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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950149-01-501693.txt : 20020410
<SEC-HEADER>0000950149-01-501693.hdr.sgml : 20020410
ACCESSION NUMBER:		0000950149-01-501693
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20010930
FILED AS OF DATE:		20011113

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN SHARED HOSPITAL SERVICES
		CENTRAL INDEX KEY:			0000744825
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-MEDICAL LABORATORIES [8071]
		IRS NUMBER:				942918118
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08789
		FILM NUMBER:		1781440

	BUSINESS ADDRESS:	
		STREET 1:		TWO EMBARCADERO CENTER
		STREET 2:		SUITE 2370
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111-3823
		BUSINESS PHONE:		4157885300

	MAIL ADDRESS:	
		STREET 1:		TWO EMBARCADERO CENTER
		STREET 2:		SUITE 2370
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f76675e10-q.txt
<DESCRIPTION>AMERICAN SHARED HOSPITAL SERVICES FORM 10-Q
<TEXT>
<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            ------------------------

                                    FORM 10-Q

(MARK ONE)

    [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

              FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 OR

    [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

       FOR THE TRANSITION PERIOD FROM _______________ TO _______________.

                          COMMISSION FILE NUMBER 1-8789
                            ------------------------

                        AMERICAN SHARED HOSPITAL SERVICES
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          CALIFORNIA                                             94-2918118
(STATE OR OTHER JURISDICTION OF                                (IRS EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)

FOUR EMBARCADERO CENTER, SUITE 3700, SAN FRANCISCO, CALIFORNIA          94111
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                    (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 788-5300

      Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

As of October 23, 2001 there are outstanding 3,524,853 shares of the
Registrant's common stock.

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        AMERICAN SHARED HOSPITAL SERVICES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   (unaudited)       (audited)
ASSETS                                            Sep. 30, 2001    Dec. 31, 2000
- ----------------------------------------          -------------    -------------
<S>                                                <C>              <C>
Current assets:
  Cash and cash equivalents                        $11,549,000      $12,421,000
  Restricted cash                                       50,000           50,000
  Accounts receivable, net of allowance for
     doubtful accounts of $70,000 in 2001
     and $0 in 2000                                  2,446,000        2,207,000
  Prepaid expenses and other assets                    509,000          573,000
                                                   -----------      -----------
TOTAL CURRENT ASSETS                                14,554,000       15,251,000

Property and equipment:

     Medical equipment and facilities               34,529,000       29,942,000
     Office equipment                                  237,000          225,000
     Deposits and construction in progress           1,103,000        1,819,000
                                                   -----------      -----------
                                                    35,869,000       31,986,000

     Accumulated depreciation and
          amortization                              (9,422,000)      (7,237,000)
                                                   -----------      -----------
Net property and equipment                          26,447,000       24,749,000

Other assets                                           250,000          209,000
                                                   -----------      -----------

TOTAL ASSETS                                       $41,251,000      $40,209,000
                                                   ===========      ===========

LIABILITIES AND
SHAREHOLDERS' EQUITY

 Current liabilities:
      Accounts payable                                $259,000          $81,000
      Accrued interest                                 213,000          153,000
      Employee compensation and benefits               145,000          190,000
      Other accrued liabilities                        343,000          546,000

      Current portion of long-term debt              4,184,000        4,126,000
                                                     ---------        ---------

 TOTAL CURRENT LIABILITIES                           5,144,000        5,096,000

 Long-term debt, less current portion               21,068,000       20,300,000
 Deferred income taxes                                 294,000                0
 Minority interest                                   1,169,000        1,155,000
 Shareholders' equity:
      Common stock, without par value:
           authorized shares - 10,000,000; issued
           and outstanding shares, 3,525,000 in
           2001 and 3,711,000 in 2000                9,240,000        9,746,000
      Common stock options issued to officer         2,414,000        2,414,000


      Additional paid-in capital                       740,000          814,000
      Retained earnings                              1,182,000          684,000
                                                     ---------        ---------
 TOTAL SHAREHOLDERS' EQUITY                         13,576,000       13,658,000
                                                     ---------        ---------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $41,251,000      $40,209,000
                                                   ===========      ===========
</TABLE>


                             See accompanying notes

                                        2
<PAGE>

                        AMERICAN SHARED HOSPITAL SERVICES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                              Three Months ended Sep.30,           Nine Months ended Sep.30,
                                             -----------------------------       -----------------------------
                                                2001              2000              2001              2000
                                             -----------       -----------       -----------       -----------
<S>                                          <C>               <C>               <C>               <C>
REVENUES:

     Medical services                        $ 3,050,000       $ 2,536,000       $ 8,729,000       $ 6,707,000

COSTS AND EXPENSES:

     Costs of operations:

          Maintenance and supplies                90,000            44,000           257,000           108,000

          Depreciation and amortization          788,000           585,000         2,160,000         1,662,000

          Other                                  188,000           293,000           727,000           659,000
                                             -----------       -----------       -----------       -----------
                                               1,066,000           922,000         3,144,000         2,429,000

     Selling and administrative                  798,000           654,000         2,379,000         1,913,000

