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<SEC-DOCUMENT>0000950134-06-023307.txt : 20061218
<SEC-HEADER>0000950134-06-023307.hdr.sgml : 20061218
<ACCEPTANCE-DATETIME>20061218153534
ACCESSION NUMBER:		0000950134-06-023307
CONFORMED SUBMISSION TYPE:	S-8
PUBLIC DOCUMENT COUNT:		4
FILED AS OF DATE:		20061218
DATE AS OF CHANGE:		20061218
EFFECTIVENESS DATE:		20061218

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:		S-8
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-139446
		FILM NUMBER:		061283331

	BUSINESS ADDRESS:	
		STREET 1:		FOUR EMBARCADERO CENTER
		STREET 2:		SUITE 3700
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111-4107
		BUSINESS PHONE:		415-788-5300

	MAIL ADDRESS:	
		STREET 1:		FOUR EMBARCADERO CENTER
		STREET 2:		SUITE 3700
		CITY:			SAN FRANCISCO
		STATE:			CA
		ZIP:			94111-4107
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-8
<SEQUENCE>1
<FILENAME>f25882sv8.htm
<DESCRIPTION>FORM S-8
<TEXT>
<HTML>
<HEAD>
<TITLE>sv8</TITLE>
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<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">As
filed with the Securities and Exchange Commission on December&nbsp;18, 2006
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 6pt">Registration No.&nbsp;333-<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM S-8</B>
</DIV>


<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B>REGISTRATION STATEMENT<BR>
<I>Under<BR>
The Securities Act of 1933</I></B>

</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>California</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">94-2918118</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer Identification No.)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">of incorporation or organization)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Four Embarcadero Center, Suite&nbsp;3700,<BR>
San Francisco, California 94111</B><BR>
(Address of principal executive offices) (Zip Code)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>American Shared Hospital Services 2006 Stock Incentive Plan</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Full title of the Plans)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Ernest A. Bates, M.D.<BR>
Chairman and Chief Executive Officer<BR>
American Shared Hospital Services<BR>
Four Embarcadero Center, Suite&nbsp;3700,<BR>
San Francisco, California 94111</B><BR>
(Name and address of agent for service)<BR>
<B>(415)&nbsp;788-5300</B><BR>
(Telephone number, including area code, of agent for service)<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>CALCULATION OF REGISTRATION FEE</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
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    <TD width="1%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Proposed Maximum</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Proposed Maximum</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount to be</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Offering Price</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Aggregate Offering</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount of</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center">Title of Securities to be
Registered</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Registered(1)</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Per Share(2)</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Price(2)</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Registration Fee</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
                    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">American Shared Hospital Services
2006 Stock Incentive Plan
Common Stock, no par value</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD colspan="3" align="center" style="border-top: 2px solid #000000"><FONT style="white-space: nowrap">750,000 shares</FONT></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">6.45</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">4,837,500.00</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">517.61</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>This Registration Statement shall also cover any additional shares of Common Stock which
become issuable under the Registrant&#146;s 2006 Stock Incentive Plan by reason of any stock
dividend, stock split, recapitalization or other similar transaction effected without the
Registrant&#146;s receipt of consideration which results in an increase in the number of the
outstanding shares of Registrant&#146;s Common Stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of
1933, as amended, on the basis of the average of the high and low selling prices per share of
Registrant&#146;s Common Stock on December&nbsp;13, 2006 as reported by the American Stock Exchange.</TD>
</TR>

</TABLE>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Item&nbsp;3. Incorporation of Documents by Reference</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Item&nbsp;4. Description of Securities</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item&nbsp;5. Interests of Named Experts and Counsel</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Item&nbsp;6. Indemnification of Directors and Officers</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Item&nbsp;7. Exemption from Registration Claimed</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item&nbsp;8. Exhibits</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item&nbsp;9. Undertakings</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">EXHIBIT INDEX</A></TD></TR>
<TR><TD colspan="9"><A HREF="f25882exv5.htm">EXHIBIT 5</A></TD></TR>
<TR><TD colspan="9"><A HREF="f25882exv23w1.htm">EXHIBIT 23.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f25882exv99w1.htm">EXHIBIT 99.1</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<!-- link1 "PART II " -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Information Required in the Registration Statement</B>

</DIV>
<!-- link2 "Item&nbsp;3. Incorporation of Documents by Reference" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;3. <U>Incorporation of Documents by Reference</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;American Shared Hospital Services (the &#147;Registrant&#148;) hereby incorporates by reference into
this Registration Statement the following documents previously filed with the Securities and
Exchange Commission (the &#147;Commission&#148;):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Registrant&#146;s Annual Report on Form&nbsp;10&#150;K for the fiscal year ended December
31, 2005, filed with the Commission on March&nbsp;31, 2006, pursuant to Section&nbsp;13 of the
Securities Exchange Act, as amended (the &#147;1934 Act&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Registrant&#146;s Quarterly Reports on Form 10-Q for the fiscal quarters ended
March&nbsp;31, 2006, June&nbsp;30, 2006 and September&nbsp;30, 2006, filed with the Commission on May
15, 2006, August&nbsp;14, 2006 and November&nbsp;14, 2006, respectively;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All other reports filed pursuant to Section 13(a) or 15(d) of the 1934 Act
since the end of the fiscal year covered by the Registrant&#146;s Annual Report referred to
in (a)&nbsp;above; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Registrant&#146;s Registration Statement No.&nbsp;33-63721 on Form S-1 filed with the
commission on October&nbsp;26, 1995, as amended on Form S-1/A on March&nbsp;29, 1996 and May&nbsp;8,
1996, in which there is described the terms, rights, and provisions applicable to the
Registrant&#146;s outstanding Common Stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All reports and definitive proxy or information statements filed pursuant to Section&nbsp;13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of this Registration Statement and prior to the
filing of a post-effective amendment which indicate that all securities offered hereby have been
sold or which de-registers all securities then remaining unsold shall be deemed to be incorporated
by reference into this Registration Statement and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any subsequently filed document
which also is deemed to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.
</DIV>
<!-- link2 "Item&nbsp;4. Description of Securities" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;4. <U>Description of Securities</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>

<!-- link2 "Item&nbsp;5. Interests of Named Experts and Counsel" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;5. <U>Interests of Named Experts and Counsel</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>

