FOUNTAIN POWERBOAT INDUSTRIES INC
COPY OF OUR 1995 STOCK OPTION PLAN, AS AMENDED
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<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>rrd57865_1839.htm
<DESCRIPTION>COPY OF OUR 1995 STOCK OPTION PLAN, AS AMENDED
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<TITLE>SECURITIES AND EXCHANGE COMMISSION</TITLE>


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<B><FONT SIZE=3><P ALIGN="RIGHT">Exhibit 10.1</P>


</B></FONT><FONT SIZE=2><P ALIGN="RIGHT"></P>


<P ALIGN="RIGHT">&nbsp;</P>


</FONT><B><FONT SIZE=3><P ALIGN="CENTER">1995 STOCK OPTION PLAN</P>


<P ALIGN="CENTER">OF</P>


<P ALIGN="CENTER">FOUNTAIN POWERBOAT INDUSTRIES, INC.</P>


</B>


<P>&nbsp;</P>


<B><P ALIGN="CENTER">ARTICLE I</P>


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<LI>PURPOSE.</B>  Fountain Powerboat Industries, Inc. (the "Company") proposes to grant to selected key employees (including officers and directors who are employees) of the Company and its subsidiaries (hereinafter referred to as "Employee Optionees") options to purchase shares of common stock, par value $.01 per share, of the Company ("Common Stock") for the purposes of (i)&nbsp;furnishing to such Employee Optionees maximum incentive to improve operations and increase profits of the Company, and (ii)&nbsp;encouraging such Employee Optionees to accept or continue employment with the Company and its subsidiaries. Such options will be granted pursuant to the plan herein set forth, which shall be known as the 1995 Stock Option Plan of Fountain Powerboat Industries, Inc. (herein referred to as the "Plan"). </LI>


<P>The Company also proposes to grant to members of the Board of Directors of the Company (the "Board of Directors") who are not officers or employees of the Company or its subsidiaries at the time of a grant (hereinafter referred to as "Non- Employee Directors") options to purchase shares of Common Stock pursuant to the Plan.  The purpose of such grants is to (i)&nbsp;provide incentives for highly qualified individuals to stand for election to the Board of Directors and continue service on the Board of Directors, (ii)&nbsp;provide maximum incentive to promote long-term stockholder value, and (iii)&nbsp;promote a greater identity of interest between Non-Employee Directors and the Company's stockholders. </P>


<B><LI>SHARES SUBJECT TO THE PLAN.</B>  Subject to adjustments as provided in Article&nbsp;I, Paragraph&nbsp;4, Article&nbsp;II, Paragraph&nbsp;3(e), Article&nbsp;III, Paragraph&nbsp;3(e), and Article&nbsp;IV, Paragraph&nbsp;4(e), the aggregate number of shares of Common Stock to be delivered upon exercise of all options granted under the Plan shall not exceed 300,000 shares.  The shares of Common Stock issuable upon exercise of options granted under the Plan may be authorized and unissued shares or reacquired shares.  In the event the number of shares to be delivered upon the exercise in full of any option granted under the Plan is reduced for any reason whatsoever or in the event any option granted under the Plan for any reason shall expire or shall terminate unexercised as to all or any shares covered thereby, the number of shares no longer subject to any such option shall thereupon be released from such option and shall thereafter be available to be re-optioned under the Plan. Shares issued pursuant to the exercise of options granted under the Plan shall be fully paid and nonassessable.</LI>


<B><LI>ADMINISTRATION OF THE PLAN.</B>  Subject to the provisions of the Plan, the Compensation Committee of the Board of Directors or such other committee of the Board of Directors which shall succeed to the functions and responsibilities of the Compensation Committee (the "Committee") shall have the authority to: (a)&nbsp;determine the provisions of the options to be granted under the Plan; (b)&nbsp;interpret the Plan and all options granted under the Plan; (c)&nbsp;adopt, amend or rescind such rules as it deems necessary for the proper administration of the Plan; (d)&nbsp;make all other determinations necessary or advisable for the administration of the Plan; and (e)&nbsp;correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option granted under the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan or any option into effect.  The Board of Directors shall have the power to add or remove members of the Committee from time to time, to fill vacancies thereon arising by resignation, death, removal, or otherwise, and shall designate a chairman from among the members of the Committee, which chairman shall preside at all meetings of the Committee. Meetings shall be held at such times and places as shall be determined by the Committee.  A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the vote of a majority of those members present at any meeting shall decide any question brought before that meeting.  The actions of the Committee in exercising all of the rights, powers and authorities set out in the Plan, when performed in good faith and in its sole judgment, shall be final and conclusive.  When appropriate, the Plan shall be administered in order to qualify certain of the options granted hereunder as "incentive stock options" described in Section&nbsp;422 of the Internal Revenue Code of 1986, as amended (the "Code"). </LI>


<P>The Committee shall consist of at least two members of the Board of Directors.  Other than options granted to Non-Employee Directors pursuant to Article&nbsp;IV, no options may be granted under the Plan to any member of the Committee during his term of membership on the Committee.  No person shall be eligible to serve on the Committee unless such person is then a "disinterested person" within the meaning of Rule&nbsp;16b-3 ("Rule&nbsp;16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the "Act"), or any similar or successor rule. The members of the Committee shall be solely "outside directors," within the meaning of Section&nbsp;162(m) of the Code and applicable interpretive authority thereunder. </P>


