as the Administrator may establish from time to time for reasons of
administrative convenience.

 

14.                                 Deferrals.  The Outside Director may, at his or her
election, defer the receipt of Shares of Restricted Stock otherwise deliverable
hereunder upon the vesting of Shares of Restricted Stock, subject to the rules
and procedures implemented by the Administrator and applicable laws.

 

15.                                 Plan
Governs.  This Agreement is subject
to all terms and provisions of the Plan. 
In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
will govern.  Capitalized terms used and
not defined in this Agreement will have the meaning set forth in the Plan.

 

16.                                 Administrator
Authority.  The Administrator will
have the power to interpret the Plan and this Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules (including, but
not limited to, the determination of whether or not any Shares of Restricted
Stock have vested).  All actions taken
and all interpretations and determinations made by the Administrator in good
faith will be final and binding upon the Outside Director, the Company and all
other interested persons.  The
Administrator will not be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Agreement.

 

17.                                 Captions.  Captions provided herein are for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.

 

18.                                 Agreement
Severable.  In the event that any
provision in this Agreement will be held invalid or unenforceable, such
provision will be severable from, and such invalidity or unenforceability will
not be construed to have any effect on, the remaining provisions of this
Agreement.

 

19.                                 Modifications
to the Agreement.  This Agreement
constitutes the entire understanding of the parties on the subjects
covered.  The Outside Director expressly
warrants that he or she is not accepting this Agreement in reliance on any
promises, representations, or inducements other than

 

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those contained
herein.  Modifications to this Agreement
or the Plan can be made only in an express written contract executed by a duly
authorized officer of the Company.

 

20.                                 Amendment,
Suspension or Termination of the Plan. 
By accepting this Award, the Outside Director expressly warrants that he
or she has received a grant of Restricted Stock under the Plan, and has
received, read and understood a description of the Plan.  The Outside Director understands that the
Plan may be amended, altered, suspended or terminated by the Company at any
time.

 

21.                                 Notice
of Governing Law.  This grant of
Restricted Stock shall be governed by, and construed in accordance with, the
laws of the State of California without regard to principles of conflict of
laws.

 

[Remainder of page left blank]

 

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EXHIBIT
A

 

ASSIGNMENT
SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED I,                                                                        ,
hereby sell, assign and transfer unto                                                                                                                                                                   (                            )
shares of the Common Stock of Digital Impact, Inc., standing in my name on the
books of said corporation represented by Certificate No.          herewith and do hereby irrevocably constitute and appoint                                                         to
transfer the said stock on the books of the within named corporation with full
power of substitution in the premises.

 

This Stock Assignment may be used only in
accordance with the Restricted Stock Agreement (the “Agreement”) between                                                           and
the undersigned Outside Director dated                                     .

 

 

	
  Dated:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  Signature of Outside Director:

  	
   

  
					

 

INSTRUCTIONS:
Please do not fill in any blanks other than the signature line.  The purpose of this assignment is to
facilitate the forfeiture provision set forth in the Agreement, without
requiring additional signatures on the part of the Outside Director.

 

Exhibit B

 

ELECTION
UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

 

The undersigned taxpayer hereby elects, pursuant to Sections 55 and
83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s
gross income or alternative minimum taxable income, as the case may be, for the
current taxable year the amount of any compensation taxable to taxpayer in
connection with taxpayer’s receipt of the property described below

 

1.                                       The
name, address, taxpayer identification number and taxable year of the
undersigned are as follows:

 

	
   

  	
  TAXPAYER:

  	
   

  	
  SPOUSE:

  
	
  NAME:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  IDENTIFICATION NO.:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TAX YEAR:

  	
   

  	
   

  	
   

  

 

2.                                       The
property with respect to which the election is made is described as follows:                        shares
(the “Shares”)
of the Common Stock of Digital Impact, Inc. (the “Company”).

 

3.                                       The
date on which the property was transferred is:                                       ,
                    .

 

4.                                       The
property is subject to the following restrictions:

 

The Shares may
not be transferred and are subject to forfeiture under the terms of an
agreement between the taxpayer and the Company. 
These restrictions lapse upon the satisfaction of certain conditions
contained in such agreement.

 

5.                                       The
fair market value at the time of transfer, determined without regard to any
restriction other than a restriction which by its terms will never lapse, of
such property is $                      .

 

6.                                       The
amount (if any) paid for such property is $                      .

 

The undersigned has submitted a copy of this statement to the person
for whom the services were performed in connection with the undersigned’s
receipt of the above-described property. 
The transferee of such property is the person performing the services in
connection with the transfer of said property.

 

 

The undersigned understands that the
foregoing election may not be revoked except with the consent of the
Commissioner.

 

 

	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
  Taxpayer

  
	
   

  	
   

  
	
  The undersigned spouse of taxpayer joins in
  this election.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
  Spouse of TaxpayerEXHIBIT 10.1

 

WATERS INSTRUMENTS, INC.

2004 EQUITY INCENTIVE PLAN

 

SECTION 1.