<!-- link2 "Item&nbsp;6. Indemnification of Directors and Officers" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;6. <U>Indemnification of Directors and Officers</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;204(10) of the California General Corporation Law (&#147;GCL&#148;) permits the
inclusion in the articles of incorporation of a California corporation of a provision eliminating
or limiting the personal liability of a director for monetary damages in an action brought by or in
the right of the corporation for breach of a director&#146;s duties to the corporation and its
shareholders. The foregoing provision is subject to certain qualifications set forth in the GCL
including, without limitation, that such provision may not limit or eliminate liability of
directors for (i)&nbsp;intentional misconduct, (ii)&nbsp;transactions from which a director derived an
improper personal benefit, (iii)&nbsp;reckless disregard of the director&#146;s duties, and (iv)&nbsp;an unexcused
pattern of inattention that amounts to an abdication of the director&#146;s
 </DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->II-1<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">duties. Article&nbsp;Fifth of the Registrant&#146;s Articles of Incorporation, as amended, contains a
provision eliminating the liability of the directors for monetary damages to the fullest extent
permissible under California law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;317 of the GCL permits the indemnification of officers, directors, employees and
agents of California corporations. Article&nbsp;Fifth, Section&nbsp;2, of the Registrant&#146;s Articles of
Incorporation, as amended, provides that the Registrant is authorized to provide indemnification to
its agents in excess of the indemnification otherwise permitted by Section&nbsp;317 of the GCL.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;IX, Sections&nbsp;7 and 8, of the Bylaws of the Registrant contains the following
indemnification provisions:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;7. MANDATORY INDEMNIFICATION OF DIRECTORS. The corporation shall, to
the maximum extent and in the manner permitted by the California Corporations
Code (&#147;Code&#148;), indemnify each of its directors against expenses (as defined in
Section 317(a) of the Code), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding (as defined
in Section 317(a) of the Code), arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Article&nbsp;IX, a
&#147;director&#148; of the corporation includes any person (i)&nbsp;who is or was a director
of the corporation, (ii)&nbsp;who is or was serving at the request of the
corporation as a director of another corporation, partnership, joint venture,
trust or other enterprise, or (iii)&nbsp;who was a director of a corporation which
was a predecessor corporation of the corporation or of another enterprise at
the request of such predecessor corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;8. PERMISSIVE INDEMNIFICATION. The corporation shall have the power, to
the extent and in the manner permitted by the Code, to indemnify each of its
officers, employees and agents against expenses (as defined in Section 317(a)
of the Code), judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the Code), arising by reason of the fact that such person is or was
an agent of the corporation. For purposes of this Article&nbsp;IX, an &#147;employee&#148; or
&#147;agent&#148; of the corporation (other than a director, includes any person (i)&nbsp;who
is or was an employee or agent of the corporation, (ii)&nbsp;who is or was serving
at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii)
who was an employee or agent of the corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the Registrant&#146;s directors has entered into an Indemnification Agreement with the
Registrant pursuant to which the Registrant is, subject to the limitations in the following
sentence, obligated to indemnify the directors to the fullest extent provided by law,
notwithstanding such indemnification is not specifically being provided in the Registrant&#146;s
Articles, Bylaws or by statute. The Registrant is not obligated under the Indemnification Agreement
to indemnify directors for the following: acts or omission or transactions from which a director
may not be relieved from liability under Section&nbsp;204 of the California General Corporation Law, a
proceeding or action instituted by an appropriate bank regulatory agency, claims initiated by such
director except with respect to proceedings to enforce a right of indemnification unless the Board
has approved the initiation or bringing of such suit, a proceeding instituted by a director to
enforce the Indemnification Agreement which is found by a court of competent jurisdiction to be not
in good faith or frivolous, insured claims or claims under Section 16(b) of the Securities Exchange
Act of 1934.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing indemnification provisions are broad enough to encompass certain liabilities of
directors under the Securities Act of 1933, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bylaws authorize the Registrant to purchase and maintain insurance on behalf of any person
who is or was an agent of the Registrant against any liability asserted against or incurred by such
person in such capacity or arising out of such person&#146;s status as such, whether or not the
Registrant would have the power to indemnify him against such liability under the provisions of the
Bylaws.
</DIV>

<!-- link2 "Item&nbsp;7. Exemption from Registration Claimed" -->
<DIV align="left"><A NAME="005"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;7. <U>Exemption from Registration Claimed</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-2<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;8. Exhibits" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;8. <U>Exhibits</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Instruments Defining the Rights of Stockholders. Reference is made to
Registrant&#146;s Registration Statement No.&nbsp;33-63721 on Form&nbsp;S-1, as amended on
Forms S-1/A, together with the exhibits thereto, which are incorporated herein by
reference pursuant to Item&nbsp;3(d) to this Registration Statement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion and Consent of Morgan, Lewis &#038; Bockius, LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Moss Adams LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Morgan, Lewis &#038; Bockius, LLP is contained in Exhibit&nbsp;5.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-10px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney. Reference is made to page II-4 of this Registration Statement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Shared Hospital Services 2006 Stock Incentive Plan</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<!-- link2 "Item&nbsp;9. Undertakings" -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;9. <U>Undertakings</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;The undersigned Registrant hereby undertakes: (1)&nbsp;to file, during any period in which
offers or sales are being made, a post-effective amendment to this Registration Statement: (i)&nbsp;to
include any prospectus required by Section&nbsp;10(a)(3) of the 1933 Act, (ii)&nbsp;to reflect in the
prospectus any facts or events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration Statement and
(iii)&nbsp;to include any material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those clauses is contained in
periodic reports filed by the Registrant pursuant to Section&nbsp;13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2)&nbsp;that for the purpose of
determining any liability under the 1933 Act each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof; and (3)&nbsp;to
remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the Registrant&#146;s 2006 Stock Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;The undersigned Registrant hereby undertakes that, for purposes of determining any
liability under the 1933 Act, each filing of the Registrant&#146;s annual report pursuant to Section
13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into this Registration
Statement shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to
directors, officers or controlling persons of the Registrant pursuant to the indemnification
provisions summarized in Item&nbsp;6 or otherwise, the Registrant has been advised that, in the opinion
of the Commission, such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->II-3<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="008"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-8, and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Francisco, State of California on
this 18th day of December, 2006.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>AMERICAN SHARED HOSPITAL SERVICES</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Ernest A. Bates, M.D.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernest A. Bates, M.D.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman of the Board and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>POWER OF ATTORNEY</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>KNOW ALL PERSONS BY THESE PRESENTS:</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;That each person whose signature appears below constitutes and appoints Ernest A. Bates, M.D.,
Chairman of the Board and Chief Executive Officer, and Craig Tagawa, Chief Operating Officer and
Chief Financial Officer and each of them, as such person&#146;s true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and in such person&#146;s
name, place and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or
his or her substitutes, may lawfully do or cause to be done by virtue thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Ernest A. Bates, M.D.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Ernest A. Bates, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board
and Chief Executive
Officer (Principal
Executive Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;18, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Craig K. Tagawa
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Craig K. Tagawa
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Operating Officer
and Chief Financial
Officer (Principal
Financial and
Accounting Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;18, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Ernest R. Bates
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Ernest R. Bates
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;18, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-4<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Olin C. Robison
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Olin C. Robison
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;18, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ John F. Ruffle
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
John F. Ruffle
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;18, 2006</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Stanley S. Trotman, Jr.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Stanley S. Trotman, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December&nbsp;18, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-5<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SECURITIES AND EXCHANGE COMMISSION
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">WASHINGTON, D.C. 20549