<B><LI>AMENDMENT AND DISCONTINUANCE OF THE PLAN.</B>  The Board of Directors may amend, suspend or terminate the Plan, provided, however, that each such amendment of the Plan: (a)&nbsp;extending the period within which options may be granted under the Plan; (b)&nbsp;increasing the aggregate number of shares of Common Stock to be optioned under the Plan except as provided in Article&nbsp;II, Paragraph&nbsp;3(e), Article&nbsp;III, Paragraph&nbsp;3(e), Article&nbsp;IV, Paragraph&nbsp;4(e) and the next succeeding sentence, (c)&nbsp;materially modifying the requirements as to eligibility of employees receiving options under, or changing the eligibility of employees or class of employees to whom options may be granted under Article&nbsp;II or III; (d)&nbsp;materially increasing the benefits to optionees under the plan; (e)&nbsp;modifying the provisions of Article&nbsp;IV; or (f)&nbsp;granting options to Non-Employee Directors other than pursuant to Article&nbsp;IV, shall, in each case, be subject to approval by the stockholders of the Company; provided, further, however, that no amendment, suspension or termination of the Plan may cause the Plan to fail to meet the requirements of Rule&nbsp;16b-3 (including, without limitation, the requirements of Rule&nbsp;16b-3(c)(2)(i)(A) and Rule&nbsp;16b-3(c)(2)(ii) or may, without the consent of the holder of an option granted under Article&nbsp;II, III, or IV, terminate such option or adversely affect such person's rights in any material respect (except as set forth in the Plan).  The Board of Directors may increase the aggregate number of shares of Common Stock that may be issued under the Plan provided that the number of shares to be issuable in connection with such increase to persons subject to Section&nbsp;16(a) of the Act shall not, in the aggregate, exceed 100,000 shares. </LI>


<P>Furthermore, the Board of Directors may alter, amend, suspend, discontinue or terminate the Plan and any option granted hereunder, without the approval of the stockholders of the Company or any holder of any option thereby affected, if necessary in order to (a)&nbsp;enable the Plan and any option granted hereunder intended to be so qualified, to qualify for:  (i)&nbsp;the exemption provided by Rule&nbsp;16b-3, (ii)&nbsp;the benefits provided under Section&nbsp;422 of the Code, or (iii)&nbsp;the exclusion for qualified performance-based compensation under Section&nbsp;162(m) of the Code and the applicable interpretive authority thereunder, and (b)&nbsp;comply with changes in the Code, the Employee Retirement Income Security Act or any other applicable law (including, with respect to any of the foregoing, changes in any rule, regulation or other interpretive authority). </P>


<B><LI>GRANTING OF OPTIONS OF EMPLOYEES.</B>  The Committee shall have authority to grant, prior to the expiration date of the Plan, to Employee Optionees options to purchase, on the terms and conditions hereinafter set forth in Article&nbsp;II and III, authorized but unissued, or reacquired, shares of Common Stock, provided such grants shall be made only to those Employee Optionees, in such amounts and at such times as determined in the discretion of the Committee, and, for this purpose, the Committee may consider the Employee Optionee's office or position, degree of responsibility for, and contribution to, the growth and success of the Company, length of service, promotions, potential and any other factors which may deem relevant. </LI>


<P>Options granted to Employee Optionees under Article&nbsp;III shall be "incentive stock options" within the meaning of Section&nbsp;422(b) of the Code, and are hereinafter referred to as "incentive stock options."  All other options granted to Employee Optionees under the Plan shall be granted pursuant to Article&nbsp;II, and are hereinafter referred to as "non-qualified options." </P>


<B><LI>GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS.</B>  All options granted to Non-Employee Directors shall be options to purchase, on the terms and conditions hereinafter set forth in Article&nbsp;IV, authorized but unissued, or reacquired, shares of Common Stock and shall be non-qualified options. </LI>


<B><LI>OPTION AGREEMENTS.</B>  Each option granted under the Plan shall be evidenced by a written agreement between the Company and the applicable optionee and shall contain such terms and conditions, and may be exercisable for such periods, as may be approved by the Committee, which terms and conditions need not be identical but which must be in compliance with the terms and provisions hereof. </LI>


<B><LI>EFFECTIVE DATE.</B>  The Plan shall become effective as of the date the Plan is approved by the stockholders of the Company (the "Effective Date").  Except with respect to options then outstanding if not sooner terminated under the provisions of Paragraph&nbsp;4 of this Article, the Plan shall terminate upon, and no further options shall be granted after, the expiration of ten years from the Effective Date. </LI>


<B><LI>MISCELLANEOUS.</B>  All references in the Plan to "Articles," "Paragraphs," and other subdivisions refer to the corresponding Article, Paragraph, and subdivisions of the Plan. </LI>


<B><LI>RULE&nbsp;16B-3 COMPLIANCE.</B>  The Company intends: </LI>


<OL TYPE="a">





<LI>that the Plan meet the requirements of Rule&nbsp;16b-3; </LI>


<LI>that participation by Non-Employee Directors under Article&nbsp;IV will not prohibit them from being "disinterested persons" within the meaning of Rule&nbsp;16b-3 with respect to administration of the Plan or with respect to administration of any other plan of the Company; </LI>


<LI>that transactions of the type specified in the first paragraph of Rule&nbsp;16b-3 by Non-Employee Directors pursuant to Article&nbsp;IV will be exempt from the operation of Section&nbsp;16(b) of the Act; and </LI>


<LI>that transactions of the type specified in the first paragraph of Rule&nbsp;16b-3 by officers of the Company (whether or not they are directors) pursuant to the Plan will be exempt from the operation of Section&nbsp;16(b) of the 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 Paragraph&nbsp;10 of this Article. </LI></OL>





