ELECTRO SCIENTIFIC INDUSTRIES INC
EX-10.1
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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT 10.1</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ELECTRO
SCIENTIFIC INDUSTRIES, INC.</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">2000 STOCK
OPTION INCENTIVE PLAN</font></b></p>

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<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Purpose</font></b>.&#160; The
purpose of this Stock Option Incentive Plan (the &#147;Plan&#148;) is to enable Electro
Scientific Industries, Inc. (the &#147;Company&#148;) to attract and retain the services
of selected employees, officers and directors of the Company or any parent or
subsidiary of the Company.&#160; For purposes
of this Plan, a person is considered to be employed by or in the service of the
Company if the person is employed by or in the service of the Company or any
parent or subsidiary of the Company (an &#147;Employer&#148;).</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Shares Subject
to the Plan</font></b>.&#160; Subject to adjustment as provided below and
in Section 7, the shares to be offered under the Plan shall consist of Common
Stock of the Company, and the total number of shares of Common Stock that may
be issued under the Plan shall be 2,000,000 shares plus any shares that are
available for grant under the Company&#146;s 1989 Stock Option Plan as in effect
June 23, 2000 (the &#147;1989 Plan&#148;) or that may subsequently become available for
grant under the 1989 Plan through the expiration, termination, forfeiture or
cancellation of grants.&#160; If an option
granted under the Plan expires, terminates or is cancelled, the unissued shares
subject to that option shall again be available under the Plan.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Effective Date
and Duration of Plan</font></b>.</p>

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<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Effective Date.</font></i></b>&#160;
The Plan shall become effective as of June 23, 2000.&#160; No Incentive Stock Option (as defined in
Section 5 below) granted under the Plan shall become exercisable, however,
until the Plan is approved by the affirmative vote of the holders of a majority
of the shares of Common Stock represented at a shareholders meeting at which a
quorum is present, and the exercise of any Incentive Stock Options granted
under the Plan before approval shall be conditioned on and subject to that
approval.&#160; Subject to this limitation,
options may be granted under the Plan at any time after the effective date and
before termination of the Plan.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Duration.</font></i></b>&#160; The
Plan shall continue in effect until all shares available for issuance under the
Plan have been issued.&#160; The Board of
Directors may suspend or terminate the Plan at any time except with respect to
options then outstanding under the Plan.&#160;
Termination shall not affect any outstanding options.</font></p>

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<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Administration</font></b>.</p>

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<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Board of Directors.</font></i></b>&#160;
The Plan shall be administered by the Board of Directors of the Company,
which shall determine and designate the individuals to whom awards shall be
made, the amount of the awards and the other terms and conditions of the
awards.&#160; Subject to the provisions of
the Plan, the Board of Directors may adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any waiting period,
accelerate any exercise date and make all other determinations in the judgment
of the Board of Directors necessary or desirable for the administration of the
Plan.&#160; The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive.&#160;
The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it deems expedient to carry the Plan into effect, and
the Board of Directors shall be the sole and final judge of such expediency.</font></p>

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<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Committee.</font></i></b>&#160; The
Board of Directors may delegate to any committee of the Board of Directors (the
&#147;Committee&#148;) any or all authority for administration of the Plan.&#160; If authority is delegated to the Committee,
all references to the Board of Directors in the Plan shall mean and relate to
the Committee, except (i)&nbsp;as otherwise provided by the Board of Directors
and (ii)&nbsp;that only the Board of Directors may amend or terminate the Plan
as provided in Sections 3 and 9.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Officers.&#160; </font></i></b>The
Board of Directors may delegate to any officer or officers of the Company
authority to grant awards under the Plan, subject to any restrictions imposed
by the Board of Directors.</font></p>

