TRIPATH IMAGING INC
EX-10.2
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>g87704exv10w2.txt
<DESCRIPTION>EX-10.2
<TEXT>
<PAGE>

                                                                  Exhibit 10.2





                              TRIPATH IMAGING, INC.

                         1997 Director Stock Option Plan


1.       Purpose.

         This 1997 Director Stock Option Plan (the "Plan") governs options to
purchase Common Stock, $.01 par value per share (the "Common Stock"), of TriPath
Imaging, Inc. (the "Company") granted by the Company to members of the Board of
Directors of the Company who are not also officers or employees of the Company.
The purpose of the Plan is to attract and retain qualified persons to serve as
Directors of the Company and to encourage ownership of the Common Stock of the
Company by such Directors.

2.       Administration.

         Grants of stock options under the Plan shall be automatic as provided
in Section 8. However, all questions of interpretation of the Plan or of any
options granted hereunder shall be determined by the Board of Directors of the
Company (the "Board"). Any and all powers of the Board under the Plan may be
exercised by a committee consisting of one or more Directors appointed by the
Board.

3.       Eligibility.

         Members of the Board shall be eligible to participate in the Plan
except those Members of the Board who (i) are also officers of the Company, or
(ii) who own beneficially (as calculated pursuant to Rule 13(d)-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) 3% or more of
the outstanding stock of the Company. Notwithstanding the foregoing, the Board
may by resolution determine that any otherwise eligible director shall not
receive grants of stock options under this plan.

4.       Shares Subject to the Plan.

         Options may be granted under the Plan in respect of a maximum of
300,000 shares of Common Stock, subject to adjustment as provided in Section 5
below. Shares to be issued upon the exercise of options granted under the Plan
may be either authorized but unissued shares or shares held by the Company in
its treasury. Whenever options under the Plan lapse or terminate or otherwise
become unexercisable, the shares of Common Stock which were available for such
options shall again be available for the grant of options under the Plan. The
Company shall at all times while the Plan is in force reserve such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan.


                                       1
<PAGE>

5.       Adjustment of Number of Option Shares.

         In the event of a stock dividend, split-up, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Company's Common Stock, the maximum aggregate number and kind of
shares or securities of the Company as to which options may be granted under
this Plan and as to which options then outstanding shall be exercisable, and the
option price of such options shall be appropriately adjusted so that the
proportionate number of shares or other securities as to which options may be
granted and the proportionate interest of holders of outstanding options shall
be maintained as before the occurrence of such event.

         In the event of any reorganization, consolidation or merger to which
the Company is a party and in which the Company does not survive, or upon the
dissolution or liquidation of the Company, all outstanding options shall
terminate; provided, however, that (i) in the event of the liquidation or
dissolution of the Company, or in the event of any such reorganization,
consolidation or merger in which the Company does not survive and with respect
to which the resulting or surviving corporation does not assume such outstanding
option or issue a substitute option therefor, such option shall be exercisable
in full, without regard to any installment restrictions on exercise imposed
pursuant to this Plan or any Option Agreement, during such period preceding the
effective date of such liquidation, dissolution, reorganization, consolidation
or merger (unless such option is terminated earlier by its terms) as may be
specified by the Board; and (ii) in the event of any such reorganization,
consolidation or merger, the Board may, in its good faith discretion, arrange to
have the resulting or surviving corporation assume such outstanding option or
issue a substitute option therefor.

         No fraction of a share shall be purchasable or deliverable upon
exercise of an option, but, in the event any adjustment hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.

6.       Non-Statutory Stock Options.

         All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").

7.       Form of Option Agreements.

         Options shall be granted hereunder pursuant to the terms of Option
Agreements which shall be substantially in the form of the attached Exhibit A or
in such other form as the Board may from time to time determine.

8.       Grant of Options and Option Terms.

         Automatic Grant of Options. Commencing after September 30, 1999, each
eligible director of the Company thereafter elected or reelected to the Board of
Directors shall, upon his or her election or reelection, automatically be
granted options to purchase 30,000 shares of Common Stock. No options shall be
granted hereunder after ten years from the date on which this Plan was initially
approved and adopted by the Board.

         Date of Grant. The "Date of Grant" for options granted under this Plan
shall be the date of the respective director's election or reelection,
commencing with all director elections or reelections occurring on or after
September 30, 1999.

         Option Price. The option price for each option granted under this Plan
shall be the current fair market value of a share of Common Stock of the Company
as determined by the Board of Directors in good faith,


                                       2
<PAGE>

provided that if the Company's Common Stock is then quoted on the National
Association of Securities Dealers Automated Quotations National Market
("Nasdaq") or traded on any other exchange, then the current fair market value
of a share of Common Stock of the Company shall be the closing price for the
Company's Common Stock as reported by Nasdaq, or the principal exchange on which
the Company's Common Stock is then traded, on the last trading day prior to the
Date of Grant.

         Term of Option. The term of each option granted under the Plan shall be
ten years from the Date of Grant.

         Period of Exercise. Options granted under the Plan shall become
exercisable in thirty-six (36) equal monthly installments on the last day of
each month, if and only if the option holder is a member of the Board at the
opening of business on that day. Directors holding exercisable options under the
Plan who cease to serve as members of the Board of the Company for any reason
other than death may, for a period of seven months following the date of
cessation of service, exercise the rights they had under such options at the
time they ceased being a Director. Any rights that have not yet become
exercisable shall terminate upon cessation of membership on the Board. Upon the
death of a Director, those entitled to do so under the Director's will or the
laws of descent and distribution shall have the right, at any time within twelve
months after the date of death, to exercise in whole or in part any rights which
were available to the Director at the time of his death. The rights of the
option holder may be exercised by the holder's guardian or legal representative
in the case of disability and by the beneficiary designated by the holder in
writing delivered to the Company or, if none has been designated, by the
holder's estate or his or her transferee on death in accordance with this Plan,
in the case of death. Options granted under the Plan shall terminate, and no
rights thereunder may be exercised, after the expiration of the applicable
exercise period. Notwithstanding the foregoing provisions, no rights under any
options may be exercised after the expiration of ten years from their Date of
Grant.