     Interest                                    652,000           547,000         1,875,000         1,591,000
                                             -----------       -----------       -----------       -----------

Total costs and expenses                       2,516,000         2,123,000         7,398,000         5,933,000
                                             -----------       -----------       -----------       -----------

                                                 534,000           413,000         1,331,000           774,000

Interest and other income                        100,000           197,000           388,000           631,000

Minority interest                               (208,000)         (186,000)         (566,000)         (454,000)
                                             -----------       -----------       -----------       -----------

Income before income taxes                       426,000           424,000         1,153,000           951,000

Income tax (expense)                            (170,000)                0          (294,000)                0
                                             -----------       -----------       -----------       -----------

Net income                                   $   256,000       $   424,000       $   859,000       $   951,000
                                             ===========       ===========       ===========       ===========

Net income per share:

     Earnings per common share - basic       $      0.07       $      0.11       $      0.24       $      0.25
                                             ===========       ===========       ===========       ===========

     Earnings per common share -
       assuming dilution                     $      0.05       $      0.08       $      0.17       $      0.17
                                             ===========       ===========       ===========       ===========
</TABLE>


                             See accompanying notes

                                       3
<PAGE>

                        AMERICAN SHARED HOSPITAL SERVICES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               Nine Months ended Sep. 30,
                                                                                 2001              2000
                                                                             ------------       ------------
<S>                                                                          <C>                <C>
OPERATING ACTIVITIES:

Net income                                                                   $    859,000       $    951,000

Adjustments to reconcile net cash provided by operating activities:

          Depreciation and amortization                                         2,212,000          1,718,000

          Deferred income taxes                                                   294,000                  0

          Changes in operating assets and liabilities:

               (Increase) in accounts receivable                                 (239,000)          (660,000)

               (Increase) decrease in prepaid expenses and other assets            (5,000)           115,000

               (Decrease) in accounts payable and accrued liabilities             (10,000)          (146,000)
                                                                             ------------       ------------

Net cash from operating activities                                              3,111,000          1,978,000

INVESTING ACTIVITIES:

     Purchase of property and equipment (net of financing)                       (694,000)          (267,000)

     Increase in minority interest                                                 14,000            264,000
                                                                             ------------       ------------

     Net cash from investing activities                                          (680,000)            (3,000)

FINANCING ACTIVITIES:

     Payment of dividends                                                        (361,000)                 0

     Payment received for exercise of stock options                                15,000            149,000

     Repurchase of options/warrants                                               (74,000)                 0

     Repurchase of common stock                                                  (521,000)          (198,000)

     Principal payments on long-term debt and capitalized leases               (2,362,000)        (1,704,000)
                                                                             ------------       ------------

     Net cash from financing activities                                        (3,303,000)        (1,753,000)
                                                                             ------------       ------------

     Net (decrease) in cash and cash equivalents                                 (872,000)           222,000

     Cash and cash equivalents at beginning of period                          12,421,000         12,903,000
                                                                             ------------       ------------

     Cash and cash equivalents at end of period                              $ 11,549,000       $ 13,125,000
                                                                             ============       ============

SUPPLEMENTAL CASH FLOW DISCLOSURE:

    Cash paid during the period for:

          Interest paid                                                      $  1,815,000       $  1,517,000

          Income taxes paid                                                  $     23,000       $     13,000
</TABLE>

                             See accompanying notes

                                       4

<PAGE>

                        AMERICAN SHARED HOSPITAL SERVICES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1. BASIS OF PRESENTATION

      In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly American Shared Hospital
Services' consolidated financial position as of September 30, 2001 and the
results of its operations for the three and nine month periods ended September
30, 2001 and 2000, which results are not necessarily indicative of results on an
annualized basis. Consolidated balance sheet amounts as of December 31, 2000
have been derived from audited financial statements.

      These financial statements include the accounts of American Shared
Hospital Services (the "Company") and its wholly-owned subsidiaries: MMRI, Inc.;
European Shared Medical Services Ltd.; American Shared Radiosurgery Services;
OR21, Inc. ("OR21"); MedLeader.com, Inc. ("MedLeader"); and the Company's
majority-owned subsidiary, GK Financing, LLC ("GK Financing"). European Shared
Medical Services, Ltd. was dissolved on April 28, 2000.

      The Company through its majority-owned subsidiary, GK Financing, provided
Gamma Knife units to twelve medical centers as of September 30, 2001 in
Arkansas, California, Connecticut, Illinois, Massachusetts, Mississippi, Nevada,
New Jersey, Ohio, Texas and Wisconsin.

      All significant intercompany accounts and transactions have been
eliminated in consolidation.

NOTE 2. PER SHARE AMOUNTS

      Per share information has been computed based on the weighted average
number of common shares and dilutive common share equivalents outstanding. For
the three and nine months ended September 30, 2001 basic earnings per share was
computed using 3,549,000 and 3,581,000 common shares, and diluted earnings per
share was computed using 5,126,000 and 5,148,000 common shares and equivalents,
respectively. For the three and nine months ended September 30, 2000 basic
earnings per share was computed using 3,836,000 and 3,820,000 common shares, and
diluted earnings per share was computed using 5,418,000 and 5,465,000 common
shares and equivalents, respectively.

NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

      In June 2001, the Financial Standards Accounting Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No.
141 addresses financial accounting and reporting for business combinations and
supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38,
"Accounting for Preacquisition Contingencies of Purchased

                                       5
<PAGE>

Enterprises". SFAS No. 141 is effective for transactions initiated after June
30, 2001. SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition. SFAS No. 142 also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. The Company does not expect the adoption of these
statements to have a material effect on its consolidated results of operations
or financial position.

      In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This Statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. The Company is
required to adopt the provisions of SFAS No. 143 no later than the beginning of
fiscal year 2003, with early adoption permitted. The Company does not expect the
adoption of this statement to have a material effect on its consolidated results
of operations or financial position.

      In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While SFAS No. 144 supersedes FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it
retains many of the fundamental provisions of that Statement. SFAS No. 144
becomes effective for fiscal years beginning after December 15, 2001, with early
applications encouraged. The Company does not expect the adoption of this
statement to have a material effect on its consolidated results of operations or
financial position.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

      Medical services revenues increased $514,000 and $2,022,000 for the three
and nine month periods ended September 30, 2001 from $2,536,000 and $6,707,000
for the three and nine month periods ended September 30, 2000. The increase in
third quarter 2001 compared to third quarter 2000 reflects the addition of three
new Gamma Knife units. The Company had twelve Gamma Knife units in operation at
September 30, 2001 compared to nine at September 30, 2000. For the nine months
ended September 30, 2001, the increase is due to three new gamma knife units and
an increase in revenue at Gamma Knife centers in operation more than one year of
4%. Ten of the Company's customers are under fee-per-use contracts, and two
customers are under revenue sharing agreements ("retail"). For retail units, the
Company receives all or a percentage of the reimbursement (exclusive of
physician fees) received by the customer, and is responsible for all or a
percentage of the operating expenses of the Gamma Knife.

      Total costs of operations increased $144,000 and $715,000 for the three
and nine month periods ended September 30, 2001 from $922,000 and $2,429,000 for
the three and nine month

                                       6
<PAGE>

periods ended September 30, 2000. Maintenance and supplies increased $46,000 and
$149,000 for the three and nine month periods ended September 30, 2001 compared
to the same periods in the prior year due to additional Gamma Knife units that
started contract maintenance after the expiration of each unit's warranty
period. There were nine Gamma Knife units covered under contract maintenance as
of September 30, 2001 compared to six as of September 30, 2000. Depreciation and
amortization increased $203,000 and $498,000 for the three and nine month
periods ended September 30, 2001 compared to the same periods in the prior year
due to the three additional Gamma Knife units. Other operating costs decreased
$105,000 and increased $68,000 for the three and nine month periods ended
September 30, 2001 compared to the same periods in the prior year. The decrease
for the third quarter was primarily due to an $80,000 credit to property tax
expense, as well as a decrease in certain operating expenses of one of the
retail Gamma Knife units due to a corresponding decrease in revenue. The
increase for the nine month period was primarily due to increases in insurance
and sales/use tax.

      Selling and administrative costs increased $144,000 and $466,000 for the
three and nine month periods ended September 30, 2001 from $654,000 and
$1,913,000 for the three and nine month periods ended September 30, 2000. For
both the three and nine month periods this increase is primarily due to
increased investor relations costs, accounting fees, and sales, business
development and marketing costs. For the nine month period ended September 30,
2001 there was $164,000 of development costs for the Company's two startup
businesses, OR21 and MedLeader, compared to $119,000 in the prior year.

      Interest expense increased $105,000 and $284,000 for the three and nine
month periods ended September 30, 2001 from $654,000 and $1,913,000 for the
three and nine month periods ended September 30, 2000. This is due to three
additional Gamma Knife units during the three and nine month periods compared to
the prior year, all of which were financed with long-term debt, resulting in
additional interest expense. In addition, the newer Gamma Knife units have
higher interest expense at the beginning of their loan term than more mature
units because interest expense decreases as the outstanding balance of each loan
is reduced.

      Interest and other income decreased $97,000 and $243,000 for the three and
nine month periods ended September 30, 2001 from $197,000 and $631,000 for the
three and nine month periods ended September 30, 2000 due to lower interest
rates on invested cash balances. In addition, for the nine month period ended
September 30, 2001 there was a decrease of approximately $73,000 of other income
compared to the same period in the prior year. Other income in the prior year
consisted primarily of state income tax refunds.

      Minority interest increased $22,000 and $112,000 for the three and nine
month periods ended September 30, 2001 from $186,000 and $454,000 for the three
and nine month periods ended September 30, 2000 due to increased profitability
of GK Financing. Minority interest represents the 19% interest of GK Financing
owned by a third party.

      The Company recorded $170,000 and $294,000 of income tax expense for the
three and nine month periods ended September 30, 2001 compared to no expense for
the three and nine month periods ended September 30, 2000. The Company did not
record any income tax expense during 2000 or the first three months of 2001 due
to net operating loss carryforwards available

                                       7
<PAGE>

for tax purposes. The Company expects that it will continue to record an
estimated 40% income tax provision for the remainder of the year.