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<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Types of
Awards, Eligibility, Limitations</font></b>.&#160; The Board of Directors may,
from time to time, take the following action, separately or in combination,
under the Plan:&#160; (i)&nbsp;grant
Incentive Stock Options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the &#147;Code&#148;), as provided in Sections 6(a) and 6(b) and
(ii)&nbsp;grant options other than Incentive Stock Options (&#147;Non-Statutory
Stock Options&#148;) as provided in Sections 6(a) and 6(c).&#160; Awards may be made to employees, including
employees who are officers or directors selected by the Board of Directors, and
directors of the Company or any parent or subsidiary of the Company; provided<i><font style="font-style:italic;">, </font></i>however,
that only employees of the Company or any parent or subsidiary of the Company
(as defined in subsections 424(e) and 424(f) of the Code) are eligible to
receive Incentive Stock Options under the Plan.&#160; The Board of Directors shall select the individuals to whom
awards shall be made and shall specify the action taken with respect to each
individual to whom an award is made.&#160; At
the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award.&#160; No employee may be granted options for more
than an aggregate of 500,000 shares of Common Stock in any calendar year;
provided, however, that to the extent the annual limitation is not fully used
in any year for an employee, any shares not used may be added to the number of
shares for which options may be granted to that employee in any future year.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Option Grants</font></b>.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160; <b><i><font style="font-style:italic;font-weight:bold;">General Rules Relating to Options.</font></i></b></font></p>

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<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160; <b><font style="font-weight:bold;">Terms of
Grant</font></b>.&#160; The Board of
Directors may grant options under the Plan.&#160;
With respect to each option grant, the Board of Directors shall
determine the number of shares subject to the option, the exercise price, the
period of the option, the time or times at which the option may be exercised
and whether the option is an Incentive Stock Option or a Non-Statutory Stock
Option.&#160; At the time of the grant of an
option or at any time thereafter, the Board of Directors may provide that an
optionee who exercised an option with Common Stock of the Company shall
automatically receive a new option to purchase additional shares equal to the
number of shares surrendered and may specify the terms and conditions of such
new options.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160; <b><font style="font-weight:bold;">Exercise of
Options</font></b>.&#160; Except as provided
in Section 6(a)(iv) or as determined by the Board of Directors, no option
granted under the Plan may be exercised unless at the time of exercise the
optionee is employed by or in the service of the Company and shall have been so
employed or provided such service continuously since the date the option was
granted.&#160; Except as provided in Sections
6(a)(iv) and 7, options granted under the Plan may be exercised from time to
time over the period stated in each option in amounts and at times prescribed
by the Board of Directors, provided that options may not be exercised for
fractional shares.&#160; Unless otherwise
determined by the Board of Directors, if an optionee does not exercise an
option in any one year for the full number of shares to which the optionee is
entitled in that year, the optionee&#146;s rights shall be cumulative and the
optionee may purchase those shares in any subsequent year during the term of
the option.</font></p>

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<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160; <b><font style="font-weight:bold;">Nontransferability</font></b>.&#160; Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors, each other option granted under
the Plan by its terms (i) shall be nonassignable and nontransferable by the
optionee, either voluntarily or by operation of law, except by will or by the
laws of descent and distribution of the state or country of the optionee&#146;s
domicile at the time of death, and (ii) during the optionee&#146;s lifetime, shall
be exercisable only by the optionee.</font></p>

