MAI SYSTEMS CORP
EXHIBIT 10.1
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<TYPE>EX-10.1
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<FILENAME>a80418ex10-1.txt
<DESCRIPTION>EXHIBIT 10.1
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                                                                    EXHIBIT 10.1



                             MAI SYSTEMS CORPORATION

                             1993 STOCK OPTION PLAN

                                    ARTICLE I

                                    PURPOSES

        1.1. PURPOSE OF PLAN. The purposes of the MAI Systems Corporation 1993
Stock Option Plan (the "Plan") are to advance the interests of MAI Systems
Corporation (the "Company") and its shareholders by providing significant
incentives to selected officers and key employees of the Company who contribute
and are expected to contribute to the success of the Company, and to enhance the
interest of such officers and employees in the Company's success and progress by
providing them with an opportunity to become shareholders of the Company.
Further, the Plan is designed to enhance the Company's ability to attract and
retain qualified employees necessary for the success and progress of the
Company.

                                   ARTICLE II

                                   DEFINITIONS

        2.1. DEFINITIONS. Certain terms used herein shall have the meaning below
stated, subject to the provisions of Section 7.1 hereof.

               (a) "Board" or "Board of Directors" means the Board of Directors
        of the Company.

               (b) "Code" means the Internal Revenue Code of 1986, as amended.

               (c) "Committee" means either (i) the Board of Directors or (ii)
        the Compensation Committee of the Board of Directors or such other
        committee of the Board as shall be appointed by the Board to administer
        the Plan pursuant to Article VII hereof.

               (d) "Common Stock" means, subject to the provisions of Section
        9.3, the authorized common stock of the Company, par value $.01 per
        share.

               (e) "Company" means MAI Systems Corporation.

               (f) "Effective Date" means the date on which the Company's plan
        of reorganization is confirmed by the Bankruptcy Court.

               (g) "Employee" means an officer or other common law employee of
        the Company or a Subsidiary, including a member of the Board who is also
        a common law employee (such term also includes consultants and other
        persons to the extent permitted by the instructions to Form S-8 under
        the Securities Act of 1993, as amended).

               (h) "Fair Market Value" means, in respect of a share of Common
        Stock on any date, the last reported sales price regular way on such
        date or, in case no such reported sale takes place on such date, the
        last reported sales price regular way on the day preceding such date on
        which a reported sale occurred, in either case on the New York Stock
        Exchange or, if at the time the Common Stock is not listed or admitted
        to trading on such Exchange, on the principal national securities
        exchange on which the Common Stock is listed or admitted to trading or,
        if at the time the Common Stock is not listed or admitted to trading on
        any national securities exchange, in the National Association of
        Securities Dealers Automated Quotations National Market System or, if at
        the time the Common Stock is not listed or admitted to trading on any
        national securities exchange or quoted on such National Market System,
        the average of the closing bid and asked prices in the over-the-counter
        market as furnished by any New York Stock Exchange member firm selected
        from time to time by the Company for that purpose or, if the Common
        Stock is not traded over-the-counter, as determined by the Committee
        using any reasonable valuation method.

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               (i) "Incentive Stock Option" means an Option to purchase Common
        Stock, granted by the Company to an Employee pursuant to Section 5.1
        hereof, which meets the requirements of Section 422 of the Code.

               (j) "Nonstatutory Stock Option" means and Option to purchase
        Common Stock, granted by the Company to an Employee pursuant to Section
        5.1 hereof, which does not meet the requirements of Section 422 of the
        Code or which provides, as of the time the Option is granted, that it
        will not be treated as an Incentive Stock Option.

               (k) "Option" means an Incentive Stock Option or a Nonstatutory
        Stock Option.

               (l) "Option Agreement" means an agreement between the Company and
        an Optionee evidencing the terms of an Option Granted under the Plan.

               (m) "Optionee" means an Employee to whom an Option has been
        granted under the Plan.

               (n) "Plan" means the MAI Systems Corporation 1993 Stock Option
        Plan, as set forth herein and as from time to time amended.

               (o) "Subsidiary" means a subsidiary of the Company within the
        meaning of Section 424(f) of the Code.