<B><LI>RECAPITALIZATION OR REORGANIZATION.</B>  If:  (i)&nbsp;the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly- owned subsidiary of the Company); (ii)&nbsp;the Company sells, leases or exchanges all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company); (iii)&nbsp;the Company is to be dissolved and liquidated, (iv)&nbsp;any person or entity, including a "group" as contemplated by Section&nbsp;13(d)(3) of the Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the outstanding shares of the Company's voting stock (based upon voting power); or (iv)&nbsp;as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board of Directors (each such event is referred to herein as a "Corporate Change"), then all outstanding options, including those not then currently exercisable, shall become exercisable in full; provided, however, in no event shall any incentive stock option, without the consent of the holder thereof, first become exercisable pursuant hereto if the result would be to cause such option, when granted, not to be treated as an incentive stock option (whether or not by reason of the possible future violation of the annual limitation set forth in Article&nbsp;III, Paragraph&nbsp;3 or otherwise). </LI>


<B><LI>FOREIGN OPTIONS AND RIGHTS.</B>  The Committee may grant options to Employee Optionees and Non- Employee Directors who are subject to the tax laws of nations other than the United States, which options may have terms and conditions as determined by the Committee as necessary to comply with applicable foreign laws.  The Committee may take any action which it deems advisable to obtain approval of any such option by the appropriate foreign governmental entity; provided, however, that no such option may be granted pursuant to this Paragraph&nbsp;12 and no action may be taken which would result in a violation of the Act, the Code or any other applicable law. </LI></OL>


</OL>





<B><P ALIGN="CENTER">ARTICLE II</P>


<P ALIGN="CENTER">NON-QUALIFIED OPTIONS</P>


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<LI>ELIGIBLE EMPLOYEES.</B>  All Employee Optionees shall be eligible to receive non-qualified options under this Article&nbsp;II. </LI>


<B><LI>CALCULATION OF EXERCISE PRICE.</B>  The exercise price to be paid for each share of Common Stock deliverable upon exercise of each non-qualified option granted under Article&nbsp;II shall be equal to the fair market value per share of Common Stock at the time of grant as determined by the Committee, based on the transactions in the Common Stock as reported by The Wall Street Journal (or any successor publication thereto), and shall be equal to the per share price of the last sale of Common Stock on the trading day immediately preceding the date of grant of such option.  The exercise price for each non-qualified option shall be subject to adjustment as provided in Paragraph&nbsp;3(e) of this Article. </LI>


<B><LI>TERMS AND CONDITIONS OF OPTIONS.</B>  Non-qualified options granted under this Article&nbsp;II shall be in such form as the Committee may from time to time approve, shall be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with this Article&nbsp;II, as the Committee shall deem desirable: </LI></OL>


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<LI>Option Period and Conditions and Limitations on Exercise.  Subject to Paragraph 4 of this Article, no non-qualified option shall be exercisable by an Employee Optionee later than the date which is the date determined by the Committee upon the grant thereof (the "Non-qualified Option Expiration Date") which, except to the extent that a longer period is specifically approved by the Board of Directors in the case of a particular non-qualified option, shall be no later than ten years after the date of grant.  To the extent not prohibited by other provisions of the Plan, each non-qualified option granted to an Employee Optionee shall be exercisable at such time or times as the Committee in its discretion may, at or prior to the time such option is granted, determine (unless otherwise extended by the Committee pursuant to Paragraphs 3(b)(2)(iii) or 4 of this Article).  In the event the Committee makes no such determination, each non-qualified option granted to an Employee Optionee shall be exercisable from time to time, in whole or in part, at any time prior to the Non-qualified Option Expiration Date.</LI>





<LI>Termination of Employment; Death.  For purposes of this Article&nbsp;II and each non-qualified option granted under this Article&nbsp;II, an Employee Optionee's employment shall be deemed to have terminated at the close of business on the day preceding the first date on which such Employee Optionee is no longer for any reason whatsoever (including the death of such Employee Optionee) employed by the Company or a subsidiary of the Company.  An Employee Optionee shall be considered to be in the employment of the Company or a subsidiary of the Company as long as such Employee Optionee remains an employee of the Company or a subsidiary of the Company, whether active or on any authorized leave of absence.  Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee and its determination shall be final and conclusive.  If an Employee Optionee's employment is terminated for any reason whatsoever (including the death of such Employee Optionee), each non-qualified option thereunto granted under this Article&nbsp;II and all rights thereunder shall wholly and completely terminate as follows: </LI>


<OL>





<LI>With respect to non-qualified options not then exercisable, at the time the Employee Optionee's employment is terminated; </LI>


<LI>With respect to non-qualified options then exercisable: </LI>


<OL TYPE="i">





<LI>At the time the Employee Optionee's employment is terminated if the Employee Optionee's employment is terminated because he is discharged for fraud, theft or embezzlement committed against the Company or a subsidiary, affiliated entity or customer of the Company, or for conflict of interest (other than legitimate competition); or </LI>


<LI>At the expiration of a period of one year after the Employee Optionee's death (but in no event later than the Non-qualified Option Expiration Date) if the Employee Optionee's employment is terminated by reason of his death.  Any such non-qualified option may be exercised by the Employee Optionee's estate or by the person or persons who acquire the right to exercise such non-qualified option by bequest or inheritance; or </LI>