      The Company had net income of $256,000 ($0.07 per basic share) and
$859,000 ($0.24 per basic share) for the three and nine month periods ended
September 30, 2001 compared to net income of $424,000 ($0.11 per basic share)
and $951,000 ($0.25 per basic share) in the same periods in the prior year. This
decrease for both the three and nine month periods ended September 30, 2001 is
primarily because the Company began recording a 40% income tax provision in the
second quarter, 2001. The effects of the tax provision were partially offset by
increased operating results due to three additional Gamma Knife units compared
to the prior year.

LIQUIDITY AND CAPITAL RESOURCES

      The Company had cash and cash equivalents of $11,549,000 at September 30,
2001 compared to $12,421,000 at December 31, 2000. The Company's cash position
decreased by $872,000 because the Company made deposits of $575,000 on future
Gamma Knife purchases, paid its first annual dividend of $0.10 per share
($361,000) to shareholders of record on March 15, 2001, and repurchased 196,000
shares and 69,000 options to purchase shares of Company stock ($595,000).

      The Company as of September 30, 2001 had shareholders' equity of
$13,576,000, working capital of $9,410,000 and total assets of approximately
$41,251,000.

      The Company has scheduled interest and principal payments under its debt
obligations of approximately $7,212,000 during the next 12 months. The Company
believes that its cash flow from operations and cash resources is adequate to
meet its scheduled debt obligations during the next 12 months.

      The Company is investing its cash in an institutionally priced money
market fund pending use in the Company's operations. The investment objective of
the money market fund is to maintain a stable net asset value, in order to
maximize yield while preserving principal value.

                                       8
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.
        None.

ITEM 2. CHANGES IN SECURITIES.
        None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
        None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
        None.

ITEM 5. OTHER INFORMATION.
        None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a) Exhibits

            The following exhibit is filed herewith:

            Exhibit Number    Description
            --------------    -----------
            10.36             American Shared Hospital Services 2001 Stock
                              Option Plan

                                       9
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                        AMERICAN SHARED HOSPITAL SERVICES
                                   Registrant


Date: November 13, 2001                 /s/ Ernest A. Bates
                                        ----------------------------------------
                                        Ernest A. Bates, M.D.
                                        Chairman of the Board and
                                        Chief Executive Officer


Date: November 13, 2001                 /s/ Craig K. Tagawa
                                        ----------------------------------------
                                        Craig K. Tagawa
                                        Senior Vice President
                                        Chief Operating and Financial Officer

                                       10

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>3
<FILENAME>f76675ex10-36.txt
<DESCRIPTION>EXHIBIT 10.36
<TEXT>
<PAGE>
Exhibit 10.36

                       AMERICAN SHARED HOSPITAL SERVICES

                             2001 STOCK OPTION PLAN

                                 I. INTRODUCTION

                1.1 PURPOSES. The purposes of the 2001 Stock Option Plan (the
"Plan") of American Shared Hospital Services (the "Company") and its
subsidiaries from time to time (individually a "Subsidiary" and collectively the
"Subsidiaries") are to align the interests of the Company's shareholders and the
recipients of options under this Plan by increasing the proprietary interest of
such recipients in the Company's growth and success and to advance the interests
of the Company by attracting and retaining officers and other key employees and
well-qualified persons who are not officers or employees of the Company for
service as directors ("non-employee directors"), consultants and advisors of the
Company. For purposes of this Plan, references to employment by the Company
shall also mean employment by a Subsidiary, which shall mean an entity in which
the Company directly or indirectly owns a majority of the voting interests or,
whether by contract or otherwise, has the power to control the policies of such
entity.

                1.2 ADMINISTRATION. This Plan shall be administered by a
committee (the "Committee") designated by the Board of Directors of the Company
(the "Board") consisting of two or more members of the Board.

                The Committee shall, subject to the terms of this Plan, select
eligible officers and other key employees for participation in this Plan and
shall determine the number of shares of Common Stock subject to each option
granted hereunder, the exercise price of such option, the time and conditions of
exercise of such option and all other terms and conditions of such option,
including, without limitation, the form of the option agreement. The Committee
shall, subject to the terms of this Plan, interpret this Plan and the
application thereof, establish rules and regulations it deems necessary or
desirable for the administration of this Plan and may impose, incidental to the
grant of an option, conditions with respect to the grant, such as limiting
competitive employment or other activities. All such interpretations, rules,
regulations and conditions shall be conclusive and binding on all parties. Each
option hereunder shall be evidenced by a written agreement (an "Agreement")
between the Company and the optionee setting forth the terms and conditions
applicable to such option.

                The Committee may delegate some or all of its power and
authority hereunder to the Chief Executive Officer or other executive officer of
the Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to the grant of
an award under this Plan to any person who is a "covered employee" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") or who, in the Committee's judgment, is likely to be a covered employee
at any time during the period an option granted hereunder to such employee would
be outstanding.