DEFINITIONS

 

As
used herein, the following terms shall have the meanings indicated below:

 

(a)                                  “Administrator”
shall mean the Board or the Committee, as the case may be.

 

(b)                                 “Affiliate”
shall mean a Parent or Subsidiary of the Company.

 

(c)                                  “Award”
shall mean any grant of an Option, Restricted Stock/Restricted Stock Unit Award
or Stock Appreciation Right.

 

(d)                                 “Committee”
shall mean a Committee of two or more directors who shall be appointed by and
serve at the pleasure of the Board.  If
the Company’s securities are registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, then, to the extent necessary for
compliance with Rule 16b-3, or any successor provision, each of the members of
the Committee shall be a “non-employee director.”  Solely for purposes of this Section 1(a),
“non-employee director” shall have the same meaning as set forth in Rule 16b-3,
or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.  Further, to the extent necessary for
compliance with the limitations set forth in Internal Revenue Code Section 162(m),
each of the members of the Committee shall be an “outside director” within the
meaning of Code Section 162(m) and the regulations issued thereunder.

 

(e)                                  The
“Company” shall mean Waters Instruments, Inc., a Minnesota corporation.

 

(f)                                    “Fair
Market Value” as of any date shall mean (i) if such stock is listed on the
Nasdaq National Market, Nasdaq SmallCap Market, or an established stock
exchange, the price of such stock at the close of the regular trading session
of such market or exchange on such date, as reported by The Wall Street
Journal or a comparable reporting service, or, if no sale of such stock
shall have occurred on such date, on the next preceding day on which there was
a sale of stock; (ii) if such stock is not so listed on the Nasdaq
National Market, Nasdaq SmallCap Market, or an established stock exchange, the
average of the closing “bid” and “asked” prices quoted by the OTC Bulletin
Board, the National Quotation Bureau, or any comparable reporting service on
such date or, if there are no quoted “bid” and “asked” prices on such date, on
the next preceding date for which there are such quotes; or (iii) if such stock
is not publicly traded as of such date, the per share value as determined by
the Board, or the Committee, in its sole discretion by applying principles of
valuation with respect to the Company’s Common Stock.

 

(g)                                 The
“Internal Revenue Code” is the Internal Revenue Code of 1986, as amended from
time to time.

 

 

(h)                                 “Option”
means an incentive stock option or nonqualified stock option granted pursuant
to the Plan.

 

(i)                                     “Option
Stock,” “Stock” or “Common Stock” shall mean Common Stock of the Company
(subject to adjustment as described in Section 13) reserved for Options,
Restricted Stock/Restricted Stock Unit Awards and Stock Appreciation Rights
pursuant to this Plan.

 

(j)                                     “Parent”
shall mean any corporation which owns, directly or indirectly in an unbroken
chain, fifty percent (50%) or more of the total voting power of the Company’s
outstanding stock.

 

(k)                                  The
“Participant” means a key employee of the Company or any Subsidiary to whom an
incentive stock option has been granted pursuant to Section 9; a
consultant or advisor to, or director, key employee or officer, of the Company
or any Subsidiary to whom a nonqualified stock option has been granted pursuant
to Section 10; or a consultant or advisor to, or director, key employee or
officer, of the Company or any Subsidiary to whom a Restricted Stock/Restricted
Stock Unit Award has been granted pursuant to Section 11; or a consultant
or advisor to, or director, key employee or officer, of the Company or any
Subsidiary to whom a Stock Appreciation Right has been granted pursuant to Section 12.

 

(l)                                     The
“Plan” means the Waters Instruments, Inc. 2004 Equity Incentive Plan, as
amended hereafter from time to time, including the form of Agreements as they
may be modified by the Administrator from time to time.

 

(m)                               “Restricted
Stock Award” shall mean any grant of restricted shares of Common Stock of the
Company pursuant to Section 11 hereof. 
“Restricted Stock Unit Award” shall mean any grant of restricted stock
units pursuant to Section 11 hereof. 
Collectively, Restricted Stock Awards and Restricted Stock Unit Awards
shall be referred to as “Restricted Stock/Restricted Stock Unit Awards.”

 

(n)                                 “Stock
Appreciation Right” shall mean a grant pursuant to Section 12 hereof.

 

(o)                                 A
“Subsidiary” shall mean any corporation of which fifty percent (50%) or more of
the total voting power of outstanding stock is owned, directly or indirectly in
an unbroken chain, by the Company.

 

SECTION 2.

PURPOSE

 

The
purpose of the Plan is to promote the success of the Company and its
Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers, directors, key employees,
consultants, and advisors upon whose efforts the success of the Company and its
Subsidiaries will depend to a large degree.