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">EXHIBITS
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">TO

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">FORM S-8

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">UNDER

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">SECURITIES ACT OF 1933

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "EXHIBIT INDEX" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">EXHIBIT INDEX
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Instruments Defining the Rights of Stockholders. Reference is made to
Registrant&#146;s Registration Statement No.&nbsp;33-63721 on Form&nbsp;S-1, as amended on
Forms S-1/A, together with the exhibits thereto, which are incorporated herein by
reference pursuant to Item&nbsp;3(d) to this Registration Statement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion and Consent of Morgan, Lewis &#038; Bockius, LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Moss Adams, LLP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Morgan, Lewis &#038; Bockius, LLP is contained in Exhibit&nbsp;5.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-10px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney. Reference is made to page II-4 of this Registration Statement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Shared Hospital Services 2006 Stock Incentive Plan</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DOCUMENT>
<TYPE>EX-5
<SEQUENCE>2
<FILENAME>f25882exv5.htm
<DESCRIPTION>EXHIBIT 5
<TEXT>
<HTML>
<HEAD>
<TITLE>exv5</TITLE>
</HEAD>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 5</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>OPINION AND CONSENT OF MORGAN LEWIS &#038; BOCKIUS LLP</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">December&nbsp;18, 2006
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">American Shared Hospital Services<BR>
Four Embarcadero Center, Suite&nbsp;3700<BR>
San Francisco, California 94111

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Re:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">American Shared Hospital Services- Registration
Statement on Form&nbsp;S-8 for 750,000 Shares of Common Stock</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have acted as counsel to American Shared Hospital Services, a California Corporation (the
&#147;Company&#148;), in connection with the registration on Form S-8 (the &#147;Registration Statement&#148;) under
the Securities Act of 1933, as amended, of 750,000 shares of Common Stock (the &#147;Shares&#148;) under the
Company&#146;s 2006 Stock Incentive Plan (the &#147;Incentive Plan&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This opinion is being furnished in accordance with the requirements of Item&nbsp;8 of Form S-8 and
Item&nbsp;601(b)(5)(i) of Regulation&nbsp;S-K.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have reviewed the Company&#146;s charter documents and the corporate proceedings taken by the
Company in connection with respect to the establishment of the Incentive Plan. Based on such
review, we are of the opinion that, if, as and when the Shares are issued and sold (and the
consideration therefore received) pursuant to the (a)&nbsp;provisions of option agreements duly
authorized under the Incentive Plan and in accordance with the Registration Statement, and (b)&nbsp;duly
authorized direct stock issuances effected under the Incentive Plan and in accordance with the
Registration Statement, such Shares will be duly authorized, legally issued, fully paid and
nonassessable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consent to the filing of this opinion letter as Exhibit&nbsp;5 to the Registration Statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This opinion letter is rendered as of the date first written above and we disclaim any
obligation to advise you of facts, circumstances, events or developments which hereafter may be
brought to our attention and which may alter, affect or modify the opinion expressed herein. Our
opinion is expressly limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the Incentive Plan or
the Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">Very truly yours,

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">/s/ Morgan Lewis &#038; Bockius LLP<BR>
MORGAN LEWIS &#038; BOCKIUS LLP

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>f25882exv23w1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
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<HEAD>
<TITLE>exv23w1</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 23.1</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the Registration Statement on Form S-8 of our
report dated March&nbsp;29, 2006, relating to the financial statements appearing in the Annual Report on
Form 10-K of American Shared Hospital Services for the year ended December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">/s/ MOSS ADAMS, LLP

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">San Francisco, California<BR>
December&nbsp;13, 2006