         Method of Exercise and Payment. Each exercise of an option hereunder
may be effected only by giving written notice, in the manner provided in Section
12 hereof, of intent to exercise the option, specifying the number of shares as
to which the option is being exercised, and accompanied by full payment of the
option price for the number of shares then being acquired. Such payment shall be
made in cash, by certified or bank check payable to the order of the Company,
credit to the Company's account at a financial or brokerage institution on the
date of exercise or a payment commitment of such an institution acceptable to
the Company, or if the option so provides, (i) in shares of Common Stock having
an aggregate Fair Market Value, at the time of such payment, equal to the total
option price for the number of shares of Common Stock for which payment is then
being made, or (ii) partly in cash or by certified or bank check payable to the
order of the Company and the balance in shares of Common Stock having an
aggregate Fair Market Value, at the time of such payment, equal to the
difference between the total option price for the number of shares of Common
Stock for which payment is then being made and the amount of the payment in cash
or by certified or bank check. Shares of Common Stock surrendered in payment of
all or part of the option price shall have been held by the person exercising
the option free of restrictions imposed by the Company for at least six months
unless otherwise permitted by the Board. For purposes hereof, the "Fair Market
Value" of the Common Stock shall be the current fair market value of a share of
Common Stock of the Common Stock of the Company as determined by the Board of
Directors in good faith, provided that if the Company's Common Stock is then
quoted on Nasdaq or traded on any other exchange, then the Fair Market Value
shall be the closing price for the Company's Common Stock as reported by Nasdaq,
or the principal exchange on which the Company's Common Stock is then traded,
for the business day immediately preceding the option exercise date.


                                       3
<PAGE>

         Receipt by the Company of such notice and payment shall, for purposes
of this Plan, constitute exercise of the option or a part thereof. Within twenty
(20) days thereafter, the Company shall deliver or cause to be delivered to the
optionee a certificate or certificates for the number of shares of Common Stock
then being purchased by the optionee. Such shares shall be fully paid and
non-assessable. If any law or applicable regulation of the Securities and
Exchange Commission or other public regulatory authority (including, but not
limited to, a stock exchange) shall require the Company or the optionee (i) to
register or qualify, under the Securities Act of 1933, as amended (the
"Securities Act"), any similar federal statute then in force or any state law
regulating the sale of securities, any shares of Common Stock covered by an
option with respect to which notice of intent to exercise shall have been
delivered to the Company or (ii) to take any other action in connection with
such shares before issuance thereof may be effected, then the delivery of the
certificate or certificates for such shares shall be postponed until completion
of the necessary action, which the Company shall take in good faith and without
delay. All such action shall be taken by the Company at its own expense.

         To the extent determined necessary by counsel to the Company to comply
with any applicable law, the Company may require an individual exercising an
option to represent that his purchase of shares of Common Stock pursuant to such
exercise is for his own account, for investment and without a view to resale or
distribution, and that he will not sell or otherwise dispose of any such shares
except pursuant to (i) an effective registration statement covering such
transaction filed with the Securities and Exchange Commission and in compliance
with all of the applicable provisions of the Securities Act, and the rules and
regulations thereunder, or (ii) an opinion of Company counsel that such
registration is not required.

         Non-transferability. Options granted under the Plan shall not be
transferable by the holder thereof otherwise than by will or the laws of descent
and distribution or by such other means as may be permitted by Rule 16b-3 (or
any successor provision) under the Exchange Act.

9.       Limitation of Rights.

         No Right to Continue as a Director. Neither the Plan, nor the granting
of an option or any other action taken pursuant to the Plan, shall constitute an
agreement or understanding, express or implied, that the Company will retain an
optionee as a Director for any period of time or at any particular rate of
compensation.

         No Stockholders' Rights for Options. Directors shall have no rights as
stockholders with respect to the shares covered by their options until the date
they exercise such options and pay the option price to the Company, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such option is exercised and paid for.

10.      Stockholder Approval.

         The Plan is subject to approval by the stockholders of the Company by
the affirmative vote of the holders of a majority of the shares of voting
capital stock present or represented and entitled to vote at a meeting of the
Company's stockholders. In the event such approval is not obtained, all options
granted under this Plan shall be void and without effect.


                                       4
<PAGE>

11.      Amendment or Termination.

         The Board may amend or terminate this Plan at any time subject to any
stockholder approval that the Board deems necessary.

12.      Notices.

         Any communication or notice required or permitted to be given under
this Plan shall be in writing and mailed by registered or certified mail or
delivered in hand, if to the Company, to its Vice President, Finance at TriPath
Imaging, Inc., 780 Plantation Drive, Burlington, North Carolina 27215 and, if to
an optionee, to such address as the optionee shall last have furnished to the
Company.

13.      Governing Law.

         The Plan shall be governed by and construed in accordance with the laws
of Delaware.

                                        As adopted by the Board of Directors on
                                        June 27, 1997

                                        As approved by the Stockholders on
                                        June 27, 1997

                                       5

</TEXT>
</DOCUMENT>