                                   ARTICLE III

                EFFECTIVE DATE OF THE PLAN; RESERVATION OF SHARES

        3.1. EFFECTIVE DATE. The Plan shall become effective as of the Effective
Date.

        3.2. SHARES RESERVED UNDER PLAN. The aggregate number of shares of
Common Stock which may be issued upon the exercise of Options granted under the
Plan shall not exceed 2,500,000 of the authorized shares of Common Stock on the
Effective Date, all or any part of which may be issued pursuant to Incentive
Stock Options or Nonstatutory Stock Options or any combination thereof. Shares
of Common Stock issued upon the exercise of Options granted under the Plan may
consist of either authorized but unissued shares or shares which have been
issued and which shall have been reacquired by the Company. The total number of
shares authorized under the Plan shall be subject to increase or decrease in
order to give effect to the provisions of Section 9.3 and to give effect to any
amendment adopted pursuant to Article VIII. If any Option granted under the Plan
shall expire, terminate or be cancelled for any reason without having been
exercised in full, the number of shares as to which such Option was not
exercised shall again be available for purposes of the Plan. The Company shall
at all times while the Plan is in effect reserve such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.

                                   ARTICLE IV

                              PARTICIPATION IN PLAN

        4.1. ELIGIBILITY. Options under the Plan may be granted to any key
Employee of the Company or a Subsidiary who performs services for the Company or
a Subsidiary that the Committee deems to be of special importance to the growth
and success of the Company. The Committee shall determine those Employees to
whom Options shall be granted, the type of Option to be granted to each such
person, and, subject to Section 3.2 hereof, the number of shares of Common Stock
subject to each such Option.

        4.2. PARTICIPATION NOT GUARANTEE OF EMPLOYMENT OR RETENTION. Nothing in
this Plan or in any Option Agreement shall in any manner be construed to limit
in any way the right of the Company or any Subsidiary to terminate an Employee's
employment at any time, without regard to the effect of such termination on any
rights such Employee would otherwise have under this Plan, or give any right to
an Employee to remain employed by the Company or a Subsidiary thereof in any
particular position or at any particular rate of compensation.


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                                    ARTICLE V

                          GRANT AND EXERCISE OF OPTIONS

        5.1. GRANT OF OPTIONS. The Committee may from time to time in its
discretion grant Incentive Stock Options and/or Nonstatutory Stock Options to
Employees at any time after the Effective Date. All Options under the Plan shall
be granted within ten (10) years from the date the Plan is adopted by the Board
or the date the Plan is approved by the stockholders of the Company, whichever
is earlier.

        5.2. OPTION TERMS. Options granted under the Plan shall be subject to
the following requirements:

               (a) Option Price. The exercise price of each Incentive Stock
        Option shall not be less than the higher of the par value or 100% of the
        Fair Market Value of the shares of Common Stock subject to the Option on
        the date the Option is granted. The exercise price of each Nonstatutory
        Stock Option shall be the amount determined by the Committee as set
        forth in the applicable Option Agreement, provided that such amount
        shall not be less than the higher of the par value or 85% of the Fair
        Market Value of the shares of Common Stock subject to the Option on the
        date the Option is granted. The exercise price of an Option may be
        subject to adjustment pursuant to Section 9.3 hereof.

               (b) Term of Option. The term during which an Option is
        exercisable shall be that period determined by the Committee as set
        forth in the applicable Option Agreement, provided that no Option shall
        have a term that exceeds a period of 10 years from the date of its
        grant.

               (c) Nontransferability of Option. No Option granted under the
        Plan shall be transferable by the Optionee otherwise than by will or the
        laws of descent and distribution, and each such Option shall be
        exercisable during the Optionee's lifetime only by him. No transfer of
        an Option by an Optionee by will or by the laws of descent and
        distribution shall be effective to bind the Company unless the Company
        shall have been furnished with written notice thereof and a copy of the
        will and/or such other evidence as the Committee may determine necessary
        to establish the validity of the transfer.

               (d) Exercise of Option. Unless the Option Agreement pursuant to
        which an Option is granted provides otherwise, each Option shall become
        exercisable, on a cumulative basis, with respect to 20% of the aggregate
        number of the shares of Common Stock covered thereby on the first
        anniversary of the date of grant and with respect to an additional 20%
        of the shares of Common Stock covered thereby on each of the next four
        succeeding anniversaries of the date of grant. Any portion of an Option
        which has become exercisable shall remain exercisable until it is
        exercised in full or terminates pursuant to the terms of the Plan or the
        Option Agreement pursuant to which it is granted.