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>f25882exv99w1.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right" style="font-size: 10pt; margin-top: 6pt"><B>Exhibit
99.1</B>
</div>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMERICAN SHARED HOSPITAL SERVICES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>2006 STOCK INCENTIVE PLAN</B></U>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE ONE</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GENERAL PROVISIONS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I.&nbsp;PURPOSE OF THE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This 2006 Stock Incentive Plan is intended to promote the interests of American Shared
Hospital Services, a California corporation, by providing eligible persons in the Corporation&#146;s
service with the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in such service.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>II.&nbsp;STRUCTURE OF THE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Plan shall be divided into three separate equity incentive programs:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT style="font-family: Symbol">&#045;</FONT> the Discretionary Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of Common Stock
or stock appreciation rights tied to the value of such Common Stock,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT style="font-family: Symbol">&#045;</FONT> the Stock Issuance Program under which eligible persons may, at the discretion
of the Plan Administrator, be issued shares of Common Stock pursuant to restricted stock
awards, restricted stock units or other stock-based awards which vest upon the completion of
a designated service period or the attainment of pre-established performance milestones, or
such shares of Common Stock may be issued through direct purchase or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT style="font-family: Symbol">&#045;</FONT> the Automatic Grant Program under which eligible non-employee Board members
will automatically receive grants at designated intervals over their period of continued
Board service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The provisions of Articles One and Five shall apply to all equity programs under the Plan
and shall govern the interests of all persons under the Plan.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>III. ADMINISTRATION OF THE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Compensation Committee shall have sole and exclusive authority to administer the
Discretionary Grant and Stock Issuance Programs with respect to Section&nbsp;16 Insiders. Administration
of the Discretionary Grant and Stock Issuance Programs with respect to all other persons eligible
to participate in those programs may, at the Board&#146;s discretion, be vested in the Compensation
Committee or a Secondary Board Committee, or the Board may retain the power to administer those
programs with respect to all such persons. However, any Awards made to the members of the
Compensation Committee other than pursuant to the Automatic Grant Program must be authorized by a
disinterested majority of the Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Members of the Compensation Committee or any Secondary Board Committee shall serve for such
period of time as the Board may determine and may be removed by the Board at any time. The Board
may also at any time terminate the functions of any Secondary Board Committee and reassume all
powers and authority previously delegated to such committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Each Plan Administrator shall, within the scope of its administrative functions under the
Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules
and regulations as it may deem appropriate for proper administration of the Discretionary Grant and
Stock Issuance Programs and to make such determinations under, and issue such interpretations of,
the provisions of those programs and any outstanding Awards thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its administrative functions
under the Plan shall be final and binding on all parties who have an interest in the Discretionary
Grant and Stock Issuance Programs under its jurisdiction or any Award thereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Service as a Plan Administrator by the members of the Compensation Committee or the
Secondary Board Committee shall constitute service as Board members, and the members of each such
committee shall accordingly be entitled to full indemnification and reimbursement as Board members
for their service on such committee. No member of the Compensation Committee or the Secondary
Board Committee shall be liable for any act or omission made in good faith with respect to the Plan
or any Award made thereunder..
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Administration of the Automatic Grant Program shall be self-executing in accordance with
the terms of that program, and no Plan Administrator shall exercise any discretionary functions
with respect to any Award made under that program, except that the Compensation Committee shall
have the express authority to establish from time to time the specific number of shares to be
subject to the initial and annual Awards made to the non-employee Board members under such program.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IV.&nbsp;ELIGIBILITY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The persons eligible to participate in the Discretionary Grant and Stock Issuance Programs
are as follows:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Employees,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Plan Administrator shall have full authority to determine, (i)&nbsp;with respect to Awards
made under the Discretionary Grant Program, which eligible persons are to receive such Awards, the
time or times when those Awards are to be made, the number of shares to be covered by each such
Award,, the time or times when the Award is to vest and become exercisable, the maximum term for
which such Award is to remain outstanding and the status of a granted option as either an Incentive
Option or a Non-Statutory Option and (ii)&nbsp;with respect to Awards made under the Stock Issuance
Program, which eligible persons are to receive such Awards, the time or times when the Awards are
to be made, the number of shares subject to each such Award, the vesting and issuance schedules
applicable to the shares which are the subject of such Award and the cash consideration (if any)
payable for those shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. The Plan Administrator shall have the absolute discretion either to grant options or stock
appreciation rights in accordance with the Discretionary Grant Program or to effect stock issuances
and other stock-based awards in accordance with the Stock Issuance Program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. The individuals who shall be eligible to participate in the Automatic Grant Program shall
be limited to (i)&nbsp;those individuals who first become non-employee Board members on or after the
Plan Effective Date, whether through appointment by the Board or election by the Corporation&#146;s
shareholders, and (ii)&nbsp;those individuals who continue to serve as non-employee Board members on or
after the Plan Effective Date. A non-employee Board member who has previously been in the employ
of the Corporation (or any Parent or Subsidiary) shall not be eligible to receive an Award under
the Automatic Grant Program at the time he or she first becomes a non-employee Board member, but
shall be eligible to receive periodic Awards under the Automatic Grant Program while he or she
continues to serve as a non-employee Board member.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>V.&nbsp;STOCK SUBJECT TO THE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Corporation on the open market. The number of
shares of Common Stock initially reserved for issuance over the term of the Plan shall be limited
to seven hundred fifty thousand (750,000) shares. Such share reserve is comprised of (i)&nbsp;the
number of shares of Common Stock available for issuance under the Predecessor Plans on the Plan
Effective Date, including the shares subject to options outstanding at that time under the
Predecessor Plans, and (ii)&nbsp;an additional increase of approximately three hundred sixty thousand
(360,000) shares of Common Stock. The Plan shall serve as the successor to the Predecessor Plans,
and no further stock option grants or stock issuances shall be made under those Predecessor Plans
on or after the Plan Effective Date. All options outstanding under the Predecessor Plans on the
Plan Effective Date shall be transferred to this Plan as part of the initial share reserve
hereunder and shall continue in full force and effect in accordance with their terms, and no
provision of this Plan shall be deemed to affect or otherwise modify the rights or obligations of
the holders of those options with respect to their acquisition of shares of Common Stock
thereunder. To the extent any options outstanding under the Predecessor Plans on the Plan Effective
Date expire or terminate unexercised, the number of shares of Common Stock subject to those expired
or terminated options at the time of expiration or termination shall be available for one or more
Awards made under this Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. No one person participating in the Plan may receive Awards for more than one hundred fifty