<PAGE>

                No member of the Board of Directors or Committee, and neither
the Chief Executive Officer nor other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interprctation, construction or determination made in connection with
this Plan in good faith, and the niembers of the Board of Directors and the
Committee and the Chief Executive Officer or other executive officer shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys' fees) arising therefrom to
the full extent permitted by law and under any directors' and officers'
liability insurance that may be in effect from time to time.

                A majority of the Committee shall constitute a quorum. The acts
of the Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts
approved in writing by a majority of the members of the Committee without a
meeting.

                1.3 ELIGIBILITY. Participants in this Plan shall consist of such
officers and other key employees of the Company and its Subsidiaries, and such
non-employee consultants and advisors, as the Committee in its sole discretion
may select from time to time; provided, however, that any officer who
beneficially owns more than 15% of the outstanding shares of Common Stock shall
not be eligible to participate in the Plan. The Committee's selection of a
person to participate in this Plan at any time shall not require the Committee
to select such person to participate in this Plan at any other time.
Non-employee directors of the Company shall be eligible to participate in this
Plan in accordance with Section III.

                1.4 SHARES AVAILABLE. Subject to adjustment as provided in
Section 4.7, 250,000 common shares, without par value, of the Company ("Common
Stock"), shall be available for grants of options under this Plan, reduced by
the sum of the aggregate number of shares of Common Stock which become subject
to outstanding options. To the extent that shares of Common Stock subject to an
outstanding option are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such option or by reason of the
delivery or withholding of shares of Common Stock to pay all or a portion of the
exercise price of such option, if any, or to satisfy all or a portion of the tax
withholding obligations relating to such option, then such shares of Common
Stock shall again be available under this Plan.

                Shares of Common Stock to be delivered under this Plan shall be
made available from authorized and unissued shares of Common Stock.

                                II. STOCK OPTIONS

                2.1 GRANTS OF STOCK OPTIONS. The Committee may, in its
discretion, grant options to purchase shares of Common Stock to such eligible
persons as may be selected by the Committee. Each option, or portion thereof,
that is not an incentive stock option, shall be a non-qualified stock option. An
incentive stock option shall mean an option to purchase shares of Common Stock
that meets the requirements of the Code, or any successor provision, which is
intended by the Committee to constitute an incentive stock option. Each
incentive stock option


<PAGE>

shall be granted within ten years of the effective date of this Plan. To the
extent that the aggregate Fair Market Value (determined as of the date of grant)
of shares of Common Stock with respect to which options designated as incentive
stock options are exercisable for the first time by a participant during any
calendar year (under this Plan or any other plan of the Company, or any parent
or Subsidiary) exceeds the amount (currently $100,000) established by the Code,
such options shall constitute non-qualified stock options. "Fair Market Value"
shall mean the closing transaction price of a share of Common Stock as reported
in the American Stock Exchange Composite Transactions on the date as of which
such value is being determined or, if there shall be no reported transaction on
such date, on the next preceding date for which a transaction was reported;
provided that if Fair Market Value for any date cannot be determined as above
provided, Fair Market Value shall be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.

                2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:

                        (a) Number of Shares and Purchase Price. The number of
shares of Common Stock subject to an option and the purchase price per share of
Common Stock purchasable upon exercise of the option shall be determined by the
Committee; provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of a non-qualified stock option shall not be less than
25% of the Fair Market Value of a share of Common Stock on the date of grant of
such option and the purchase price per share of Common Stock purchasable upon
exercise of an incentive stock option shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant of such option;
provided further, that if an incentive stock option shall be granted to any
person who, at the time such option is granted, owns capital stock possessing
more than ten percent of the total combined voting power of all classes of
capital stock of the Company (a "Ten Percent Holder"), the purchase price per
share of Common Stock shall be the price (currently 110% of Fair Market Value)
required by the Code in order to constitute an incentive stock option.

                        (b) Option Period and Exercisabilitv. The period during
which an option may be exercised shall be determined by the Committee and set
forth in the Agreement relating to such option; provided, however, that no
option shall be exercised later than ten years after its date of grant; provided
further, that if an incentive stock option shall be granted to a Ten Percent
Holder, such option shall not be exercised later than five years after its date
of grant. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable option, or portion thereof, may be exercised only
with respect to whole shares of Common Stock. At any time after the grant of an
option the Committee may, in its sole discretion and subject to whatever terms
and conditions it determines appropriate, accelerate the period during which an
option is exercisable.

                        (c) Method of Exercise. An option may be exercised (i)
by giving written notice to the Company specifying the number of whole shares of
Common Stock to be


<PAGE>

purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (A) in cash, (B) by delivery
of previously owned whole shares of Common Stock for which the optionee has good
title, free and clear of all liens and encumbrances, and having a Fair Market
Value, determined as of the date of exercise, equal to the aggregate purchase
price payable by reason of such exercise, (C) by authorizing the Company to
withhold whole shares of Common Stock which would otherwise be delivered upon
exercise of the option having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, (D) in cash by a broker-dealer acceptable to the Company to whom the
optionee has submitted an irrevocable notice of exercise together with
irrevocable instructions to sell a sufficient portion of the shares and deliver
the sale proceeds to the Company, or (E) a combination of (A), (B) and (C), in
each case to the extent set forth in the Agreement relating to the option and
(ii) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (B)-(E) and in the case of an optionee who is subject to Section
16 of the Securities Exchange Act of 1934 ("Exchange Act"), the Company may
require that the method of making such payment be in compliance with Section 16
and the rules and regulations thereunder. Any fraction of a share of Common
Stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the optionee. No
certificate representing Common Stock shall be delivered until the full purchase
price therefor has been paid.