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<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160; <b><font style="font-weight:bold;">Termination
of Employment or Service</font></b>.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(A) &#160;<b><font style="font-weight:bold;">General Rule</font></b>.&#160; Unless otherwise determined by the Board of
Directors, if an optionee&#146;s employment or service with the Company terminates
for any reason other than because of total disability or death as provided in
Sections 6(a)(iv)(B) and (C), his or her option may be exercised at any time
before the expiration date of the option or the expiration of three months
after the date of termination, whichever is the shorter period, but only if and
to the extent the optionee was entitled to exercise the option at the date of
termination.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(B)&#160; <b><font style="font-weight:bold;">Termination
Because of Total Disability</font></b>.&#160;
Unless otherwise determined by the Board of Directors, if an optionee&#146;s
employment or service with the Company terminates because of total disability,
his or her option may be exercised at any time before the expiration date of
the option or before the date 12 months after the date of termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of termination.&#160; The&nbsp;term &#147;total disability&#148; means a
medically determinable mental or physical impairment that is expected to result
in death or has lasted or is expected to last for a continuous period of 12
months or more and that, in the opinion of the Company and two independent
physicians, causes the optionee to be unable to perform his or her duties as an
employee, director, officer or consultant of the Employer and unable to be
engaged in any substantial gainful activity.&#160;
Total disability shall be deemed to have occurred on the first day after
the two independent physicians have furnished their written opinion of total
disability to the Company and the Company has reached an opinion of total
disability.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(C)&#160; <b><font style="font-weight:bold;">Termination
Because of Death</font></b>.&#160; Unless
otherwise determined by the Board of Directors, if an optionee dies while
employed by or providing service to the Company, his or her option may be
exercised at any time before the expiration date of the option or before the
date 12 months after the date of death, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the option at
the date of death and only by the person or persons to whom the optionee&#146;s
rights under the option shall pass by the optionee&#146;s will or by the laws of
descent and distribution of the state or country of domicile at the time of
death.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(D)&#160; <b><font style="font-weight:bold;">Amendment of
Exercise Period Applicable to Termination</font></b>.&#160; The Board of Directors may at any time extend the three month and
12-month exercise periods any length of time not longer than the original
expiration date of the option.&#160; The
Board of Directors may at any time increase the portion of an option that is
exercisable, subject to terms and conditions determined by the Board of
Directors.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(E)&#160; <b><font style="font-weight:bold;">Failure to
Exercise Option</font></b>.&#160; To the
extent that the option of any deceased optionee or any optionee whose
employment or service terminates is not</font></p>

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within the applicable period, all further rights to purchase shares pursuant to
the option shall cease and terminate.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(F)&#160; <b><font style="font-weight:bold;">Leave of Absence.</font></b>&#160; Absence on leave approved by the Employer or on account of
illness or disability shall not be deemed a termination or interruption of
employment or service.&#160; Unless otherwise
determined by the Board of Directors, vesting of options shall continue during
a medical, family, military or other leave of absence, whether paid or unpaid.</font></p>

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<p style="margin:0in 0in .0001pt 1.0in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(G)&#160; <b><font style="font-weight:bold;">Change of Control</font></b>.&#160; In the event an optionee&#146;s employment by the
Company or by any parent or subsidiary of the Company terminates within one
year after a change in control of the Company for any reason other than
retirement, death, or physical disability (as defined in Section 6(a)(iv)(B)),
any option held by such optionee may be exercised with respect to all remaining
shares subject thereto, free of any limitation on the number of shares with
respect to which the option may be exercised in any one year, at any time prior
to its expiration date or the expiration of three months after the date of such
termination of employment, whichever is the shorter period.&#160; A &#147;change in control of the Company&#148; shall
mean a change in control of a nature that would be required to be reported in
response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (&#147;Exchange Act&#148;); provided that,
without limitation, such a change in control shall be deemed to have occurred
if (1) any &#147;person&#148; (as such term is used in Sections 13(d) or 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20 percent or more of the combined
voting power of the Company&#146;s then outstanding securities; or (2) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company&#146;s shareholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.&#160;
A change in control of the Company shall not include any change in
control pursuant to a written agreement between the Company and another person,
which agreement is approved and adopted by the Board of Directors of the
Company or pursuant to any tender offer or exchange offer which the Board of
Directors has in any manner recommended acceptance of to the shareholders of
the Company.</font></p>