               (e) Acceleration of Exercise on Change of Control.
        Notwithstanding the provisions of paragraph (d) of this Section or any
        other restrictions limiting the number of shares of Common Stock as to
        which an Option may be exercised, each Option shall become immediately
        exercisable in full upon and simultaneously with any "Change of Control"
        of the Company. For purposes of this Plan, a "Change of Control" shall
        be deemed to have occurred if:

                      (i) any "person," as such term is used in Sections 13(d)
               and 14(d) of the Securities Exchange Act of 1934, as amended (the
               "Exchange Act") (other than the Company, any employee benefit
               plan sponsored by the Company, any trustee or other fiduciary
               holding securities under an employee benefit plan of the Company,
               or any corporation owned, directly or indirectly, by the
               stockholders of the Company in substantially the same proportions
               as their ownership of stock of the Company), is or becomes the
               "beneficial owner" (as defined in Rule 13d-3 under the Exchange
               Act), directly or indirectly, of securities of the Company
               representing 50% or more of the combined voting power of the
               Company's then outstanding securities;

                      (ii) during any period of two consecutive years
               individuals who at the beginning of such period constitute the
               Board, and any new director (other than a director designated by
               a person who has entered into an agreement with the Company to
               effect a transaction described in clause (i), (iii) or


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               (iv) of this Section) whose election by the Board of nomination
               for election by the Company's stockholders was approved by a vote
               of at least two-thirds (2/3) of the directors then still in
               office who either were directors at the beginning of the period
               or whose election or nomination for election was previously so
               approved cease for any reason to constitute at least a majority
               thereof;

                      (iii) the stockholders of the Company approve a merger or
               consolidation of the Company with any other corporation, other
               than a merger or consolidation which would result in the voting
               securities of the Company outstanding immediately prior thereto
               continuing to represent (either by remaining outstanding or by
               being converted into voting securities of the surviving entity)
               more than 50% of the combined voting power of the voting
               securities of the Company or such surviving entity outstanding
               immediately after such merger or consolidation; or

                      (iv) the stockholders of the Company approve a plan of
               complete liquidation of the Company or an agreement for the sale
               or disposition by the Company of all or substantially all of the
               Company's assets. For the purposes of this subsection (iv),
               "substantially all" of the Company's assets shall mean any of the
               following:

                             (A) assets for which the price or consideration
                      upon sale or disposition equals or exceeds fifty percent
                      (50%) or more of the book value of the total assets of the
                      Company;

                             (B) assets for which the price or consideration
                      upon sale or disposition equals or exceeds fifty percent
                      (50%) or more of the fair market value of the Company
                      (which for purposes of this subsection (iv) shall be the
                      number of shares of voting securities outstanding on the
                      date on which the change of control of the Company is
                      deemed to occur multiplied by the Fair Market Value of
                      said securities; or

                             (C) assets that generated fifty percent (50%) or
                      more of the Company's reported net sales or net income in
                      either of the two (2) taxable years ended prior to the
                      date on which the change of control of the Company is
                      deemed to occur.

               Notwithstanding the foregoing provisions of this Section 5.3(e),
               as long as Brooke Group, Ltd. (BGL) and/or any affiliate thereof
               shall own stock of the Company representing 50% or more of the
               combined voting power for the election of directors, (x) the
               beneficial ownership of such stock by BGL and/or any affiliate,
               and (y) any acquisition of additional voting stock by BGL and/or
               any affiliate shall not constitute a Change of Control.

        (f) Incentive Stock Options Granted to Ten Percent Shareholders. No
Incentive Stock Options shall be granted to any Employee who owns, directly or
indirectly within the meaning of Section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary, unless at the time the Incentive Stock Option is
granted, the exercise price of the Incentive Stock Option is at least 110% of
the Fair Market Value of the Common Stock subject to such Incentive Stock Option
and such Incentive Stock Option, by its terms, is not exercisable after the
expiration of five years from the date such Incentive Stock Option is granted.

        (g) Limitation on Incentive Stock Options. To the extent that the
aggregate Fair Market Value of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by an Optionee during any
calendar year (under all plans of the Company and its parent and subsidiary
corporations) exceeds $100,000, such Options shall be treated as Nonstatutory
Options. For this purpose, Options shall be taken into account in the order in
which they were granted and the Fair Market Value of the Common Stock shall be
determined as of the time the Option with respect to such Common Stock is
granted.