 

2

 

It is
the intention of the Company to carry out the Plan through the granting of
Options which will qualify as “incentive stock options” under the provisions of
Section 422 of the Internal Revenue Code, or any successor provision,
pursuant to Section 9 of this Plan, through the granting of Options that
are “nonqualified stock options” pursuant to Section 10 of this Plan, through
the granting of Restricted Stock/Restricted Stock Unit Awards pursuant to Section 11
of this Plan, and through the granting of Stock Appreciation Rights pursuant to
Section 12 hereof.  Adoption of this
Plan shall be and is expressly subject to the condition of approval by the
shareholders of the Company within twelve (12) months before or after the
adoption of the Plan by the Board of Directors. 
In no event shall any Options, Restricted Stock/Restricted Stock Unit
Awards or Stock Appreciation Rights be granted prior to the date this Plan is
approved by the shareholders of the Company.

 

SECTION 3.

EFFECTIVE DATE OF PLAN

 

The
Plan shall be effective as of the date of adoption by the Board of Directors,
subject to approval by the shareholders of the Company as required in Section 2.

 

SECTION 4.

ADMINISTRATION

 

The
Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the “Board”) or by a Committee which may be
appointed by the Board from time to time to administer the Plan (hereinafter
collectively referred to as the “Administrator”).  Except as otherwise provided herein, the
Administrator shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to exclusive authority to determine, in its
sole discretion, whether an Award shall be granted; the individuals to whom,
and the time or times at which, such Awards shall be granted; the number of
shares subject to each such Award, and any other terms and conditions of each
Award.  The Administrator shall have full
power and authority to administer and interpret the Plan, to make and amend
rules, regulations and guidelines for administering the Plan, to prescribe the
form and conditions of the respective Awards (which may vary from Participant
to Participant) evidencing each Award, and to make all other determinations
necessary or advisable for the administration of the Plan.  The Administrator’s interpretation of the
Plan, and all actions taken and determinations made by the Administrator
pursuant to the power vested in it hereunder, shall be conclusive and binding
on all parties concerned.

 

No
member of the Board or the Committee shall be liable for any action taken or
determination made in good faith in connection with the administration of the
Plan.  In the event the Board appoints a
Committee as provided hereunder, any action of the Committee with respect to
the administration of the Plan shall be taken pursuant to a majority vote of
the Committee members or pursuant to the written resolution of all Committee
members.

 

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SECTION 5.

PARTICIPANTS

 

The
Administrator shall from time to time, at its discretion and without approval
of the shareholders, designate those key employees, officers, directors,
consultants, and advisors of the Company or of any Subsidiary to whom Awards
shall be granted under this Plan; provided, however, that consultants or
advisors shall not be eligible to receive Awards hereunder unless such
consultant or advisor renders bona fide services to the Company or Subsidiary
and such services are not in connection with the offer or sale of securities in
a capital raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities. 
The Administrator shall, from time to time, at its discretion and
without approval of the shareholders, designate those employees of the Company
or any Subsidiary to whom Awards shall be granted under this Plan.  The Administrator may grant additional Awards
under this Plan to some or all Participants then holding Awards, or may grant
Awards solely or partially to new Participants. In designating Participants,
the Administrator shall also determine the number of shares subject to each
Award granted to each Participant. The Administrator may from time to time
designate individuals as being ineligible to participate in the Plan.

 

SECTION 6.

STOCK

 

The
capital stock to be issued under this Plan shall consist of authorized but
unissued shares of Stock.  Five Hundred
Fifty Thousand (550,000) shares of Stock shall be reserved and available for
Awards under the Plan; provided, however, that the total number of shares of
Stock reserved for Awards under this Plan shall be subject to adjustment as
provided in Section 13 of the Plan; and provided, further, that all shares
of Stock reserved and available under the Plan shall constitute the maximum
aggregate number of shares of Stock that may be issued through incentive stock
options.  In the event that any outstanding
Option, Stock Appreciation Right, Restricted Stock/Restricted Stock Unit Award
under the Plan for any reason expires or is terminated prior to the exercise of
the Option or Stock Appreciation Right, or prior to the lapsing of the risks of
forfeiture on the Restricted Stock/Restricted Stock Unit Award, the shares of
Stock allocable to the unexercised portion of such Option or Stock Appreciation
Right or to the forfeited portion of the Restricted Stock/Restricted Stock Unit
Award shall continue to be reserved for Options, Stock Appreciation Rights,
Restricted Stock/Restricted Stock Unit Awards under the Plan and may be
optioned or awarded hereunder.

 

SECTION 7.

DURATION OF PLAN

 

Incentive
stock options may be granted pursuant to the Plan from time to time during a
period of ten (10) years from the effective date as defined in Section 3.  Other Awards may be 

 

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granted pursuant to the
Plan from time to time after the effective date of the Plan and until the Plan
is discontinued or terminated by the Board.

 

SECTION 8.

PAYMENT 

 

Participants
may pay for shares of Stock of the Company upon exercise of Options granted
pursuant to this Plan with cash, personal check, certified check or, if
approved by the Administrator in its sole discretion, previously-owned shares
of the Company’s Common Stock, or any combination thereof, or such other form
of payment as may be authorized by the Administrator.  Any Stock so tendered as part of such payment
shall be valued at such Stock’s then Fair Market Value. The Administrator may,
in its sole discretion, limit the forms of payment available to the Participant
and may exercise such discretion any time prior to the termination of the
Option granted to the Participant or upon any exercise of the Option by the
Participant.  “Previously-owned shares”
means shares of the Company’s Common Stock which the Participant has owned for
at least six (6) months prior to the exercise of the stock option, or for such
other period of time as may be required by generally accepted accounting
principles.