thousand (150,000) shares of Common Stock in the aggregate per calendar year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Shares of Common Stock subject to outstanding Awards made under the Plan (including the
options transferred from the Predecessor Plans) shall be available for subsequent issuance under
the Plan to the extent those Awards expire or terminate for any reason prior to the issuance of the
shares of Common Stock subject to those Awards. Unvested shares issued under the Plan and
subsequently forfeited or repurchased by the Corporation, at a price per share not greater than the
original issue price paid per share, pursuant to the Corporation&#146;s repurchase rights under the Plan
shall be added back to the number of shares of Common Stock reserved for issuance under the Plan
and shall accordingly be available for subsequent reissuance. Should the exercise price of an
option under the Plan be paid with shares of Common Stock, then the authorized reserve of Common
Stock under the Plan shall be reduced by the gross number of shares for which that option is
exercised, and not by the net number of shares issued under the exercised stock option. If shares
of Common Stock otherwise issuable under the Plan are withheld by the Corporation in satisfaction
of the withholding taxes incurred
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in connection with the issuance, exercise or vesting of an Award, then the number of shares of
Common Stock available for issuance under the Plan shall be reduced by the gross number of shares
issued, exercised or vesting under such Award, calculated in each instance prior to any such share
withholding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. If any change is made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation&#146;s receipt of consideration, appropriate
adjustments shall be made by the Plan Administrator to (i)&nbsp;the maximum number and/or class of
securities issuable under the Plan, (ii)&nbsp;the maximum number and/or class of securities for which
any one person may receive Awards under the Plan per calendar year, (iii)&nbsp;the maximum number and/or
class of securities for which stock option grants and restricted stock unit awards may subsequently
be made under the Automatic Grant Program to new and continuing non-employee Board members, (iv)
the number and/or class of securities and the exercise or base price per share in effect under each
outstanding Award under the Discretionary Grant Program and (v)&nbsp;the number and/or class of
securities subject to each outstanding Award under the Stock Issuance Program and the cash
consideration (if any) payable per share. To the extent the foregoing adjustments are to be made
to outstanding Awards, such adjustments shall be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under those Awards. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. Outstanding Awards under the Plan shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE TWO</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DISCRETIONARY GRANT PROGRAM</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I.&nbsp;OPTION TERMS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each option shall be evidenced by one or more documents in the form approved by the Plan
Administrator; <U>provided</U>, however, that each such document shall comply with the terms
specified below. Each document evidencing an Incentive Option shall, in addition, be subject to
the provisions of the Plan applicable to such options.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <U><B>Exercise Price</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The exercise price per share shall be fixed by the Plan Administrator; provided, however,
that such exercise price shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;The exercise price shall become immediately due upon exercise of the option and shall,
subject to the provisions of the documents evidencing the option, be payable in one or more of the
forms specified below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) cash or check made payable to the Corporation,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) shares of Common Stock valued at Fair Market Value on the Exercise Date
and held for the requisite period (if any) necessary to avoid any additional charges
to the Corporation&#146;s earnings for financial reporting purposes, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) to the extent the option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide instructions to (a)&nbsp;a brokerage firm (reasonably satisfactory
to the Corporation for purposes of administering such procedure in compliance with
the Corporation&#146;s pre-clearance/pre-notification policies) to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable income and employment
taxes required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm on such settlement date in order to complete the sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except to the extent such sale and remittance procedure is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <U><B>Exercise and Term of Options</B></U><B>. </B>Each option shall be exercisable at such time or
times, during such period and for such number of shares as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option. However, no option shall have
a term in excess of seven (7)&nbsp;years measured from the grant date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. <U><B>Effect of Termination of Service</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The following provisions shall govern the exercise of any options granted pursuant to the
Discretionary Grant Program that are outstanding at the time of the Optionee&#146;s cessation of Service
or death:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Any option outstanding at the time of the Optionee&#146;s cessation of Service
for any reason shall remain exercisable for such period of time thereafter as shall
be determined by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the expiration of the
option term.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Any option held by the Optionee at the time of the Optionee&#146;s death and
exercisable in whole or in part at that time may be subsequently exercised by the
personal representative of the Optionee&#146;s estate or by the person or persons to whom
the option is transferred pursuant to the Optionee&#146;s will or the laws of inheritance
or by the Optionee&#146;s designated beneficiary or beneficiaries of that option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Should the Optionee&#146;s Service be terminated for Misconduct or should the
Optionee otherwise engage in Misconduct while holding one or more outstanding
options granted under this Article&nbsp;Two, then all of those options shall terminate
immediately and cease to be outstanding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) During the applicable post-Service exercise period, the option may not be
exercised for more than the number of vested shares for which the option is at the
time exercisable. No additional shares shall vest under the option following the
Optionee&#146;s cessation of Service, except to the extent (if any) specifically
authorized by the Plan Administrator in its sole discretion pursuant to an express
written agreement with the Optionee. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any shares for which the option has not
been exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;The Plan Administrator shall have complete discretion, exercisable either at the time an
option is granted or at any time while the option remains outstanding, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) extend the period of time for which the option is to remain exercisable
following the Optionee&#146;s cessation of Service from the limited exercise period
otherwise in effect for that option to such greater period of time as
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">the Plan Administrator shall deem appropriate, but in no event beyond the
expiration of the option term,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) include an automatic extension provision whereby the specified
post-Service exercise period in effect for any option granted under this Article&nbsp;Two
shall automatically be extended by an additional period of time equal in duration to
any interval within the specified post-Service exercise period during which the
exercise of that option or the immediate sale of the shares acquired under such
option could not be effected in compliance with applicable federal and state
securities laws, but in no event shall such an extension result in the continuation
of such option beyond the expiration date of the term of that option, and/or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee&#146;s cessation
of Service but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. <U><B>Shareholder Rights</B></U><B>. </B>The holder of an option shall have no shareholder rights with
respect to the shares subject to the option until such person shall have exercised the option, paid
the exercise price and become a holder of record of the purchased shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. <U><B>Repurchase Rights</B></U><B>. </B>The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the Optionee cease
Service while such shares are unvested, the Corporation shall have the right to repurchase any or
all of those unvested shares at a price per share equal to the <B><I>lower </I></B>of (i)&nbsp;the exercise price paid
per share or (ii)&nbsp;the Fair Market Value per share of Common Stock at the time of repurchase. The