        5.3. PAYMENT OF EXERCISE PRICE AND DELIVERY OF SHARES.

        (a) Notice and Payment for Shares. Each Option shall be exercised by
delivery of a written notice to the Company in such form as the Committee shall
approve stating the number of the whole shares of Common Stock as to which the
Option is being exercised and accompanied by payment therefor. No Option shall
be deemed exercised in


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the event that payment therefor is not received and shares of Common Stock shall
not be issued upon the exercise of an Option unless the exercise price is paid
in full. Payment for shares of Common Stock purchased upon the exercise of an
Option shall be made by (i) cash, (ii) certified check payable to the order of
the Company, (iii) outstanding shares of Common Stock duly endorsed to the
Company (which shares of Common Stock shall be valued at their Fair Market Value
as of the day preceding the date of such exercise), (iv) any combination of the
foregoing, or (v) such other method of payment as may be provided in the
applicable Option Agreement.

        (b) Rights of Optionee in Stock. Neither any Optionee nor the legal
representatives, heirs, legatees or distributees of any Optionee, shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock issuable upon exercise of an Option
granted hereunder unless and until such shares are issued to him or them and
such person or persons have received a certificate or certificates therefor.
Upon the issuance and receipt of such certificate or certificates, such Optionee
or the legal representatives, heirs, legatees or distributees of such Optionee
shall have absolute ownership of the shares of Common Stock evidenced thereby,
including the right to vote such shares, to the same extent as any other owner
of shares of Common Stock, and to receive dividends thereon, subject, however,
to the terms, conditions and restrictions of this Plan.

                                   ARTICLE VI

                              TERMINATION AND DEATH

        6.1. TERMINATION OTHER THAN BY DEATH OR FOR CAUSE. If an Optionee's
position as an Employee of the Company or a Subsidiary terminates for any reason
other than death or for Cause (as defined in Section 6.2) he may, unless the
applicable Option Agreement provides otherwise, exercise an Option previously
granted within three months after the date of such termination, but in no event
later than the date on which the Option would have expired in accordance with
its terms. To the extent the Option is not so exercised, it shall expire at the
end of such three-month period.

        6.2. TERMINATION FOR CAUSE. If an Optionee's position as an Employee of
the Company or a Subsidiary is terminated for Cause, any Option theretofore
granted to him shall expire and cease to be exercisable on the date notice of
such termination is delivered to the Optionee. "Cause" shall mean (a) the
willful and continued failure by an Optionee to substantially perform his duties
with the Company (other than any such failure resulting from his incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Optionee by the Board, which demand specifically
identifies the manner in which the Board believes that the Optionee has not
substantially performed his duties, or (b) the willful engaging by the Optionee
in conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this Section 6.2, no act, or failure to
act, shall be deemed "willful" unless done, or omitted to be done, not in good
faith and without reasonable belief that such action or omission was in the best
interest of the Company.

        6.3. DEATH. If an Optionee dies (i) while he is an Employee of the
Company or a Subsidiary or (ii) during the three-month period after the
termination of his position as an Employee of the Company or a Subsidiary, and
at the time of his death the Optionee was entitled to exercise an Option
theretofore granted to him, such Option shall, unless the applicable Option
Agreement provides otherwise, expire one year after the date of his death, but
in no event later than the date on which the Option would have expired if the
Optionee had lived. During such one-year period the Option may be exercised by
the Optionee's executor or administrator or by any person or persons who shall
have acquired the Option directly from the Optionee by bequest or inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of his death and, to the extent the Option is not so exercised, it
shall expire at the end of such one-year period.

                                   ARTICLE VII

                             ADMINISTRATION OF PLAN

        7.1. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors or such other committee as may be appointed
by the Board of Directors of the Company, which Committee shall consist of not
less than two members, all of whom are members of the Board of Directors. A
majority of the Committee shall constitute a quorum thereof and the actions of a
majority of the Committee at a meeting at which a


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quorum is present, or actions unanimously approved in writing by all members of
the Committee, shall be the actions of the Committee. Vacancies occurring on the
Committee shall be filled by the Board. The Committee shall have full and final
authority (i) to interpret the Plan and each of the Option Agreements, (ii) to
prescribe, amend and rescind rules and regulations, if any, relating to the
Plan, (iii) to make all determinations necessary or advisable for the
administration of the Plan and (iv) to correct any defect, supply any omission
and reconcile any inconsistency in the Plan and any Option Agreement. The
Committee's determination in all matters referred to herein shall be conclusive
and binding for all purposes and upon all persons including, but without
limitation, the Company, the shareholders of the Company, the Committee, and
each of the members thereof, Employees and their respective successors in
interest.