 

With
respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.

 

SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

 

Each
incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written incentive stock option agreement (the “Option Agreement”).  The Option Agreement shall be in such form as
may be approved from time to time by the Administrator and may vary from
Participant to Participant; provided, however, that each Participant and each
Option Agreement shall comply with and be subject to the following terms and
conditions:

 

(a)                                  Number
of Shares and Option Price.  The
Option Agreement shall state the total number of shares covered by the
incentive stock option.  Except as
permitted by Section 424(d) of the Internal Revenue Code, or any successor
provision, the option price per share shall not be less than one hundred
percent (100%) of the per share Fair Market Value of the Company’s Common Stock
on the date the Administrator grants the option; provided, however, that if a
Participant owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its Parent
or any Subsidiary, the option price per share of an incentive stock option
granted to such Participant shall not be less than one hundred ten percent
(110%) of the per share Fair Market Value of the Company’s Common Stock on the
date of the grant of the option.  The
Administrator shall have full authority and discretion in establishing the
option price and shall be fully protected in so doing.

 

5

 

(b)                                 Term
and Exercisability of Incentive Stock Option.  The term during which any incentive stock
option granted under the Plan may be exercised shall be established in each
case by the Administrator.  In no event
shall any incentive stock option be exercisable during a term of more than ten
(10) years after the date on which it is granted; provided, however, that if a
Participant owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its Parent
or any Subsidiary, the incentive stock option granted to such Participant shall
be exercisable during a term of not more than five (5) years after the date on
which it is granted.

 

The
Option Agreement shall state when the incentive stock option becomes
exercisable and shall also state the maximum term during which such option may
be exercised.  In the event an incentive
stock option is exercisable immediately, the manner of exercise of such option
in the event it is not exercised in full immediately shall be specified in the
Option Agreement.  The Administrator may
accelerate the exercisability of any incentive stock option granted hereunder
which is not immediately exercisable as of the date of grant.

 

(c)                                  Nontransferability.  No incentive stock option shall be
transferable, in whole or in part, by the Participant other than by will or by
the laws of descent and distribution. 
During the Participant’s lifetime, the incentive stock option may be
exercised only by the Participant.  If
the Participant shall attempt any transfer of any incentive stock option
granted under the Plan during the Participant’s lifetime, such transfer shall
be void and the incentive stock option, to the extent not fully exercised,
shall terminate.

 

(d)                                 No
Rights as Shareholder.  A Participant
(or the Participant’s successor or successors) shall have no rights as a
shareholder with respect to any shares covered by an incentive stock option
until the date of the issuance of a stock certificate evidencing such
shares.  No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise
provided in Section 13 of the Plan).

 

(e)                                  Withholding
Taxes.  The Company or its Affiliate
shall be entitled to withhold and deduct from future wages of the Participant
all legally required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s exercise of an
incentive stock option or a “disqualifying disposition” of shares acquired
through the exercise of an incentive stock option as defined in Code Section 421(b).  In the event the Participant is required
under the Option Agreement to pay the Company or its Affiliate, or make
arrangements satisfactory to the Company or its Affiliate respecting payment
of, such withholding and employment-related taxes, the Administrator may, in
its discretion and pursuant to such rules as it may adopt, permit the
Participant to satisfy such obligation, in whole or in part, by electing to
have the Company or its Affiliate withhold shares of Option Stock otherwise
issuable to the Participant as a result of the exercise of the incentive stock
option having a Fair Market Value equal to the minimum required tax withholding,
based on the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes, that are applicable to the supplemental
income resulting from such exercise.  In
no event may the Company or its Affiliate 

 

6

 

withhold shares having a
Fair Market Value in excess of such statutory minimum required tax
withholding.  The Participant’s election
to have shares withheld for this purpose shall be made on or before the date
the incentive stock option is exercised or, if later, the date that the amount
of tax to be withheld is determined under applicable tax law.  Such election shall be approved by the
Administrator and otherwise comply with such rules as the Administrator may
adopt to assure compliance with Rule 16b-3, or any successor provision, as then
in effect, of the General Rules and Regulations under the Securities Exchange
Act of 1934, if applicable.

 

(f)                                    Other
Provisions.  The Option Agreement
authorized under this Section 9 shall contain such other provisions as the
Administrator shall deem advisable.  Any
such Option Agreement shall contain such limitations and restrictions upon the
exercise of the Option as shall be necessary to ensure that such Option will be
considered an “incentive stock option” as defined in Section 422 of the
Internal Revenue Code or to conform to any change therein.