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<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(v)&#160; <b><font style="font-weight:bold;">Purchase of
Shares</font></b>.&#160; Unless the Board of
Directors determines otherwise, shares may be acquired pursuant to an option
granted under the Plan only upon the Company&#146;s receipt of written notice from
the optionee of the optionee&#146;s binding commitment to purchase shares,
specifying the number of shares the optionee desires to purchase under the
option and the date on which the optionee is obligated to complete the
transaction, and, if required to comply with the Securities Act of 1933,
containing a representation that it is the optionee&#146;s intention to acquire the
shares for investment and not with a view to distribution.&#160; Unless the Board of Directors determines
otherwise, on or before the date specified for completion of the purchase of
shares pursuant to an option exercise, the optionee must pay the Company the
full purchase price of those shares in cash, check or, in whole or in part, in
Common Stock of the Company valued at fair market value, restricted stock or
other contingent awards denominated in either stock or cash, promissory notes
and other forms of consideration.&#160;
Unless otherwise determined by the Board of Directors, any Common Stock
provided in payment of the purchase price must have been previously acquired
and held by the optionee for at least six months. The fair market value of
Common Stock provided in payment of the purchase price shall be the closing
price of the</font></p>

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<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Common
Stock last reported on the date the option is exercised, if the Common Stock is
publicly traded, or another value of the Common Stock as specified by the Board
of Directors.&#160; No&nbsp;shares shall be
issued until full payment for the shares has been made, including all amounts
owed for tax withholding.&#160; Unless the
Board of Directors determines otherwise, an optionee may request the Company to
apply automatically the shares to be received upon the exercise of a portion of
a stock option (even though stock certificates have not yet been issued) to
satisfy the purchase price for additional portions of the option.&#160; Each&nbsp;optionee who has exercised an
option shall, immediately upon notification of the amount due, if any, pay to
the Company in cash or check amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements.&#160; If&nbsp;additional withholding is or becomes
required (as a result of exercise of an option or as a result of disposition of
shares acquired pursuant to exercise of an option) beyond any amount deposited
before delivery of the certificates, the optionee shall pay such amount, in
cash or check, to the Company on demand.&#160;
If the optionee fails to pay the amount demanded, the Company or the
Employer may withhold that amount from other amounts payable to the optionee,
including salary, subject to applicable law. Unless the Board of Directors
determines otherwise, an optionee may satisfy this obligation, in whole or in
part, by instructing the Company to withhold from the shares to be issued upon
exercise or by delivering to the Company other shares of Common Stock;
provided, however, that the number of shares so withheld or delivered shall not
exceed the minimum amount necessary to satisfy the required withholding
obligation.&#160; Upon the exercise of an
option, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued upon exercise of the option (less the
number of any shares surrendered in payment for the exercise price or withheld
to satisfy withholding requirements).</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Incentive Stock Options</font></i></b>.&#160; Incentive Stock Options shall be subject to the following
additional terms and conditions:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160; <b><font style="font-weight:bold;">Limitation
on Amount of Grants</font></b>.&#160; If the
aggregate fair market value of stock (determined as of the date the option is
granted) for which Incentive Stock Options granted under this Plan (and any
other stock incentive plan of the Company or its parent or subsidiary
corporations, as defined in subsections 424(e) and 424(f) of the Code) are
exercisable for the first time by an employee during any calendar year exceeds
$100,000, the portion of the option or options not exceeding $100,000, to the
extent of whole shares, will be treated as an Incentive Stock Option and the
remaining portion of the option or options will be treated as a Non-Statutory
Stock Option.&#160; The preceding sentence
will be applied by taking options into account in the order in which they were
granted. If, under the $100,000 limitation, a portion of an option is treated
as an Incentive Stock Option and the remaining portion of the option is treated
as a Non-Statutory Stock Option, unless the optionee designates otherwise at
the time of exercise, the optionee&#146;s exercise of all or a portion of the option
will be treated as the exercise of the Incentive Stock Option portion of the
option to the full extent permitted under the $100,000 limitation.&#160; If an optionee exercises an option that is
treated as in part an Incentive Stock Option and in part a Non-Statutory Stock
Option, the Company will designate the portion of the stock acquired pursuant
to the exercise of the Incentive Stock Option portion as Incentive Stock Option
stock by issuing a separate certificate for that portion of the stock and
identifying the certificate as Incentive Stock Option stock in its stock
records.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160; <b><font style="font-weight:bold;">Limitations
on Grants to 10 Percent Shareholders</font></b>.&#160; An Incentive Stock Option may be granted under the Plan to an
employee possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary (as defined in
subsections 424(e) and 424(f) of the Code) only if the option price is at least
110 percent of the fair market value, as described in Section 6(b)(iv), of the
Common Stock subject to</font></p>