<LI>Unless it is otherwise provided in the option agreement or otherwise extended in the discretion of the Committee in the event of the Employee Optionee's retirement or disability, at the expiration of a period of three years after the Employee Optionee's employment is terminated because of retirement under a Company Retirement Plan, if any, or disability (but in no event later than the Non-qualified Option Expiration Date); or </LI>


<LI>At the expiration of a period of three months after the Employee Optionee's employment is terminated (but in no event later than the Non-qualified Option Expiration Date) if the Employee Optionee's employment is terminated for any reason other than his death, retirement, disability or the reasons specified in Paragraph&nbsp;3(b)(2)(i) of this Article. </LI></OL>


</OL>





<LI>Manner of Exercise.  In order to exercise all or a portion of a non-qualified option granted under this Article&nbsp;II and certain options granted under Article&nbsp;III as described in Paragraph&nbsp;3(b) thereof, the person or persons entitled to exercise it shall deliver to the Company payment in full the shares then being purchased, together with any required withholding tax.  The payment of such exercise price and any required withholding tax shall either be in cash or through delivery to the Company of shares of Common Stock, or by any combination of cash or shares; provided that if any such shares of Common Stock so delivered were obtained through the previous exercise of any option granted under the Plan, such shares must have been held for at least six months prior to such delivery.  The value of each share of Common Stock so delivered shall be deemed to be equal to the per share price of the last sale of Common Stock on the trading day immediately preceding the date the non-qualified option is exercised, based on the transactions in the Common Stock as reported in The Wall Street Journal (or any successor publication thereto).  If the Committee so requires, such person or persons shall also deliver a written representation that all shares being purchased are being acquired for investment and not with a view to, or for resale in connection with, any distribution of such shares.  An option agreement may, in the discretion of the Committee, provide for other methods to pay for, or otherwise exercise, a non-qualified option.  An option agreement also may, in the discretion of the Committee, provide for the withholding of federal, state or local income tax upon exercise of a non-qualified option from any cash or stock remuneration (from the Plan or otherwise) then or thereafter payable by the Company to the Employee Optionee. </LI>


<LI>Option not Transferable.  Except with the express permission of the Board of Directors<B><I>,</B></I> no non-qualified option granted under this Article II shall be transferable otherwise than by will or by the laws of descent and distribution and, during the lifetime of the Employee Optionee to whom any such non-qualified option is granted, such non-qualified option shall be exercisable only by the Employee Optionee.  Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to execution, attachment or similar process, any non-qualified option granted under this Article II, or any right thereunder, contrary to the provisions hereof, shall be void and ineffective, shall give no right to the purported transferee, and shall, at the sole discretion of the Committee, result in forfeiture of the non-qualified option with respect to the shares involved in such attempt.</LI>





<LI>Adjustment of Shares.  In the event that at any time after the Effective Date the outstanding shares of Common Stock are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of merger, consolidation, recapitalization, reclassification, stock split, stock dividend, or combination of shares, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares subject to this Article&nbsp;II (including shares as to which all outstanding non-qualified options granted under this Article&nbsp;II, or portions thereof then unexercised, shall be exercisable), to the end that after such event the shares subject to this Article&nbsp;II and each Employee Optionee's proportionate interest shall be maintained as if such Employee Optionee had exercised the option before the occurrence of such event.  Such adjustment in an outstanding non-qualified option granted under this Article&nbsp;II shall be made without change in the total price applicable to such non-qualified option or the unexercised portion of such non-qualified option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustments in exercise price per share.  Any such adjustment made by the Committee shall be final, conclusive and binding upon all Employee Optionees, the Company, and all other interested persons. </LI>


<LI>Listing and Registration of Shares.  Each non-qualified option granted under this Article&nbsp;II shall be subject to the requirement that if at any time the Committee determines, in its discretion, that the listing, registration, or qualification of the shares subject to such non-qualified option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, such non-qualified option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained and the same shall have been free of any conditions not acceptable to the Committee. </LI></OL>


</OL>


</OL>





<B><P>4.&#9;AMENDMENTS.</B>  The Committee may, with the consent of the person or persons entitled to exercise any outstanding non-qualified option granted under this Article&nbsp;II, amend such non-qualified option; provided, however, that any such amendment shall be subject to stockholder approval when required in Article&nbsp;I, Paragraph&nbsp;4.  The Committee may at any time or from time to time, at its discretion, in the case of any non-qualified option previously granted under this Article&nbsp;II which is not then immediately exercisable in full, accelerate the time or times at which such option may be exercised to any earlier time or times. </P>


<B><P>5.&#9;OTHER PROVISIONS.</P>


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</B><LI>The person or persons entitled to exercise, or who have exercised, a non-qualified option granted under this Article&nbsp;II shall not be entitled to any rights as a stockholder of the Company with respect to any shares subject to such non-qualified option until he shall have become the beneficial owner of such shares. </LI>


<LI>No non-qualified option granted under this Article&nbsp;II shall be construed as limiting any right which the Company or any subsidiary of the Company may have to terminate at any time, with or without cause, the employment of any person to whom such non-qualified option has been granted. </LI>


<LI>Notwithstanding any provision of the Plan or the terms of any non-qualified option granted under this Article&nbsp;II, the Company shall not be required to issue any shares hereunder or thereunder if such issuance would, in the judgment of the Committee, constitute a violation of any state or federal law or of the rules or regulations of any governmental regulatory body. </LI></OL>


</OL>


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<B><P ALIGN="CENTER">ARTICLE III</P>


<P ALIGN="CENTER">INCENTIVE STOCK OPTIONS</P>


<P>1.&#9;ELIGIBLE EMPLOYEES.</B>  All Employee Optionees shall be eligible to receive incentive stock options under this Article&nbsp;III. </P>