 

SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

 

Each
nonqualified stock option granted pursuant to this Section 10 shall be
evidenced by a written nonqualified stock option agreement (the “Option
Agreement”).  The Option Agreement shall
be in such form as may be approved from time to time by the Administrator and
may vary from Participant to Participant; provided, however, that each
Participant and each Option Agreement shall comply with and be subject to the
following terms and conditions:

 

(a)                                  Number
of Shares and Option Price.  The
Option Agreement shall state the total number of shares covered by the
nonqualified stock option.  Unless
otherwise determined by the Administrator, the option price per share shall not
be less than one hundred percent (100%) of the per share Fair Market Value of
the Company’s Common Stock on the date the Administrator grants the option.

 

(b)                                 Term
and Exercisability of Nonqualified Stock Option.  The term during which any nonqualified stock
option granted under the Plan may be exercised shall be established in each
case by the Administrator.  The Option
Agreement shall state when the nonqualified stock option becomes exercisable
and shall also state the maximum term during which such option may be
exercised.  In the event a nonqualified
stock option is exercisable immediately, the manner of exercise of such option
in the event it is not exercised in full immediately shall be specified in the
Option Agreement.   The Administrator may
accelerate the exercisability of any nonqualified stock option granted
hereunder which is not immediately exercisable as of the date of grant.

 

(c)                                  Transferability.  The Administrator may, in its sole
discretion, permit the Participant to transfer any or all nonqualified stock
options to any member of the Participant’s “immediate family” as such term is
defined in Rule 16a-1(e) promulgated under the Securities Exchange Act of 1934,
or any successor provision, or to one or more trusts whose beneficiaries are
members of such Participant’s “immediate family” or partnerships in which such
family members are the only partners; provided, however, that the Participant
cannot receive any consideration for the transfer 

 

7

 

and such transferred
nonqualified stock option shall continue to be subject to the same terms and
conditions as were applicable to such nonqualified stock option immediately
prior to its transfer.

 

(d)                                 No
Rights as Shareholder.  A Participant
(or the Participant’s successor or successors) shall have no rights as a
shareholder with respect to any shares covered by a nonqualified stock option
until the date of the issuance of a stock certificate evidencing such
shares.  No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise
provided in Section 13 of the Plan).

 

(e)                                  Withholding
Taxes.  The Company or its Affiliate
shall be entitled to withhold and deduct from future wages of the Participant
all legally required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s exercise of a
nonqualified stock option.  In the event
the Participant is required under the Option Agreement to pay the Company or
its Affiliate, or make arrangements satisfactory to the Company or its
Affiliate respecting payment of, such withholding and employment-related taxes,
the Administrator may, in its discretion and pursuant to such rules as it may
adopt, permit the Participant to satisfy such obligation, in whole or in part,
by electing to have the Company or its Affiliate withhold shares of Option
Stock otherwise issuable to the Participant as a result of the exercise of the
nonqualified stock option having a Fair Market Value equal to the minimum
required tax withholding, based on the minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
the supplemental income resulting from such exercise.  In no event may the Company or its Affiliate
withhold shares having a Fair Market Value in excess of such statutory minimum
required tax withholding.  The
Participant’s election to have shares withheld for this purpose shall be made
on or before the date the nonqualified stock option is exercised or, if later,
the date that the amount of tax to be withheld is determined under applicable
tax law.  Such election shall be approved
by the Administrator and otherwise comply with such rules as the Administrator
may adopt to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the
Securities Exchange Act of 1934, if applicable.

 

(f)                                    Other
Provisions.  The Option Agreement
authorized under this Section 10 shall contain such other provisions as
the Administrator shall deem advisable.

 

SECTION 11.

RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS

 

Each
Restricted Stock/Restricted Stock Unit Award granted pursuant to this Section 11
shall be evidenced by a written restricted stock agreement or restricted stock
unit agreement (the “Restricted Stock Agreement” or “Restricted Stock Unit
Agreement”, as the case may be).  The
Restricted Stock Agreement or Restricted Stock Unit Agreement shall be in such
form as may be approved from time to time by the Administrator and may vary
from Participant to Participant; provided, however, that each Participant and
each Restricted Stock Agreement or Restricted Stock Unit Agreement shall comply
with and be subject to the following terms and conditions:

 

8

 

(a)                                  Number
of Shares.  The Restricted Stock
Agreement or Restricted Stock Unit Agreement shall state the total number of
shares of Stock covered by the Restricted Stock/ Restricted Stock Unit Award.

 

(b)                                 Risks
of Forfeiture.  The Restricted Stock
Agreement or Restricted Stock Unit Agreement shall set forth the risks of
forfeiture, if any, which shall apply to the shares of Stock covered by the
Restricted Stock/Restricted Stock Unit Award, and shall specify the manner in
which such risks of forfeiture shall lapse. 
The Administrator may, in its sole discretion, modify the manner in
which such risks of forfeiture shall lapse but only with respect to those
shares of Stock which are restricted as of the effective date of the
modification.

 

(c)                                  Issuance
of Shares; Rights as Shareholder.