terms upon which such repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be established by the
Plan Administrator and set forth in the document evidencing such repurchase right.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. <U><B>Transferability of Options</B></U>. The transferability of options granted under the Plan
shall be governed by the following provisions:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;<U><I>Incentive Options</I></U>: During the lifetime of the Optionee, Incentive Options shall
be exercisable only by the Optionee and shall not be assignable or transferable other than by will
or the laws of inheritance following the Optionee&#146;s death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;<U><I>Non-Statutory Options</I></U>. Non-Statutory Options shall be subject to the same
limitation on transfer as Incentive Options, except that the Plan Administrator may structure one
or more Non-Statutory Options so that the option may be assigned in whole or in part during the
Optionee&#146;s lifetime to one or more Family Members of the Optionee or to a trust
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">established exclusively for the Optionee and/or one or more such Family Members, to the extent such
assignment is in connection with the Optionee&#146;s estate plan or pursuant to a domestic relations
order. The assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem
appropriate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;<U><I>Beneficiary Designations</I></U>. Notwithstanding the foregoing, the Optionee may
designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article&nbsp;Two (whether Incentive Options or Non-Statutory Options), and those options
shall, in accordance with such designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee&#146;s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and conditions of the
applicable agreement evidencing each such transferred option, including (without limitation) the
limited time period during which the option may be exercised following the Optionee&#146;s death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>II.&nbsp;INCENTIVE OPTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms specified below shall be applicable to all Incentive Options. Except as modified by
the provisions of this Section&nbsp;II, all the provisions of Articles One, Two and Five shall be
applicable to Incentive Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall <U>not</U> be subject to the terms of this Section&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <U><B>Eligibility</B></U><B>. </B>Incentive Options may only be granted to Employees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <U><B>Dollar Limitation</B></U><B>. </B>The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more options granted to
any Employee under the Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent the Employee holds two (2)&nbsp;or more such options which become exercisable for the
first time in the same calendar year, then for purposes of the foregoing limitations on the
exercisability of those options as Incentive Options, such options shall be deemed to become first
exercisable in that calendar year on the basis of the chronological order in which they were
granted, except to the extent otherwise provided under applicable law or regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. <U><B>10% Shareholder</B></U><B>. </B>If any Employee to whom an Incentive Option is granted is a 10%
Shareholder, then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option
term shall not exceed five (5)&nbsp;years measured from the option grant date.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>III. STOCK APPRECIATION RIGHTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <U><B>Authority</B></U>. The Plan Administrator shall have full power and authority, exercisable
in its sole discretion, to grant stock appreciation rights in accordance with this Section&nbsp;III to
selected Optionees or other individuals eligible to receive option grants under the Discretionary
Grant Program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <U><B>Types</B></U>. Two types of stock appreciation rights shall be authorized for issuance
under this Section&nbsp;III: (i)&nbsp;tandem stock appreciation rights (&#147;Tandem Rights&#148;) and (ii)&nbsp;stand-alone
stock appreciation rights (&#147;Stand-alone Rights&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. <U><B>Tandem Rights</B></U>. The following terms and conditions shall govern the grant and
exercise of Tandem Rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;One or more Optionees may be granted a Tandem Right, exercisable upon such terms and
conditions as the Plan Administrator may establish, to elect between the exercise of the underlying
option for shares of Common Stock or the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (i)&nbsp;the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (ii)&nbsp;the aggregate exercise price payable
for such vested shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;No such option surrender shall be effective unless it is approved by the Plan
Administrator, either at the time of the actual option surrender or at any earlier time. If the
surrender is so approved, then the distribution to which the Optionee shall accordingly become
entitled under this Section&nbsp;III shall be made in shares of Common Stock valued at Fair Market Value
on the option surrender date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;If the surrender of an option is not approved by the Plan Administrator, then the Optionee
shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at any time prior to the <I>later</I>
of (i)&nbsp;five (5)&nbsp;business days after the receipt of the rejection notice or (ii)&nbsp;the last day on
which the option is otherwise exercisable in accordance with the terms of the instrument evidencing
such option, but in no event may such rights be exercised more than seven (7)&nbsp;years after the date
of the option grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. <U><B>Stand-Alone Rights</B></U>. The following terms and conditions shall govern the grant and
exercise of Stand-alone Rights:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;One or more individuals eligible to participate in the Discretionary Grant Program may be
granted a Stand-alone Right not tied to any underlying option under this Discretionary Grant
Program. The Stand-alone Right shall relate to a specified number of shares of Common Stock and
shall be exercisable upon such terms and conditions as the Plan Administrator may establish. In no
event, however, may the Stand-alone Right have a maximum term in excess of seven (7)&nbsp;years measured
from the grant date. Upon exercise of the Stand-
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">alone Right, the holder shall be entitled to receive a distribution from the Corporation in an
amount equal to the excess of (i)&nbsp;the aggregate Fair Market Value (on the exercise date) of the
shares of Common Stock underlying the exercised right over (ii)&nbsp;the aggregate base price in effect
for those shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;The number of shares of Common Stock underlying each Stand-alone Right and the base price
in effect for those shares shall be determined by the Plan Administrator in its sole discretion at
the time the Stand-alone Right is granted. In no event, however, may the base price per share be
less than the Fair Market Value per underlying share of Common Stock on the grant date. In the
event outstanding Stand-alone Rights are to be assumed in connection with a Change in Control
transaction or otherwise continued in effect, the shares of Common Stock underlying each such
Stand-alone Right shall be adjusted immediately after such Change in Control so as to apply to the
number and class of securities into which those shares of Common Stock would have been converted in
consummation of such Change in Control had those shares actually been outstanding at that time.
Appropriate adjustments to reflect such Change in Control shall also be made to the base price per
share in effect under each outstanding Stand-alone Right, <U>provided</U> the aggregate base price
shall remain the same. To the extent the actual holders of the Corporation&#146;s outstanding Common
Stock receive cash consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption or continuation of the outstanding
Stand-alone Rights under the Discretionary Grant Program, substitute, for the securities underlying
those assumed rights, one or more shares of its own common stock with a fair market value
equivalent to the cash consideration paid per share of Common Stock in the Change in Control
transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Stand-alone Rights shall be subject to the same transferability restrictions applicable to
Non-Statutory Options and may not be transferred during the holder&#146;s lifetime, except if such
assignment is in connection with the holder&#146;s estate plan and is to one or more Family Members of
the holder or to a trust established for the holder and/or one or more such Family Members or
pursuant to a domestic relations order covering the Stand-alone Right as marital property. In
addition, one or more beneficiaries may be designated for an outstanding Stand-alone Right in
accordance with substantially the same terms and provisions as set forth in Section&nbsp;I.F of this
Article&nbsp;Two.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;The distribution with respect to an exercised Stand-alone Right shall be made in shares of