<B><P>2.&#9;CALCULATION OF EXERCISE PRICE.</B>  The exercise price to be paid for each share of Common Stock deliverable upon exercise of each incentive stock option granted hereunder shall be equal to the fair market value per share of Common Stock at the time of grant as determined by the Committee, based on the transaction in the Common Stock as reported by The Wall Street Journal (or any successor publication thereto), and shall be equal to the per share price of the last sale of Common Stock on the trading day immediately proceeding the date of grant of such incentive stock option; provided, however, that in the case of an Employee Optionee who, at the time such incentive stock option is granted, owns more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation, within the meaning of Section&nbsp;422(b)(6) of the Code (a "10% Employee Optionee"), the exercise price per share shall be at least 110% of the fair market value per share of Common Stock at the time of grant.  The exercise price for each incentive stock option shall be subject to adjustment as provided in Paragraph&nbsp;3(e) of this Article. </P>


<B><P>3.&#9;TERMS AND CONDITIONS OF OPTIONS.</B>  Incentive stock options shall be in such form as the Committee may from time to time approve, shall be subject to the following terms and conditions and may contain such additional terms and conditions, not inconsistent with this Article&nbsp;III, as the Committee shall deem desirable: </P>


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<LI>Option Period and Conditions and Limitations on Exercise.  Subject to Paragraph&nbsp;4 of this Article, no incentive stock option shall be exercisable with respect to any of the shares subject to such incentive stock option later than the date which is the date determined by the Committee upon the grant thereof (the "ISO Expiration Date"), which shall be no later than ten years after the date of grant; provided, however, that in the case of any 10% Employee Optionee, the ISO Expiration Date of any incentive stock option granted thereto shall not be later than five years after the date of such grant.  To the extent not prohibited by other provisions of the Plan, each incentive stock option shall be exercisable at such time or times as the Committee in its discretion may determine at or prior to the time such incentive stock option is granted (unless otherwise extended by the Committee pursuant to Paragraph&nbsp;3(b)(2)(iii) of this Article).  In the event the Committee makes no such determination, each incentive stock option shall be exercisable from time to time, in whole or in part, subject to the monetary limitations set forth in Paragraph&nbsp;3(g) of this Article, at any time prior to the ISO Expiration Date. </LI>


<LI>Termination of Employment; Death.  For purposes of this Article&nbsp;III, and each incentive stock option granted hereunder, an Employee Optionee's employment shall be deemed to have terminated at the close of business on the day preceding the first date on which such Employee Optionee is no longer for any reason whatsoever (including the death of such Employee Optionee) employed by the Company or a subsidiary of the Company.  An Employee Optionee shall be considered to be in the employment of the Company or a subsidiary of the Company as long as such Employee Optionee remains an employee of the Company or a subsidiary of the Company, whether active or on any authorized leave of absence.  Any question as to whether and when there has been a termination of such employment and the cause of such termination, shall be determined by the Committee and its determination shall be final and conclusive.  If an Employee Optionee's employment is terminated for any reason whatsoever (including the death of such Employee Optionee), each incentive stock option thereunto granted hereunder and all rights thereunder shall wholly and completely terminate as follows: </LI>


<OL>





<LI>With respect to incentive stock options not then exercisable, at the time the Employee Optionee's employment is terminated; and </LI>


<LI>With respect to incentive stock options then exercisable:</LI>


<OL TYPE="i">





<LI>At the time the Employee Optionee's employment is terminated if his employment is terminated because he is discharged for fraud, theft or embezzlement committed against the Company or a subsidiary, affiliated entity or customer of the Company, or for conflict of interest (other than legitimate competition); or </LI>


<LI>At the expiration of a period of one year after the Employee Optionee's death (but in no event later than the ISO Expiration Date) if the Employee Optionee's employment is terminated by reason of his death.  An incentive stock option granted under this Article&nbsp;III may be exercised by the Employee Optionee's estate or by the person or persons who acquire the right to exercise such incentive stock option by bequest or inheritance; or </LI>


<LI>Unless it is otherwise provided in the option agreement or otherwise extended in the discretion of the Committee after the date which is three months after the Employee Optionee's retirement or disability, at the expiration of a period of three years after the Employee Optionee's employment is terminated because of retirement under the Retirement Plan or disability (but in no event later than the ISO Expiration Date): or </LI>


<LI>At the expiration of a period of three months after the Employee Optionee's employment is terminated (but in no event later than the ISO Expiration Date) if the Employee Optionee's employment is terminated for any reason other than his death, retirement, disability or the reasons specified in Paragraph&nbsp;3(b)(2)(i) of this Article. </LI></OL>


</OL>





<P>In the event and to the extent that an incentive stock option granted under this Article&nbsp;III is not exercised (i)&nbsp;within three months after the Employee Optionee's employment is terminated because of retirement of disability not within the meaning of section&nbsp;22(e)(3) of the Code, or (ii)&nbsp;within one year after the Employee Optionee's employment is terminated because of disability within the meaning of section&nbsp;22(e)(3) of the Code, such option shall be taxed as a non-qualified option and shall be subject to the manner of exercise provisions described in Article&nbsp;II, Paragraph&nbsp;3(c). </P>