 

(i)                                     With
respect to a Restricted Stock Award, the Company shall cause to be issued a
stock certificate representing such shares of Stock in the Participant’s name,
and shall deliver such certificate to the Participant; provided, however, that
the Company shall place a legend on such certificate describing the risks of
forfeiture and other transfer restrictions set forth in the Participant’s
Restricted Stock Agreement and providing for the cancellation and return of
such certificate if the shares of Stock subject to the Restricted Stock Award
are forfeited.  Until the risks of
forfeiture have lapsed or the shares subject to such Restricted Stock Award
have been forfeited, the Participant shall be entitled to vote the shares of
Stock represented by such stock certificates and shall receive all dividends
attributable to such shares, but the Participant shall not have any other
rights as a shareholder with respect to such shares.

 

(ii)                                  With
respect to a Restricted Stock Unit Award, as the risks of forfeiture on the
restricted stock units lapse, the Administrator shall cause to be issued one or
more stock certificates in the Participant’s name and shall deliver such
certificates to the Participant in satisfaction of such restricted stock
units.  Until the risks of forfeiture on
the restricted stock units have lapsed, the Participant shall not be entitled
to vote any shares of stock which may be acquired through the restricted stock
units, shall not receive any dividends attributable to such shares, and shall
not have any other rights as a shareholder with respect to such shares.

 

(d)                                 Withholding
Taxes.  The Company or its Affiliate
shall be entitled to withhold and deduct from future wages of the Participant
all legally required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s Restricted Stock/
Restricted Stock Unit Award.  In the
event the Participant is required under the Restricted Stock Agreement or
Restricted Stock Unit Agreement to pay the Company or its Affiliate, or make
arrangements satisfactory to the Company or its Affiliate respecting payment
of, such withholding and employment-related taxes, the Administrator may, in
its discretion and pursuant to such rules as it may adopt, permit the
Participant to satisfy such obligations, in whole or in part, by delivering
shares of Common Stock, including shares of Stock received pursuant to a
Restricted Stock/ Restricted Stock Unit Award on which the risks of forfeiture
have lapsed.  Such shares shall have a
Fair Market Value equal to the minimum required tax withholding, based on the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are 

 

9

 

applicable to the
supplemental income resulting from the lapsing of the risks of forfeiture on
such Restricted Stock or Restricted Stock Units.  In no event may the Participant deliver shares
having a Fair Market Value in excess of such statutory minimum required tax
withholding.  The Participant’s election
to deliver shares of Common Stock for this purpose shall be made on or before
the date that the amount of tax to be withheld is determined under applicable
tax law.  Such election shall be approved
by the Administrator and otherwise comply with such rules as the Administrator
may adopt to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.

 

(e)                                  Nontransferability.  No Restricted Stock/Restricted Stock Unit
Award shall be transferable, in whole or in part, by the Participant, other
than by will or by the laws of descent and distribution, prior to the date the
risks of forfeiture described in the Restricted Stock Agreement or Restricted
Stock Unit Agreement have lapsed.  If the
Participant shall attempt any transfer of any Restricted Stock/Restricted Stock
Unit Award granted under the Plan prior to such date, such transfer shall be
void and the Restricted Stock/Restricted Stock Unit Award shall terminate.

 

(f)                                    Other
Provisions.  The Restricted Stock
Agreement authorized under this Section 11 shall contain such other provisions
as the Administrator shall deem advisable.

 

SECTION 12.

STOCK APPRECIATION RIGHTS

 

Each
Stock Appreciation Right granted pursuant to this Section 12 shall be
evidenced by a written agreement (the “Stock Appreciation Agreement”).  The Stock Appreciation Agreement shall be in
such form as may be approved from time to time by the Administrator and may
vary from Participant to Participant; provided, however, that each Participant
and each Stock Appreciation Agreement shall comply with and be subject to the
following terms and conditions:

 

(a)                                  Awards.  A Stock Appreciation Right shall entitle the
Participant to receive, upon exercise, cash, shares of Stock, or any
combination thereof, having a value equal to the excess of (i) the Fair Market
Value of a specified number of shares of Stock on the date of such exercise,
over (ii) a specified exercise price. 
Unless otherwise determined by the Administrator, the specified exercise
price shall not be less than 100% of the Fair Market Value of such shares of
Stock on the date of grant of the Stock Appreciation Right.  A Stock Appreciation Right may be granted
independent of or in tandem with a previously or contemporaneously granted
Option.

 

(b)                                 Term
and Exercisability.  The term during
which any Stock Appreciation Right granted under the Plan may be exercised
shall be established in each case by the Administrator.  The Stock Appreciation Agreement shall state
when the Stock Appreciation Right becomes exercisable and shall also state the
maximum term during which such Stock Appreciation Right may be exercised.  In the event a Stock Appreciation Right is
exercisable immediately, the manner of exercise of such Stock Appreciation
Right in the event it is not exercised in full immediately shall 

 

10

 

be specified in the Stock
Appreciation Agreement.   The
Administrator may accelerate the exercisability of any Stock Appreciation Right
granted hereunder which is not immediately exercisable as of the date of grant.  If a Stock Appreciation Right is granted in
tandem with an Option, Stock Appreciation Agreement shall set forth the extent
to which the exercise of all or a portion of the Stock Appreciation Right shall
cancel a corresponding portion of the Option, and the extent to which the
exercise of all or a portion of the Option shall cancel a corresponding portion
of the Stock Appreciation Right.