                        (d) Additional Options. The Committee shall have the
authority to include in any Agreement relating to an option a provision
entitling the optionee to an additional option in the event such optionee
exercises the option represented by such option agreement, in whole or in part,
by delivering previously owned whole shares of Common Stock in payment of the
purchase price in accordance with this Plan and such Agreement. Any such
additional option shall be for a number of shares of Common Stock equal to the
number of delivered shares, shall have a purchase price determined by the
Committee in accordance with this Plan, shall be exercisable on the terms and
subject to the conditions established by the Committee at the time of grant of
such additional option, and shall be subject to such other terms and conditions
as the Committee shall determine in accordance with this Plan.

                2.3 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.

                        (a) Permanent and Total Disability. Subject to Section
4.8 and unless otherwise specified in the Agreement relating to an option, if an
optionee's employment or directorship with the Company terminates by reason of
Permanent and Total Disability (as defined in Section 22(e)(3) of the Code),
each option held by such optionee shall be exercisable only to the extent that
such option is exercisable on the effective date of such termination and may
thereafter be exercised by such optionee (or such optionee's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is one year (or such shorter period as set forth in the
Agreement relating to such option) after the effective date of such termination
and (ii) the expiration date of the term of such option.

                        (b) Death. Subject to Section 4.8 and unless otherwise
specified in the Agreement relating to an option, if an optionee's employment or
directorship with the


<PAGE>

Company terminates by reason of death, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the date of
such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person, as
the case may be, until and including the earliest to occur of (i) the date which
is one year (or such shorter period as set forth in the Agreement relating to
such option) after the date of death and (ii) the expiration date of the term of
such option.

                        (c) Other Termination. Subject to Section 4.8 and unless
otherwise specified in the Agreement relating to an option, if an optionee's
employment or directorship with the Company terminates for any reason other than
Permanent or Total Disability or death, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the
effective date of such optionee's termination and may thereafter be exercised by
such optionee (or such optionee's legal representative or similar person) until
and including the earliest to occur of (i) the date which is three months (or
such shorter period as set forth in the Agreement relating to such option) after
the effective date of such optionee's termination and (ii) the expiration date
of the term of such option; provided that if such optionee's employment is
terminated for Cause, all options held by such optionee shall terminate
automatically on the effective date of such optionee's termination of
employment. For purposes of this Plan, "Cause" shall mean termination for
commission of an act of dishonesty, theft, fraud, embezzlement, falsification of
books and records, continued or prolonged intoxication, both alcohol and drug
related, and conviction of a felony or a crime involving moral turpitude, and in
any event, the determination of the Committee with respect thereto shall be
final and conclusive.

                        (d) Death Following Termination of Employment. Subject
to Section 4.8 and unless otherwise specified in the Agreement relating to an
option, if an optionee dies during the one-year period following termination by
reason of Permanent and Total Disability, or if an optionee dies during the
three-month period following termination for any reason other than Permanent or
Total Disability or death (or, in each case, such shorter period as the
Committee may specify in the Agreement relating to an option), each option held
by such optionee shall be exercisable only to the extent that such option is
exercisable on the date of such optionee's death and may thereafter be exercised
by such optionee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be, until and including the earliest to occur of
(i) the date which is one year (or such shorter period as set forth in the
Agreement relating to such option) after the date of death and (ii) the
expiration date of the term of such option.

                        (e) Unexercisable Options. No portion of an option which
is unexercisable as of the date on which an optionee's employment or
directorship with the Company terminates shall thereafter become exercisable;
provided, however, that provision may be made in the Agreement relating to such
option that such option shall become exercisable, with the consent of the
Committee, in the event of a termination of employment because of the optionee's
normal retirement or permanent and total disability (each as determined by the
Committee in accordance with Company policies), or death, or in the event of
termination of directorship upon expiration of the regular term thereof.


<PAGE>

        III. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS

                3.1 ELIGIBILITY. Each member of the Board of Directors of the
Company who is not an employee, either full-time or part-time, of the Company or
a Subsidiary shall be granted options to purchase shares of Common Stock in
accordance with this Section III. All options granted under this Section III
shall be non-qualified stock options.

                3.2 GRANTS OF STOCK OPTIONS. Each non-employee director shall be
granted non-qualified stock options as folio

                        (a) Time of Grant. Commencing with the 2001 annual
meeting of stockholders (or, if later, on the date on which a person is first
elected or begins to serve as a non-employee director other than by reason of
termination of employment), and, thereafter, on the date of each annual meeting
of stockholders of the Company, each person who is a non-employee director after
such meeting of stockholders shall be granted an option to purchase 4,000 shares
of Common Stock (which amount shall be pro-rated if such person is first elected
or begins to serve as a non-employee director on a date other than the date of
an annual meeting of stockholders) at a purchase price per share equal to the
Fair Market Value of the Common Stock on the date of grant of such option;
provided, that the aggregate number of options granted to any person hereunder
or under any other plan of the Company, including, but not limited to, the 1995
Stock Option Plan, shall not exceed 12,000.