<LI>Manner of Exercise.  In order to exercise all or a portion of an incentive stock option granted under this Article&nbsp;III, the person or persons entitled to exercise it shall deliver to the Company payment in full for the shares then being purchased.  The payment of such exercise price shall either be in cash or through delivery to the Company of shares of Common Stock, or by any combination of cash or shares; provided that if any such shares of Common Stock so delivered were obtained through the previous exercise of any option granted under the Plan, such shares must have been held for at least six months prior to such delivery.  The value of each share of Common Stock delivered shall be deemed to be equal to the per share price of the last sale of Common Stock on the trading day immediately preceding the date the incentive stock option is exercised, based on the transactions in the Common Stock as reported in The Wall Street Journal (or any successor publication thereto).  If the Committee so requires, such person or persons shall also deliver a written representation that all shares being purchased are being acquired for investment and not with a view to, or for resale in connection with, any distribution of such shares. An option agreement may, in the discretion of the Committee, provide for other methods to pay for, or otherwise exercise, an incentive stock option. An option agreement also may, in the discretion of the Committee, provide for the withholding of Federal, state or local income tax upon exercise of any incentive stock option from any cash or stock remuneration (from the Plan or otherwise) then or thereafter payable by the Company to the Employee Optionee. </LI>


<LI>Options not Transferable.  No incentive stock option shall be transferable otherwise than by will or by the laws of descent and distribution and, during the lifetime of the Employee Optionee to whom any incentive stock option is granted, such incentive stock option shall be exercisable only by such Employee Optionee.  Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to execution, attachment or similar process, any incentive stock option, or any right thereunder, contrary to the provisions hereof, shall be void and ineffective, shall give no right to the purported transferee, and shall, at the sole discretion of the Committee, result in forfeiture of the incentive stock option with respect to the shares involved in such attempt. </LI>


<LI>Adjustment of Shares.  In the event that at any time after the Effective Date the outstanding shares of Common Stock are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of merger, consolidation, recapitalization, reclassification, stock split, stock dividend, or combination of shares, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares subject to this Article&nbsp;III (including shares as to which all outstanding incentive stock options, or portions thereof then unexercised, shall be exercisable), to the end that after such event the shares subject to this Article&nbsp;III and each Employee Optionee's proportionate interest shall be maintained as if such Employee Optionee had exercised the option before the occurrence of such event.  Such adjustment in an outstanding incentive stock option shall be made without change in the total price applicable to such incentive stock option or the unexercised portion of such incentive stock option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in exercise price per share.  Any such adjustment made by the Committee shall be final, conclusive and binding upon all Employee Optionees, the Company, and all other interested persons.  Any adjustment of an incentive stock option under this Paragraph&nbsp;(e) shall be made in such manner as not to constitute a "modification" within the meaning of section&nbsp;424(h)(3) of the Code. </LI>


<LI>Listing and Registration of Shares.  Each incentive stock option shall be subject to the requirement that if at any time the Committee determines, in its discretion, that the listing, registration, or qualification of the shares subject to such incentive stock option upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, such incentive stock option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained and the same shall have been free of any conditions not acceptable to the Committee. </LI>


<LI>Limitation on Amount.  Notwithstanding any other provision of the Plan, the aggregate fair market value (determined as of the time an incentive stock option is granted, based upon the calculation of the exercise price as provided in Paragraph&nbsp;2 of this Article) of the Common Stock with respect to which incentive stock options are exercisable for the first time by an Employee Optionee, under all incentive stock option plans of the Company and its subsidiaries, during any calendar year cannot exceed $_______ or such other maximum amount permitted under section&nbsp;422(d) of the Code.  If the date on which one or more of such incentive stock options could first be exercised would be accelerated pursuant to any provision of the Plan or any option agreement, and the acceleration of such exercise date would result in a violation of the monetary restriction set forth in the preceding sentence, then, notwithstanding any such provision, but subject to the provisions of the next succeeding sentence, the exercise dates of such incentive stock options shall be accelerated only to the date or dates, if any, that do not result in a violation of such restriction and, in such event the exercise date of the incentive stock options with the lowest option prices shall be accelerated to the earliest such dates.  The Committee may, in its discretion, authorize the acceleration of the exercise date of one or more incentive stock options even if such acceleration would violate the monetary restriction set forth in the first sentence of this Paragraph&nbsp;(g) and even if such incentive stock options were thereby converted in whole or in part to non-qualified options. </LI></OL>


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</OL>





<B><P>4.&#9;AMENDMENT.</B>  The Committee may, with the consent of the person or persons entitled to exercise any outstanding incentive stock option, amend such incentive stock option; provided, however, that any such amendment shall be subject to stockholder approval when required in Article&nbsp;I, Paragraph&nbsp;4.  Subject to Paragraph&nbsp;3(g) of this Article, the Committee may at any time or from time to time, in its discretion, in the case of any incentive stock option previously granted hereunder which is not then immediately exercisable in full, accelerate the time or times at which such incentive stock option may be exercised to any earlier time or times. </P>


<B><P>5.&#9;OTHER PROVISIONS. </P><DIR>


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</B><P>(a)&#9;The person or persons entitled to exercise, or who have exercised, an incentive stock option shall not be entitled to any rights as a stockholder of the Company with respect to any shares subject to such incentive stock option until he shall have become the beneficial owner of such shares. </P>


<P>(b)&#9;No incentive stock option shall be construed as limiting any right which the Company or any subsidiary of the Company may have to terminate at any time, with or without cause, the employment of any person to whom such incentive stock option has been granted. </P>


<P>(c)&#9;Notwithstanding any provision of the Plan or the terms of any incentive stock option, the company shall not be required to issue any shares hereunder if such issuance would, in the judgment of the Committee, constitute a violation of any state or Federal law or of the rules or regulations of any governmental regulatory body. </P>