 

(c)                                  Withholding
Taxes.  The Company or its Affiliate
shall be entitled to withhold and deduct from future wages of the Participant
all legally required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s Stock Appreciation
Right.  In the event the Participant is
required under the Stock Appreciation Right to pay the Company or its
Affiliate, or make arrangements satisfactory to the Company or its Affiliate
respecting payment of, such withholding and employment-related taxes, the
Administrator may, in its discretion and pursuant to such rules as it may
adopt, permit the Participant to satisfy such obligations, in whole or in part,
by delivering shares of Common Stock. 
Such shares shall have a Fair Market Value equal to the minimum required
tax withholding, based on the minimum statutory withholding rates for federal
and state tax purposes, including payroll taxes.  In no event may the Participant deliver
shares having a Fair Market Value in excess of such statutory minimum required
tax withholding.  The Participant’s
election to deliver shares of Common Stock for this purpose shall be made on or
before the date that the amount of tax to be withheld is determined under
applicable tax law.  Such election shall
be approved by the Administrator and otherwise comply with such rules as the
Administrator may adopt to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and Regulations
under the Securities Exchange Act of 1934, if applicable.

 

(d)                                 Nontransferability.  No Stock Appreciation Right shall be
transferable, in whole or in part, by the Participant, other than by will or by
the laws of descent and distribution.  If
the Participant shall attempt any transfer of any Stock Appreciation Right
granted under the Plan, such transfer shall be void and the Stock Appreciation
Right shall terminate.

 

(e)                                  No
Rights as Shareholder.  A Participant
(or the Participant’s successor or successors) shall have no rights as a
shareholder with respect to any shares covered by a Stock Appreciation Right
until the date of the issuance of a stock certificate evidencing such
shares.  No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise
provided in Section 13 of the Plan).

 

(f)                                    Other
Provisions.  The Stock Appreciation
Agreement authorized under this Section 12 shall contain such other
provisions as the Administrator shall deem advisable, including but not limited
to any restrictions on the exercise of the Stock Appreciation Right which may
be necessary to comply with Rule 16b-3 of the Securities Exchange Act of 1934,
as amended.

 

11

 

SECTION 13.

RECAPITALIZATION, SALE, MERGER, EXCHANGE

OR LIQUIDATION

 

In the
event of an increase or decrease in the number of shares of Common Stock
resulting from a subdivision or consolidation of shares, stock dividend, or
stock split, the Board may, in its sole discretion, adjust the number of shares
of Stock reserved under Section 6 hereof, the number of shares of Stock
covered by each Award, and, if applicable, the price per share thereof to
reflect such change.  Additional shares
which may be credited pursuant to such adjustment shall be subject to the same
restrictions as are applicable to the shares with respect to which the
adjustment relates.

 

Unless
otherwise provided in the agreement with respect to an Award, in the event of
an acquisition of the Company through the sale of substantially all of the
Company’s assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification,
extraordinary dividend, divestiture or liquidation of the Company (collectively
referred to as a “transaction”), the Board may provide for one or more of the
following:

 

(a)                                  the
equitable acceleration of the exercisability of any outstanding Options or
Stock Appreciation Rights or the lapsing of the risks of forfeiture on any
Restricted Stock/Restricted Stock Unit Awards;

 

(b)                                 the
complete termination of this Plan, the cancellation of outstanding Options or
Stock Appreciation Rights not exercised prior to a date specified by the Board
(which date shall give Participants a reasonable period of time in which to
exercise such Award prior to the effectiveness of such transaction) and the
cancellation of any Restricted Stock/Restricted Stock Unit Awards for which the
risks of forfeiture have not lapsed;

 

(c)                                  that
Participants holding outstanding Options and Stock Appreciation Rights shall
receive, with respect to each share of Stock subject to such Awards, as of the
effective date of any such transaction, cash in an amount equal to the excess
of the Fair Market Value of such Stock on the date immediately preceding the
effective date of such transaction over the price per share of such Options or
Stock Appreciation Rights; provided that the Board may, in lieu of such cash
payment, distribute to such Participants shares of Common Stock of the Company
or shares of stock of any corporation succeeding the Company by reason of such
transaction, such shares having a value equal to the cash payment herein;

 

(d)                                 that
Participants holding outstanding Restricted Stock/Restricted Stock Unit Awards
shall receive, with respect to each share of Stock subject to such Awards, as
of the effective date of any such transaction, cash in an amount equal to the
Fair Market Value of such Stock on the date immediately preceding the effective
date of such transaction; provided that the Board may, in lieu of such cash
payment, distribute to such Participants shares of Common Stock of the Company
or shares of stock of any corporation succeeding the Company by reason of such
transaction, such shares having a value equal to the cash payment herein;