                        (b) Option Period and Exercisability. Each option
granted under this Article III shall be fully exercisable one year after its
date of grant (unless the Agreement relating to such option specifies an earlier
date, either as to all or a portion of the shares covered thereby) and shall
expire ten years after its date of grant. An exercisable option, or portion
thereof, may be exercised in whole or in part only with respect to whole shares
of Common Stock. Options granted under this Article HI shall be exercisable in
accordance with Section 2.2(c) and shall be subject to the provisions of
Sections 2.3(a) through (d) in the event of the termination of a director's
service on the Board.

                                   IV. GENERAL

                4.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan will be submitted
for the approval of the Company's stockholders within 12 months after the date
of the Board's initial adoption of this Plan. Options may be granted prior to
such stockholder approval, provided that such Options shall not be exercisable
prior to the time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said 12-month
period, all options previously granted shall thereupon be cancelled and become
null and void. This Plan shall terminate ten years after its effective date
unless terminated earlier by the Board. Termination of this Plan shall not
affect the terms or conditions of any option granted prior to termination.
Options may be granted hereunder at any time prior to the termination of this
Plan, provided that no award may be made later than ten years after the
effective date of this Plan.

                4.2 AMENDMENTS. The Board may amend this Plan as it shall deem


<PAGE>

advisable, subject to any requirement of stockholder approval required by
applicable law, rule or regulation; provided, however, that no amendment shall
be made without stockholder approval if such amendment would (a) increase the
maximum number of shares of Common Stock available under this Plan (subject to
Section 4.7), (b) reduce the minimum purchase price per share of Common Stock
subject to an option, (c) effect any change inconsistent with Section 422 of the
Code, or (d) extend the term of this Plan or the maximum period during which an
option may be exercised; provided, further, that this Plan shall not be amended
in a manner which fails to comply with Rule l6b-3(c)(2)(ii)(B) under Section 16
of the Exchange Act. No amendment may impair the rights of a holder of an
outstanding option without the consent of such holder.

                4.3 AGREEMENT. No option shall be valid until an Agreement is
executed by the Company and the optionee and, upon execution by the Company and
the optionee and delivery of the Agreement to the Company, such option shall be
effective as of the effective date set forth in the Agreement.

                4.4 NON-TRANSFERABILITY. No option hereunder shall be
transferable other than by will or the laws of descent and distribution or
pursuant to the beneficiary designation procedures set forth in Section 4.11.
Each option may be exercised during the optionee's lifetime only by the optionee
or the optionee's legal representative or similar person. Except as permitted by
the second preceding sentence, no option hereunder shall be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any option hereunder, such option and all
rights thereunder shall immediately become null and void.

                4.5 TAX WITHHOLDING. The Company shall have the right to
require, prior to the issuance or delivery of any shares of Common Stock,
payment by the optionee of any Federal, state, local or other taxes which may be
required to be withheld or paid in connection with an option hereunder. An
Agreement may provide that (i) the Company shall withhold whole shares of Common
Stock which would otherwise be delivered upon exercise of the option having an
aggregate Fair Market Value determined as of the date the obligation to withhold
or pay taxes arises in connection with the option (the `Tax Date") in the amount
necessary to satisfy any such obligation or (ii) the optionee may satisfy any
such obligation by any of the following means:

(A) a cash payment to the Company, (B) delivery to the Company of previously
owned whole shares of Common Stock for which the optionee has good title, free
and clear of all liens and encumbrances, and having an aggregate Fair Market
Value determined as of the Tax Date, equal to the amount necessary to satisfy
any such obligation, (C) authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered upon exercise of the option
having an aggregate Fair Market Value determined as of the Tax Date, (D) a cash
payment by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise together with irrevocable
instructions to sell a sufficient portion of the shares and deliver the sale
proceeds to the Company or (E) any combination of (A), (B) and (C), in each case
to the extent set forth in the Agreement relating to the option; provided,
however, that the Committee shall have sole discretion to disapprove of an
election pursuant to any of clauses (B)(E) and that in the case of an optionec
who is subject to Section 16 of the Exchange Act, the Company may require that
the method of satisfying any such obligation be in compliance with


<PAGE>

Section 16 and the rules and regulations thereunder. An Agreement may provide
for shares of Common Stock to be delivered or withheld having a Fair Market
Value in excess of the minimum amount required to be withheld. Any fraction of a
share of Common Stock which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
optionee.

                4.6 RESTRICTIONS ON SHARES. Each option hereunder shall be
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of Common Stock subject to
such option upon any securities exchange or under any law, or the nsent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery of
shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any option hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

                4.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option, the purchase
price per security, and the number of securities subject to each option to be
granted to non-employee directors pursuant to Article III shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding options without an increase in the aggregate purchase price. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive. If any adjustment would result in a fractional security being
(i) available under this Plan, such fractional security shall be disregarded, or
(ii) subject to an option under this Plan, the Company shall pay the optionee,
in connection with the first exercise of the option in whole or in part,
occurring after such adjustment, an amount in cash determined by multiplying (A)
the fraction of such security (rounded to the nearest hundredth) by (B) the
excess, if any, of (x) the Fair Market Value on the exercise date over (y) the
exercise price of the option.