<P>(d)&#9;The Committee may require any person who exercises an incentive stock option to give prompt notice to the Company of any disposition of shares of Common Stock acquired upon exercise of an incentive stock option within one year after the transfer of shares to such person. </P></DIR>


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<B><P ALIGN="CENTER">ARTICLE IV</P>


<P ALIGN="CENTER">NON-EMPLOYEE DIRECTOR OPTIONS</P>


<P>1.&#9;ELIGIBLE PERSONS.</B>  Non-Employee Directors shall be eligible to receive options under, and solely under, this Article&nbsp;IV and any such options shall be non-qualified options.</P>


<B><P>2.&#9;INITIAL AND ANNUAL GRANTING OF NON-QUALIFIED OPTIONS TO NON-EMPLOYEE DIRECTORS.</B>  Subject to the limitation of the number of shares of Common stock set forth in Article&nbsp;I, Paragraph&nbsp;2:  (a)&nbsp;a non-qualified option to purchase shares of Common Stock may be granted to each Non-Employee Director who is a Non- Employee Director as of the close of business on the Effective Date (which date shall be the date of grant for purposes hereof), (b)&nbsp;a non-qualified option to purchase shares of Common Stock may be granted to each Non-Employee Director who is initially elected or appointed to the Board of Directors after the Effective Date and prior to the expiration of the Plan, effective on the date of his initial election or appointment (which date shall be the date of grant for purposes hereof), and (c)&nbsp;a non-qualified option to purchase shares of Common Stock may be granted annually, effective as of the anniversary date of the Effective Date in each year after the Effective Date until the expiration of the Plan, to each person who is a Non-Employee Director on each such anniversary date (which date shall be the date of grant for purposes hereof). </P>


<B><P>3.&#9;CALCULATION OF EXERCISE PRICE.</B>  The exercise price to be paid for each share of Common Stock deliverable upon exercise of each non-qualified option granted under this Article&nbsp;IV shall be equal to the fair market value per share of Common Stock at the time of grant as determined by the Committee, based on the transactions in the Common Stock as reported by The Wall Street Journal (or any successor publication thereto), and shall be equal to the per share price of the last sale of Common Stock on the trading day immediately preceding the date of grant of such non-qualified option.  The exercise price for each option granted under this Article&nbsp;IV shall be subject to adjustment as provided in Paragraph&nbsp;4(e) of this Article. </P>


<B><P>4.&#9;TERMS AND CONDITIONS OF NON-QUALIFIED OPTIONS.</B>  Subject to the provisions of Paragraph&nbsp;4 of this Article, non-qualified options granted under this Article&nbsp;IV shall be in such form as the Committee may from time to time approve.  Non-qualified options granted under this Article&nbsp;IV shall be subject to the following terms and conditions: </P>


<OL TYPE="a">


<OL TYPE="a">





<OL TYPE="a">





<LI>Option Period and Conditions and Limitations on Exercise.  Each non-qualified option granted under this Article&nbsp;IV shall be exercisable from time to time, in whole or in part, at any time after six months from the date of grant and prior to the date determined by the Committee upon the grant thereof (the "Option Expiration Date"), which shall be no later than ten years after the date of grant.</LI>


<LI>Termination of Directorship; Death.  For purposes of this Article&nbsp;IV and each non-qualified option granted under this Article&nbsp;IV, a Non-Employee Director's directorship shall be deemed to have terminated at the close of business on the day preceding the first date on which he ceases to be a member of the Board of Directors for any reason whatsoever (including the death of such Non-Employee Director).  If a Non-Employee Director's directorship is terminated for any reason (including the death of such Non-Employee Director), each non-qualified option thereunto granted under this Article&nbsp;IV and all rights thereunder shall wholly and completely terminate as follows:</LI>


<OL>





<LI>With respect to each non-qualified option granted within the six month period preceding such termination, at the time the Non-Employee Director's directorship is terminated; and</LI>


<LI>With respect to each non-qualified option granted prior to the six month period preceding such termination:</LI>


<OL TYPE="i">





<LI>At the time the Non-Employee Director's directorship is terminated if his directorship is terminated as a result of his removal from the Board of Directors for cause (other than disability); or</LI>


<LI>At the expiration of a period of one year after the Non-Employee Director's death (but in no event later than the Option Expiration Date) if the Non-Employee Director's directorship is terminated by reason of his death.  A non-qualified option granted under this Article&nbsp;IV may be exercised by the Non-Employee Director's estate or by the person or persons who acquire the right to exercise such non-qualified option by bequest or inheritance; or </LI>


<LI>At the expiration of a period of three years after the Non-Employee Director's directorship is terminated as a result of such person's resignation or removal from the Board of Director's because of disability (but in no event later than the Option Expiration Date); or </LI>


<LI>At the expiration of a period of three months after the Non-Employee Director directorship is terminated (but in no event later than the Option Expiration Date) if the Non-Employee Director's directorship is terminated for any reason other than the reasons specified in Paragraphs&nbsp;4(b)(2)(i) through 4(b)(2)(iii) of this Article. </LI></OL>