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<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

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<p style="margin:0in 0in .0001pt .5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">the
option on the date it is granted and the option by its terms is not exercisable
after the expiration of five years from the date it is granted.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160; <b><font style="font-weight:bold;">Duration of
Options</font></b>.&#160; Subject to Sections
6(a)(ii), 6(a)(iv) and 6(b)(ii), Incentive Stock Options granted under the Plan
shall continue in effect for the period fixed by the Board of Directors, except
that by its terms no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it is granted.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160; <b><font style="font-weight:bold;">Option Price</font></b>.&#160; The option price per share shall be
determined by the Board of Directors at the time of grant.&#160; Except as provided in Section 6(b)(ii), the
option price shall not be less than 100&nbsp;percent of the fair market value
of the Common Stock covered by the Incentive Stock Option at the date the
option is granted.&#160; The fair market
value shall be the closing price of the Common Stock last reported on the date
the option is granted, if the stock is publicly traded, or another value of the
Common Stock as specified by the Board of Directors.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(v)&#160; <b><font style="font-weight:bold;">Limitation
on Time of Grant</font></b>.&#160; No
Incentive Stock Option shall be granted on or after the tenth anniversary of
the last action by the Board of Directors approving an increase in the number
of shares available for issuance under the Plan, which action was subsequently
approved within 12 months by the shareholders.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(vi)&#160; <b><font style="font-weight:bold;">Early
Dispositions</font></b>.&#160; If within two
years after an Incentive Stock Option is granted or within 12 months after an
Incentive Stock Option is exercised, the optionee sells or otherwise disposes
of Common Stock acquired on exercise of the Option, the optionee shall within
30&nbsp;days of the sale or disposition notify the Company in writing of
(i)&nbsp;the date of the sale or disposition, (ii)&nbsp;the amount realized on
the sale or disposition and (iii)&nbsp;the nature of the disposition (e.g.,
sale, gift, etc.)</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Non-Statutory Stock Options</font></i></b>.&#160; Non-Statutory Stock Options shall be subject to the following
terms and conditions, in addition to those set forth in Section 6(a) above:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160; <b><font style="font-weight:bold;">Option Price</font></b>.&#160; The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of grant but
shall not be less than 100% of the fair market value of the Common Stock
covered by the Non-Statutory Option on the date the option is granted.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160; <b><font style="font-weight:bold;">Duration of
Options</font></b>.&#160; Non-Statutory Stock
Options granted under the Plan shall continue in effect for the period fixed by
the Board of Directors.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Changes in Capital Structure.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Stock Splits, Stock Dividends</font></i></b><i><font style="font-style:italic;">.</font></i>&#160; If the outstanding Common Stock of the Company is hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any stock split,
combination of shares, dividend payable in shares, recapitalization or
reclassification, appropriate adjustment shall be made by the Board of
Directors in the number and kind of shares available for grants under the Plan
and in all other share amounts set forth in the Plan.&#160; In addition, the Board of Directors shall make appropriate
adjustment in the number and kind of shares as to which outstanding options, or
portions thereof then unexercised, shall be exercisable, so that the optionee&#146;s
proportionate interest before and after the occurrence of the event shall be
maintained as before the occurrence of such event.&#160; Such adjustment in outstanding options shall be made without
change in the total price applicable to the unexercised portion of any option
and with a corresponding adjustment in the option price per share.&#160; Notwithstanding the foregoing, the Board</font></p>