        7.2. LIABILITY. No member of the Committee shall be liable for anything
done or omitted to be done by him or by any other member of the Committee in
connection with the Plan, except for his own willful misconduct or gross
negligence. The Committee shall have power to engage outside consultants,
auditors or other professional help to assist in the fulfillment of the
Committee's duties under the Plan at the Company's expense.

        7.3. DETERMINATIONS. In making its determinations concerning the key
Employees who shall receive Options as well as the number of shares to be
covered thereby and the time or times at which they shall be granted, the
Committee shall take into account the nature of the services rendered by such
key Employees, their past, present and potential contribution to the Company's
success and such other factors as the Committee may deem relevant. The Committee
shall determine the form of Option Agreements under the Plan and the terms and
conditions to be included therein, provided such terms and conditions are not
inconsistent with the terms of the Plan. The Committee may waive any provisions
of any Option Agreement, provided such waiver is not inconsistent with the terms
of the Plan as then in effect. The Committee's determinations under the Plan
need not be uniform and may be made by it selectively among persons who receive,
or are eligible to receive, Options under the Plan, whether or not such persons
are similarly situated.

                                  ARTICLE VIII

                        AMENDMENT AND TERMINATION OF PLAN

        8.1. AMENDMENT OF PLAN. (a) Generally. The Plan may be amended at any
time and from time to time by the Board, but, except as provided by Section 9.3,
no amendment which (i) increases the aggregate number of shares of Common Stock
which may be issued pursuant to Options granted under the Plan, (ii) decreases
the minimum Incentive Stock Option exercise price provided in the Plan, (iii)
extends the period during which Options may be granted pursuant to the Plan,
(iv) changes the class of individuals eligible to the granted Options, (v)
materially increases the benefits provided by the Plan, or (vi) has the effect
of any of the above shall be effective unless and until the same is approved by
the affirmative vote of the holders of a majority of the outstanding shares of
the Company's voting stock, either in person or by proxy, in accordance with the
applicable provisions of the charter and bylaws of the Company and applicable
State law. No amendment to the Plan shall, without the consent of an Optionee,
affect such Optionee's rights under an Option previously granted.

        (b) Amendments Relating to Incentive Stock Options. To the extent
applicable, the Plan is intended to permit the issuance of Incentive Stock
Options to Employees in accordance with the provisions of Section 422 of the
Code. Subject to paragraph 8.1(a) above, the Plan and Option Agreements may be
modified or amended at any time, both prospectively and retroactively, and in a
manner that may affect Incentive Stock Options previously granted, if such
amendment or modification is necessary for the Plan and Incentive Stock Options
granted hereunder to qualify under said provisions of the Code.

        8.2. TERMINATION. The Board may at any time terminate the Plan as of any
date specified in a resolution adopted by the Board. If not earlier terminated,
the Plan shall terminate on June 27, 2003. No Options may be granted after the
Plan has terminated, but the Committee shall continue to supervise the
administration of Options previously granted.


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                                   ARTICLE IX

                            MISCELLANEOUS PROVISIONS

        9.1. RESTRICTIONS UPON GRANT OF OPTIONS. If the listing upon any stock
exchange or the registration or qualification under any federal or state law of
any shares of Common Stock to be issued on the exercise of Options granted under
this Plan (whether to permit the grant of Options or the resale or other
disposition of any such shares of Common Stock by or on behalf of Optionees
receiving such shares) should be or become necessary or desirable, the Board in
its sole discretion may determine that delivery of the certificates for such
shares of Common Stock shall not be made until such listing, registration or
qualification shall have been completed. The Company agrees that it will use its
best efforts to effect any such listing, registration or qualification,
provided, however, that the Company shall not be required to use its best
efforts to effect such registration under the Securities Act of 1933 other than
on Form S-8 or such other forms as may be in effect from time to time calling
for information comparable to that presently required to be furnished under Form
S-8.