                4.8 CHANGE IN CONTROL.

                        (a) (1) Notwithstanding any provision in this Plan or
any Agreement, in the event of a Change in Control pursuant to Section (b)(3) or
(4) below in connection with which the holders of Common Stock receive shares of
common stock that are registered under Section 12 of the Exchange Act, there
shall be substituted for each share of Common Stock available under this Plan,
whether or not then subject to an outstanding option, the number and class of
shares into which each outstanding share of Common Stock shall be converted
pursuant to such Change in Control. In the event of any such substitution, the
purchase price per share of each option shall be appropriately adjusted by the
Committee, such adjustments to be made without an increase in the aggregate
purchase price or base price.


<PAGE>

                                (2) Notwithstanding any provision in this Plan
or any Agreement, in the event of a Change in Control pursuant to Section (b)(1)
or (2) below, or in the event of a Change in Control pursuant to Section (b)(3)
or (4) below in connection with which the holders of Common Stock receive
consideration other than shares of common stock that are registered under
Section 12 of the Exchange Act, each outstanding option shall be surrendered to
the Company by the holder thereof, and each such option shall immediately be
cancelled by the Company, and the holder shall receive, within ten days of the
occurrence of a Change in Control pursuant to Section (b)( 1) or (2) below or
within ten days of the approval of the stockholders of the Company contemplated
by Section (b)(3) or (4) below, a cash payment from the Company in an amount
equal to the number of shares of Common Stock then subject to such option,
multiplied by the excess, if any, of (i) the greater of (A) the highest per
share price offered to stockholders of the Company in any transaction whereby
the Change in Control takes place or (B) the Fair Market Value of a share of
Common Stock on the date of occurrence of the Change in Control over (ii) the
purchase price per share of Common Stock subject to the option. The Company may,
but is not required to, cooperate with any person who is subject to Section 16
of the Exchange Act to assure that any cash payment in accordance with the
foregoing to such person is made in compliance with Section 16 and the rules and
regulations thereunder.

                        (b) "Change in Control" shall mean:

                                (1) the acquisition by any individual, entity or
group (a "Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of 25% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); excluding,
however, the following: (A) any acquisition directly from the Company (excluding
any acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (B) any acquisition by the
Company, (C) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (D) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
Section 4.8(b);

                                (2) individuals who, as of the effective date of
the Plan, constitute the Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority of such Board; provided that any
individual who becomes a director of the Company subsequent to the effective
date of the Plan whose election, or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority of the directors
then comprising the Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was initially elected as a
director of the Company as a result of an actual or threatened election contest,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board shall not be deemed
a member of the Incumbent Board;


<PAGE>

                                (3) approval by the stockholders of the Company
of a reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which (i) all or
substantially all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively, the
outstanding shares of common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or indirectly) in substantially the same
proportions relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (ii) no Person (other
than: the Company; any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; the
corporation resulting from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate Transaction, directly or
indirectly, 25% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 25% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors and (iii)
individuals who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the corporation resulting
from such Corporate Transaction; or

                                (4) approval by the stockholders of the Company
of a plan of complete liquidation or dissolution of the Company.

                4.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall
have any right to participate in this Plan. Neither this Plan nor any option
granted hereunder shall confer upon any person any right to continued employment
by the Company, any Subsidiary or any affiliate of the Company or affect in any
manner the right of the Company, any Subsidiary or any affiliate of the Company
to terminate the employment of any person at any time without liability
hereunder.

                4.10 RIGHTS AS STOCKHOLDER. No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock which are
subject to an option hereunder until such person becomes a stockholder of record
with respect to such shares of Common Stock.

                4.11 DESIGNATION OF BENEFICIARY. Each optionee may file with the
Committee a written designation of one or more persons as such optionee's
beneficiary or beneficiaries (both primary and contingent) in the event of the
optionee's death. To the extent an outstanding option granted hereunder is
exercisable, such beneficiary or beneficiaries shall be entitled to exercise
such option.


<PAGE>

                Each beneficiary designation shall become effective only when
filed in writing with the Committee during the optionee's lifetime on a form
prescribed by the Committee. The spouse of a married optionee domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Committee of a new beneficiary
designation shall cancel all previously filed beneficiary designations.

                If an optionee fails to designate a beneficiary, or if all
designated beneficiaries of an optionee predecease the optionee, then each
outstanding option hereunder held by such optionee, to the extent exercisable,
may be exercised by such optionee's executor, administrator, legal
representative or similar person.

                4.12 GOVERNING LAW. This Plan, each option hereunder and the
related Agreement, and all determinations made and actions taken pursuant
thereto, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of California and
construed in accordance therewith with out giving effect to principles of
conflicts of laws.

                                            Adopted by the Board of Directors
                                            on November 30, 2000


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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