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<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">of
Directors shall have no obligation to effect any adjustment that would or might
result in the issuance of fractional shares, and any fractional shares
resulting from any adjustment may be disregarded or provided for in any manner
determined by the Board of Directors.&#160;
Any&nbsp;such adjustments made by the Board of Directors shall be
conclusive.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Mergers, Reorganizations, Etc</font></i></b><i><font style="font-style:italic;">.</font></i>&#160; In the event of a merger, consolidation, plan of exchange,
acquisition of property or stock, split-up, split-off, spin-off, reorganization
or liquidation to which the Company is a party or a sale of all or substantially
all of the Company&#146;s assets (each, a &#147;Transaction&#148;), the Board of Directors
shall, in its sole discretion and to the extent possible under the structure of
the Transaction, select one of the following alternatives for treating
outstanding options under the Plan:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;
Outstanding options shall remain in effect in accordance with their
terms.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;
Outstanding options shall be converted into options to purchase stock in
one or more of the corporations, including the Company, that are the surviving
or acquiring corporations in the Transaction.&#160;
The amount, type of securities subject thereto and exercise price of the
converted options shall be determined by the Board of Directors of the Company,
taking into account the relative values of the companies involved in the
Transaction and the exchange rate, if any, used in determining shares of the
surviving corporation(s) to be held by holders of shares of the Company
following the Transaction.&#160; Unless
otherwise determined by the Board of Directors, the converted options shall be
vested only to the extent that the vesting requirements relating to options
granted hereunder have been satisfied.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .5in;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160; The
Board of Directors shall provide a period of 30 days or less before the
completion of the Transaction during which outstanding options may be exercised
to the extent then exercisable, and upon the expiration of that period, all
unexercised options shall immediately terminate.&#160; The Board of Directors may, in its sole discretion, accelerate
the exercisability of options so that they are exercisable in full during that
period.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Dissolution of the Company</font></i></b><i><font style="font-style:italic;">.</font></i>&#160; In the event of the dissolution of the Company, options shall be
treated in accordance with Section 7(b)(iii).</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Rights Issued by Another Corporation</font></i></b><i><font style="font-style:italic;">.</font></i>&#160; The Board of Directors may also grant options under the Plan with
terms, conditions and provisions that vary from those specified in the Plan,
provided that any such awards are granted in substitution for, or in connection
with the assumption of, existing options, granted by another corporation and
assumed or otherwise agreed to be provided for by the Company pursuant to or by
reason of a Transaction.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Option Grants
to Non-Employee Directors.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Initial Grants</font></i></b><i><font style="font-style:italic;">.&#160; </font></i>Each Non-Employee
Director shall be automatically granted an option to purchase 30,000 shares of
Common Stock (the &#147;Initial Grant&#148;) on the date such person first becomes a
Non-Employee Director, whether through election by the shareholders of the
Company or by the Board of Directors to fill a vacancy; provided, however, that
an Inside Director who ceases to be an Inside Director but who remains a
director will not receive an Initial Grant.&#160;
A &#147;Non-Employee Director&#148; is a director who is not a full-time employee
of the Company or any of its subsidiaries and has not been a full-time employee
of the Company or any of its subsidiaries within one year of any date as of
which a determination of eligibility is made.&#160;
An &#147;Inside Director&#148; is a director who is a full-time employee of the
Company or any of its subsidiaries.</font></p>