Common Stock valued at Fair Market Value on the exercise date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;The holder of a Stand-alone Right shall have no shareholder rights with respect to the
shares subject to the Stand-alone Right unless and until such person shall have exercised the
Stand-alone Right and become a holder of record of the shares of Common Stock issued upon the
exercise of such Stand-alone Right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. <U><B>Post-Service Exercise</B></U>. The provisions governing the exercise of Tandem and
Stand-alone Rights following the cessation of the recipient&#146;s Service shall be substantially the
same as those set forth in Section&nbsp;I.C of this Article&nbsp;Two for the options granted under the
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Discretionary Grant Program, and the Plan Administrator&#146;s discretionary authority under
Section&nbsp;I.C.2 of this Article&nbsp;Two shall also extend to any outstanding Tandem or Stand-alone
Appreciation Rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. <U><B>Gross Counting</B></U><B>. </B>Upon the exercise of any Tandem or Stand-alone Right under this
Section&nbsp;III, the share reserve under Section&nbsp;V of Article&nbsp;One shall be reduced by the gross number
of shares as to which such right is exercised, and not by the net number of shares actually issued
by the Corporation upon such exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IV.&nbsp;CHANGE IN CONTROL/HOSTILE TAKE-OVER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. In the event of a Change in Control, each outstanding Award under the Discretionary Grant
Program shall automatically accelerate so that each such Award shall, immediately prior to the
effective date of that Change in Control, become exercisable as to all the shares of Common Stock
at the time subject to such Award and may be exercised as to any or all of those shares as fully
vested shares of Common Stock. However, an outstanding Award under the Discretionary Grant Program
shall <B><I>not </I></B>become exercisable on such an accelerated basis if and to the extent: (i)&nbsp;such Award is
to be assumed by the successor corporation (or parent thereof) or is otherwise to continue in full
force and effect pursuant to the terms of the Change in Control transaction or (ii)&nbsp;such Award is
to be replaced with a cash retention program of the successor corporation which preserves the
spread existing at the time of the Change in Control on any shares as to which the Award is not
otherwise at that time vested and exercisable and provides for subsequent payout of that spread in
accordance with the same exercise/vesting schedule in effect for that Award or (iii)&nbsp;the
acceleration of such Award is subject to other limitations imposed by the Plan Administrator.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. All outstanding repurchase rights under the Discretionary Grant Program shall automatically
terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of a Change in Control, except to the extent: (i)&nbsp;those repurchase rights are
to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in
full force and effect pursuant to the terms of the Change in Control transaction or (ii)&nbsp;such
accelerated vesting is precluded by other limitations imposed by the Plan Administrator.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Immediately following the consummation of the Change in Control, all outstanding Awards
under the Discretionary Grant Program shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise continued in full
force and effect pursuant to the terms of the Change in Control transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Each option which is assumed in connection with a Change in Control or otherwise continued
in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities which would have been issuable to the Optionee in consummation
of such Change in Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments to reflect such Change in
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Control shall also be made to (i)&nbsp;the exercise price payable per share under each outstanding
option, <U>provided</U> the aggregate exercise price payable for such securities shall remain the
same, (ii)&nbsp;the maximum number and/or class of securities available for issuance over the remaining
term of the Plan (iii)&nbsp;the maximum number and/or class of securities which may be issued without
cash consideration under the Stock Issuance Program and (iv)&nbsp;the maximum number and/or class of
securities for which any one person may receive Awards under the Plan per calendar year. To the
extent the actual holders of the Corporation&#146;s outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Change in Control, the successor corporation may, in
connection with the assumption or continuation of the outstanding options under the Discretionary
Grant Program, substitute one or more shares of its own common stock with a fair market value
equivalent to the cash consideration paid per share of Common Stock in such Change in Control
transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. The Plan Administrator shall have the discretionary authority to structure one or more
outstanding Awards rights under the Discretionary Grant Program so that those Awards shall,
immediately prior to the effective date of a Change in Control, become exercisable as to all the
shares of Common Stock at the time subject to those Awards and may be exercised as to any or all of
those shares as fully vested shares of Common Stock, whether or not those Awards are to be assumed
in the Change in Control transaction or otherwise continued in effect. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of the Corporation&#146;s
repurchase rights under the Discretionary Grant Program so that those rights shall immediately
terminate upon the consummation of the Change in Control transaction, and the shares subject to
those terminated rights shall thereupon vest in full.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. The Plan Administrator shall have full power and authority to structure one or more
outstanding Awards under the Discretionary Grant Program so that those Awards shall become
exercisable as to all the shares of Common Stock at the time subject to those Awards in the event
the Optionee&#146;s Service is subsequently terminated by reason of an Involuntary Termination within a
designated period following the effective date of any Change in Control transaction in which those
Awards do not otherwise fully accelerate. In addition, the Plan Administrator may structure one or
more of the Corporation&#146;s repurchase rights so that those rights shall immediately terminate with
respect to any shares held by the Optionee at the time of such Involuntary Termination, and the
shares subject to those terminated repurchase rights shall accordingly vest in full at that time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. The Plan Administrator shall have the discretionary authority to structure one or more
outstanding Awards under the Discretionary Grant Program so that those Awards shall, immediately
prior to the effective date of a Hostile Take-Over, become exercisable as to all the shares of
Common Stock at the time subject to those Awards and may be exercised as to any or all of those
shares as fully vested shares of Common Stock. In addition, the Plan Administrator shall have the
discretionary authority to structure one or more of the Corporation&#146;s repurchase rights under the
Discretionary Grant Program so that those rights shall terminate automatically upon the
consummation of such Hostile Take-Over, and the shares subject to those terminated rights shall
thereupon vest in full. Alternatively, the Plan Administrator may
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">condition the automatic acceleration of one or more outstanding Awards under the Discretionary
Grant Program and the termination of one or more of the Corporation&#146;s outstanding repurchase rights
under such program upon the subsequent termination of the Optionee&#146;s Service by reason of an
Involuntary Termination within a designated period following the effective date of such Hostile
Take-Over.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. The portion of any Incentive Option accelerated in connection with a Change in Control or
Hostile Take-Over shall remain exercisable as an Incentive Option only to the extent the applicable
One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be exercisable as a
Non-statutory Option under the Federal tax laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>V.&nbsp;PROHIBITION ON REPRICING PROGRAMS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Plan Administrator shall not (i)&nbsp;implement any cancellation/regrant program pursuant to
which outstanding options or stock appreciation rights under the Plan are cancelled and new options
or stock appreciation rights are granted in replacement with a lower exercise price per share, (ii)
cancel outstanding options or stock appreciation rights under the Plan with exercise prices per
share in excess of the then current Fair Market Value per share of Common Stock for consideration
payable in equity securities of the Corporation or (iii)&nbsp;otherwise directly reduce the exercise
price in effect for outstanding options or stock appreciation rights under the Plan, without in
each such instance obtaining shareholder approval.
</DIV>