</OL>





<LI>Manner of Exercise.  In order to exercise all or a portion of a non-qualified option granted under this Article&nbsp;IV, the person, or persons entitled to exercise it shall deliver to the Company payment in full for the shares then being purchased, together with any required withholding tax.  The payment of such exercise price and any required withholding tax shall, either be in cash or through delivery to the Company of shares of Common Stock, or by any combination of cash or shares; provided that if any such shares of Common Stock so delivered were obtained through the previous exercise of any option granted under the Plan; such shares must have been held for at least six months prior to such delivery.  The value of each share of Common Stock delivered shall be deemed to be equal to the per share price of the last sale of Common Stock on the trading date immediately preceding the date the non-qualified option is exercised, based on the transactions in the Common Stock as reported in The Wall Street Journal (or any successor publication thereto).  If the Committee so requires, such person or persons shall also deliver a written representation that all shares being purchased are being acquired for investment and not with a view to, or for resale in connection with, any distribution of such shares.  An option agreement may, in the discretion of the Committee, provide for other methods to pay for, or otherwise exercise, a non-qualified option.  An option agreement also may, in the discretion of the Committee, provide for the withholding of federal, state or local income tax upon exercise of a non-qualified option from any cash or stock remuneration (from the Plan or otherwise) then or thereafter payable by the Company to the Non-Employee Director.</LI>


<LI>Non-qualified Options Not Transferable.  No non-qualified option granted under this Article&nbsp;IV shall be transferable otherwise than by will or by the laws of descent and distribution and, during the lifetime of the Non-Employee Director to whom any such non-qualified option is granted, such non-qualified option shall be exercisable only by such Non-Employee Director.  Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to execution, attachment or similar process, any non-qualified option granted under this Article&nbsp;IV, or any right thereunder, contrary to the provisions hereof, shall be void and ineffective, shall give no right to the purported transferee, and shall, at the sole discretion of the Committee, result in forfeiture of the non-qualified option with respect to the shares involved in such attempt.</LI>


<LI>Adjustment of Shares.  In the event that at any time after the effective date of the Plan the outstanding shares of Common Stock are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of merger, consolidation, recapitalization, reclassification, stock split, stock dividend, or combination of shares, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares subject to this Article&nbsp;IV (including shares as to which all outstanding non-qualified options granted under this Article&nbsp;IV, or portions thereof then unexercised, shall be exercisable), to the end that after such event the shares subject to this Article&nbsp;IV of the Plan and each Non-Employee Director's proportionate interest shall be maintained as if such Non-Employee Director had exercised the option before the occurrence of such event.  Such adjustment in an outstanding non-qualified option granted under this Article&nbsp;IV shall be made without change in the total price applicable to the non-qualified option or the unexercised portion of the non-qualified option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in exercise price per share.  Any such adjustment made by the Committee shall be final, conclusive and binding upon all Non-Employee Directors, the Company, and all other interested persons. </LI>


<LI>Listing and Registration of Shares.  Each non-qualified option granted under this Article&nbsp;IV shall be subject to the requirement that if at any time the Committee determines, in its discretion, that the listing, registration, or qualification of the shares subject to such non-qualified option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue or purchase of shares thereunder, such non-qualified option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained and the same shall have been free of any conditions not acceptable to the Committee.</LI></OL>


</OL>


</OL>





<B><P>5.&#9;AMENDMENT.</B>  The Committee may, with the consent of the person or persons entitled to exercise any outstanding non-qualified option granted under this Article&nbsp;IV, amend such non-qualified option; provided, however, that any such amendment shall be subject to stockholder approval when required in Article&nbsp;I, Paragraph&nbsp;4.</P>





<P>&nbsp;</P>


<B><P>6.&#9;OTHER PROVISIONS.</P><DIR>


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<DIR>


<DIR>





</B><P>a.&#9;The person or persons entitled to exercise, or who have exercised, a non-qualified option granted under this Article&nbsp;IV shall not be entitled to any rights as a stockholder of the Company with respect to any shares subject to such non-qualified option until he shall have become the beneficial owner of such shares.</P>


<P>b.&#9;No non-qualified option granted under this Article&nbsp;IV shall be construed as limiting any right which either the stockholders of the Company or the Board of Directors may have to remove at any time, with or without cause, any Non-Employee Director to whom such non-qualified option has been granted from the Board of Directors.</P>


<P>c.&#9;Notwithstanding any provision of the Plan or the terms of any non-qualified option granted under this Article&nbsp;IV, the Company shall not be required to issue any shares hereunder if such issuance would, in the judgment of the Committee, constitute a violation of any state or Federal law or of the rules or regulations or any governmental regulatory body.</P>


<P>d.&#9;Notwithstanding any provision of the Plan, the Committee may not exercise any discretion with respect to this Article&nbsp;IV which would be inconsistent with the intent that (i)&nbsp;the Plan meet the requirements of Rule&nbsp;16b-3 and (ii) any Non-Employee Director who is eligible to receive a grant or to whom a grant is made pursuant this Article&nbsp;IV will not for such reason cease to be a "disinterested person" within the meaning of such Rule&nbsp;16b-3 with respect to the Plan and other stock related plans of the Company or any of its affiliates.  Specifically, in the e-vent of a Corporate Change, as defined in Article I, Paragraph 11, the Committee may, with respect to non-qualified options under this Article IV, only exercise the alternative in clause (2) of Article I, Paragraph 11, or such other alternatives specified in Article I, Paragraph 11 as would not, in the opinion of legal counsel of the Company, violate the limitations contained in the immediately preceding sentence. If any Plan provision is found not to be in compliance with Rule 16b-3 or if any Plan provision would disqualify any Non-Employee Director from remaining a "disinterested person, " that provision shall be deemed amended so that the Plan does so comply and the Plan participants remain disinterested, to the extent permitted by law and deemed advisable by the Committee, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. </P></DIR>


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