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<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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<p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Annual Grants</font></i></b>.&#160;
Each Non-Employee Director shall be automatically granted an option to
purchase 10,000 shares of Common Stock on July 31 of each year (the &#147;Annual
Grant&#148;); provided that the Non-Employee Director is a director on the date of
grant and has served on the Board of Directors for at least the six months
preceding that date.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Exercise Price</font></i></b>.&#160;
The exercise price of the options granted pursuant to this Section 8
shall be equal to 100 percent of the fair market value of the Common Stock
determined pursuant to paragraph 6(a)(v).</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Term of Option</font></i></b>.&#160;
The term of each option granted pursuant to this Section 8 shall be 10
years from the date of grant.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Exercisability</font></i></b>.&#160;
Until an option expires or is terminated and except as provided in
Sections 8(f) and 7, an option granted under this Section 8 shall be
exercisable as follows:&#160; (i)&nbsp;each
Initial Grant shall become exercisable as to one-third of the shares subject to
the Initial Grant on each anniversary of its date of grant, provided that the
optionee continually serves as a director of the Company, and (ii)&nbsp;each
Annual Grant shall become exercisable as to one-twelfth of the shares subject
to the Annual Grant each month after the date of the grant, provided that the
optionee continually serves as a director of the Company.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Termination As a Director</font></i></b>.&#160; Unless otherwise determined by the Board of Directors, if an
optionee ceases to be a director of the Company for any reason, other than
death or physical disability (as defined in Section 6(a)(iv)(B)) or retirement,
as provided in the last sentence of this Section&nbsp;8(f), the option may be
exercised at any time prior to the expiration date of the option or the
expiration of the seven months after the last day the optionee served as a
director, whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option as of the last day the optionee
served as a director.&#160; Unless otherwise
determined by the Board of Directors, if an optionee ceases to be a director of
the Company as a result of death or physical disability (as defined in Section
6(a)(iv)(B)), the option may be exercised with respect to all remaining shares
subject thereto, free of any limitation on the number of shares with respect to
which the option may be exercised in any one year, at any time, prior to the
expiration date of the option or the expiration of one year after the last day
the optionee served as a director, whichever is the shorter period.&#160; Unless otherwise determined by the Board of
Directors, if an optionee ceases to be a director of the Company as a result of
the retirement of the optionee in accordance with the retirement policy of the
Board of Directors in effect from time to time, the option may be exercised at
any time prior to the expiration date of the option or the expiration of five
years after the last day the optionee served as a director, whichever is the
shorter period, but only if and to the extent the optionee was entitled to
exercise the option as of the last day the optionee served as a director.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Exercise of Options</font></i></b>.&#160;
Options may be exercised upon payment of cash or shares of Common Stock
of the Company in accordance with Section 6.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h)&#160; <b><i><font style="font-style:italic;font-weight:bold;">Replaces 1989 Plan</font></i></b>.&#160;
Upon approval of this Option Plan by the shareholders of the Company,
this Section 8 shall replace and supercede paragraph 16 of the Company&#146;s 1989
Stock Option Plan.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Amendment of
the Plan</font></b>.&#160; The Board of Directors may at any time
modify or amend the Plan in any respect.&#160;
Except as provided in Section 7, however, no change in an award already
granted shall be made without the written consent of the holder of the award if
the change would adversely affect the holder.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


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<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
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</font>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Approvals</font></b>.&#160; The
Company&#146;s obligations under the Plan are subject to the approval of state and
federal authorities or agencies with jurisdiction in the matter.&#160; The Company will use its best efforts to
take steps required by state or federal law or applicable regulations,
including rules and regulations of the Securities and Exchange Commission and
any stock exchange on which the Company&#146;s shares may then be listed, in
connection with the grants under the Plan.&#160;
The foregoing notwithstanding, the Company shall not be obligated to
issue or deliver Common Stock under the Plan if such issuance or delivery would
violate state or federal securities laws.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Employment and
Service Rights</font></b>.&#160; Nothing in the Plan or any award pursuant to
the Plan shall (i) confer upon any employee any right to be continued in the
employment of an Employer or interfere in any way with the Employer&#146;s right to
terminate the employee&#146;s employment at any time, for any reason, with or
without cause, or to decrease the employee&#146;s compensation or benefits, or
(ii)&nbsp;confer upon any person engaged by an Employer any right to be retained
or employed by the Employer or to the continuation, extension, renewal or
modification of any compensation, contract or arrangement with or by the
Employer.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.</font><font size="1" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><b><font style="font-weight:bold;">Rights as a
Shareholder</font></b>.&#160; The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Common Stock until
the date of issue to the recipient of a stock certificate for those
shares.&#160; Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date occurs before the date such stock certificate is
issued.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Adopted:&#160; June 23, 2000.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Amended:&#160; October 30, 2003</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


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</font></div>

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