 

12

 

(e)                                  the
continuance of the Plan with respect to the exercise of Options or Stock
Appreciation Rights which were outstanding as of the date of adoption by the
Board of such plan for such transaction and provide to Participants holding
such Options and Stock Appreciation Rights the right to exercise their
respective Options or Stock Appreciation Rights as to an equivalent number of
shares of stock of the corporation succeeding the Company by reason of such
transaction; and

 

(f)                                    the
continuance of the Plan with respect to Restricted Stock/Restricted Stock Unit
Awards for which the risks of forfeiture have not lapsed as of the date of
adoption by the Board of such plan for such transaction and provide to
Participants holding such Awards the right to receive an equivalent number of
shares of stock of the corporation succeeding the Company by reason of such
transaction.

 

The
Board may restrict the rights of or the applicability of this Section 13
to the extent necessary to comply with Section 16(b) of the Securities
Exchange Act of 1934, the Internal Revenue Code or any other applicable law or
regulation.  The grant of an Award
pursuant to the Plan shall not limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or
assets.

 

SECTION 14.

INVESTMENT PURPOSE

 

No
shares of Stock shall be issued pursuant to the Plan unless and until there has
been compliance, in the opinion of Company’s counsel, with all applicable legal
requirements, including without limitation, those relating to securities laws
and stock exchange listing requirements. 
As a condition to the issuance of Stock to Participant, the
Administrator may require Participant to (a) represent that the shares of Stock
are being acquired for investment and not resale and to make such other
representations as the Administrator shall deem necessary or appropriate to
qualify the issuance of the shares of Stock as exempt from the Securities Act
of 1933 and any other applicable securities laws, and (b) represent that
Participant shall not dispose of the shares of Stock in violation of the
Securities Act of 1933 or any other applicable securities laws.

 

As a
further condition to the issuance of Stock to Participant, Participant agrees
to the following:

 

(a)                                  In
the event the Company advises Participant that it plans an underwritten public
offering of its Common Stock in compliance with the Securities Act of 1933, as
amended, and the underwriter(s) seek to impose restrictions under which certain
shareholders may not sell or contract to sell or grant any option to buy or
otherwise dispose of part or all of their rights to the Common Stock underlying
Awards, Participant will not, for a period not to exceed 180 days from the
prospectus, sell or contract to sell or grant an option to buy or otherwise dispose
of any Award 

 

13

 

granted to Participant
pursuant to the Plan or any of the underlying shares of Common Stock without
the prior written consent of the underwriter(s) or its representative(s).

 

(b)                                 In
the event the Company makes any public offering of its securities and
determines in its sole discretion that it is necessary to reduce the number of
issued but unexercised Options or Stock Appreciation Rights so as to comply
with any state’s securities or Blue Sky law limitations with respect thereto,
the Board shall have the right (i) to accelerate the exercisability of any
Award and the date on which such Award must be exercised, provided that the
Company gives Participant prior written notice of such acceleration, and (ii)
to cancel any Awards or portions thereof which Participant does not exercise
prior to or contemporaneously with such public offering.

 

(c)                                  In
the event of a transaction (as defined in Section 13 of the Plan),
Participant will comply with Rule 145 of the Securities Act of 1933 and any
other restrictions imposed under other applicable legal or accounting
principles if Participant is an “affiliate” (as defined in such applicable
legal and accounting principles) at the time of the transaction, and
Participant will execute any documents necessary to ensure compliance with such
rules.

 

The
Company reserves the right to place a legend on any stock certificate issued
upon the exercise of an Award pursuant to the Plan to assure compliance with this
Section 14.

 

SECTION 15.

AMENDMENT OF THE PLAN

 

The
Board may from time to time, insofar as permitted by law, suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 13,
shall impair the terms and conditions of any Award which is outstanding on the
date of such revision or amendment to the material detriment of the Participant
without the consent of the Participant. 
Notwithstanding the foregoing, no such revision or amendment shall (i)
materially increase the number of shares subject to the Plan except as provided
in Section 13 hereof, (ii) change the designation of the class of
employees eligible to receive Awards, (iii) decrease the price at which Options
may be granted, or (iv) materially increase the benefits accruing to
Participants under the Plan without the approval of the shareholders of the
Company if such approval is required for compliance with the requirements of
any applicable law or regulation. 
Furthermore, the Plan may not, without the approval of the shareholders,
be amended in any manner that will cause incentive stock options to fail to
meet the requirements of Section 422 of the Internal Revenue Code.

 

SECTION 16.

NO OBLIGATION TO EXERCISE OPTION

 

The
granting of an Option or Stock Appreciation Right shall impose no obligation
upon the Participant to exercise such Option or Stock Appreciation Right.  Further, the granting of any 

 

14

 

Award hereunder shall not
impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ for any period.

 

15

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