        9.2. RESTRICTIONS UPON RESALE OF UNREGISTERED STOCK. Each Optionee
shall, if the Company deems it advisable, represent and agree in writing (i)
that any shares of Common Stock acquired by such Optionee pursuant to this Plan
will not be sold except pursuant to an effective registration statement under
the Securities Act of 1933 or pursuant to an exemption from registration under
said Ac, (ii) that such Optionee is acquiring such shares of Common Stock for
his own account and not with a view to the distribution thereof, and (iii) to
such other customary matters as the Company may request. In such case, no shares
of Common Stock shall be issued to such Optionee unless such Optionee provides
such representations and agreements and the Company is reasonably satisfied that
such representations and agreements are correct.

        9.3. ADJUSTMENTS. The number of shares of Common Stock of the Company
authorized for issuance under the Plan, as well as the price to be paid and the
number of shares issued upon exercise of outstanding Options, shall be subject
to adjustment by the Committee, in its sole discretion, to reflect any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other similar event.

        9.4. WITHHOLDING OF TAXES. (a) Each Optionee who exercises a
Nonstatutory Stock Option shall agree that no later than the date of such
exercise or receipt of shares of Common Stock pursuant thereto he will pay to
the Company, or make arrangements satisfactory to the Committee regarding
payment of, any Federal, state or local taxes of any kind required by law to be
withheld with respect to the transfer to him of such shares of Common Stock.

        (b) The applicable Option Agreement may provide that an Optionee may
satisfy, in whole or in part, the requirements of paragraph (a):

               (i) by delivery of shares of Common Stock owned by the Optionee
        for at least six months (or such shorter or longer period as the
        Committee may approve) having a Fair Market Value (determined as of the
        date of such delivery) equal to all or part of the amount to be so
        withheld, or

               (ii) by electing to have the Company withhold the requisite
        number of shares from shares otherwise deliverable pursuant to the
        exercise of the Option giving rise to the tax withholding obligation
        provided, however, that

                      (A) the Optionee's election and the withholding pursuant
               thereto take effect during the period beginning on the third
               business day following the date of release for publication of the
               quarterly and annual summary statements of the Company's sales
               and earning's and ending on the twelfth business day following
               such date, and six months have elapsed since the date the Option
               was granted, or

                      (B) such election was irrevocably made by the Optionee and
               filed with the Committee in writing at least six months in
               advance of the date on which such withholding occurs.

The Committee may require, as a condition of accepting any such delivery of
Common Stock or any such election by the Optionee, that the Optionee furnish to
the Company an opinion of counsel to the effect that such delivery or


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election will not result in the Optionee incurring any liability under Section
16(b) of the Securities Exchange Act of 1934, as amended.

        9.5. USE OF PROCEEDS. The proceeds from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Company and may be used for such corporate purposes as the Company may
determine.

        9.6. SUBSTITUTION OF OPTIONS. (a) The Committee may, with the consent of
the holder of any Option granted under the Plan, cancel such Option and grant a
new Option in substitution therefor, provided that the Option as so substituted
shall satisfy all of the requirements of the Plan as of the date such new Option
is granted.

        (b) Options may be granted under this Plan in substitution for options
held by individuals who are employees of another corporation and who become
Employees of the Company or any Subsidiary of the Company eligible to receive
Options pursuant to the Plan as a result of a merger, consolidation,
reorganization or similar event. The terms and conditions of any Options so
granted may vary from those set forth in the Plan to the extent deemed
appropriate by the Committee in order to conform the provisions of Options
granted pursuant to the Plan to the provisions of the options in substitution
for which they are granted.

        (c) Notwithstanding the foregoing, Options granted under this Plan may
not be replaced or repriced unless all of the following conditions are met:

               (i) The substitution or repricing is authorized by a compensation
committee composed entirely of independent directors to fulfill a legitimate
corporate purpose such as retention of a key employee;

               (ii) The substitution or repricing is not utilized more often
than once every two (2) years and then only to maintain option value due to
extreme circumstances beyond management's control; and

               (iii) The substitution or repricing is limited to no more than
five percent (5%) of the shares authorized for issuance under the Plan.

        9.7. NOTICES. Any notice required or permitted hereunder shall be
sufficiently given only if sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company at its principal place of
business, and to the Optionee at the address on file with the Company at the
time of grant hereunder, or to such other address as either party may hereafter
designate in writing by notice similarly given by one party to the other.

        9.8. GOVERNING LAW. The Plan and all determinations made and actions
taken hereunder, to the extent not otherwise governed by the Code or the laws of
the Untied States of America, shall be governed by the laws of the State of
California and construed accordingly.


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