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</DIV>


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE THREE</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>STOCK ISSUANCE PROGRAM</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I.&nbsp;STOCK ISSUANCE TERMS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares of Common Stock may be issued under the Stock Issuance Program, either as vested or
unvested shares, through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the
terms specified below. Shares of Common Stock may also be issued under the Stock Issuance Program
pursuant to share right awards or restricted stock units which entitle the recipients to receive
the shares underlying those awards or units upon the attainment of designated performance goals or
the satisfaction of specified Service requirements or upon the expiration of a designated time
period following the vesting of those awards or units.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <U><B>Issue Price</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The issue price per share shall be fixed by the Plan Administrator, but shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the issuance
date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Shares of Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem appropriate in each
individual instance:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;cash or check made payable to the Corporation,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;past services rendered to the Corporation (or any Parent or Subsidiary);
or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;any other valid consideration under the California Corporation Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <U><B>Vesting Provisions</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of
the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more
installments over the Participant&#146;s period of Service or upon the attainment of specified
performance objectives. The elements of the vesting schedule applicable to any unvested shares of
Common Stock issued under the Stock Issuance Program shall be determined by the Plan Administrator
and incorporated into the Stock Issuance Agreement. Shares of Common Stock may also be issued
under the Stock Issuance Program pursuant to
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">share right awards or restricted stock units which entitle the recipients to receive the
shares underlying those awards or units upon the attainment of designated performance goals or the
satisfaction of specified Service requirements or upon the expiration of a designated time period
following the vesting of those awards or units, including (without limitation) a deferred
distribution date following the termination of the Participant&#146;s Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;The Plan Administrator shall also have the discretionary authority, consistent with Code
Section&nbsp;162(m), to structure one or more Awards under the Stock Issuance Program so that the shares
of Common Stock subject to those Awards shall vest (or vest and become issuable) upon the
achievement of certain pre-established corporate performance goals based on one or more of the
following criteria: (1)&nbsp;return on total shareholder equity; (2)&nbsp;earnings per share of Common Stock;
(3)&nbsp;net income or operating income (before or after taxes); (4)&nbsp;earnings before interest, taxes,
depreciation and amortization; (5)&nbsp;earnings before interest, taxes, depreciation, amortization and
charges for stock-based compensation, (6)&nbsp;sales or revenue targets; (7)&nbsp;return on assets, capital
or investment; (8)&nbsp;cash flow; (9)&nbsp;market share; (10)&nbsp;cost reduction goals; (11)&nbsp;budget comparisons;
(12)&nbsp;measures of customer satisfaction; (13)&nbsp;any combination of, or a specified increase in, any of
the foregoing; (14)&nbsp;new product development or successful completion of research and development
projects; and (15)&nbsp;the formation of joint ventures, research or development collaborations, or the
completion of other corporate transactions intended to enhance the Corporation&#146;s revenue or
profitability or enhance its customer base. In addition, such performance goals may be based upon
the attainment of specified levels of the Corporation&#146;s performance under one or more of the
measures described above relative to the performance of other entities and may also be based on the
performance of any of the Corporation&#146;s business units or divisions or any Parent or Subsidiary.
Performance goals may include a minimum threshold level of performance below which no award will be
earned, levels of performance at which specified portions of an award will be earned and a maximum
level of performance at which an award will be fully earned. The performance goals may, at the
time they are established for one or more Awards under the Stock Issuance Program, be subject to
adjustment for one or more of the following items: extraordinary, unusual or non-recurring items of
gain, loss or expense; items of gain, loss or expense related to (a)&nbsp;the disposal of a business or
discontinued operations or (b)&nbsp;the operations of any business acquired by Corporation; accruals for
reorganization and restructuring cost and expenses; and items of gain, loss or expense attributable
to changes in tax laws and regulations, accounting principles or other applicable laws or
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Any new, substituted or additional securities or other property (including money paid other
than as a regular cash dividend) which the Participant may have the right to receive with respect
to the Participant&#146;s unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation&#146;s receipt of consideration shall be
issued subject to (i)&nbsp;the same vesting requirements applicable to the Participant&#146;s unvested shares
of Common Stock and (ii)&nbsp;such escrow arrangements as the Plan Administrator shall deem appropriate.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;The Participant shall have full shareholder rights with respect to any shares of Common
Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant&#146;s
interest in those shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any dividends paid on such shares, subject to any applicable vesting
requirements. The Participant shall not have any shareholder rights with respect to the shares of
Common Stock subject to a restricted stock unit or share right award until that award vests and the
shares of Common Stock are actually issued thereunder. However, dividend-equivalent units may be
paid or credited, either in cash or in actual or phantom shares of Common Stock, on outstanding
restricted stock unit or share right awards, subject to such terms and conditions as the Plan
Administrator may deem appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;Should the Participant cease to remain in Service while holding one or more unvested shares
of Common Stock issued under the Stock Issuance Program or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock, then those shares shall
be immediately surrendered to the Corporation for cancellation, and the Participant shall have no
further shareholder rights with respect to those shares. To the extent the surrendered shares were
previously issued to the Participant for consideration paid in cash or cash equivalent, the
Corporation shall repay to the Participant the <B><I>lower </I></B>of (i)&nbsp;the cash consideration paid for the
surrendered shares or (ii)&nbsp;the Fair Market Value of those shares at the time of cancellation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;The Plan Administrator may in its discretion waive the surrender and cancellation of one or
more unvested shares of Common Stock which would otherwise occur upon the cessation of the
Participant&#146;s Service or the non-attainment of the performance objectives applicable to those
shares. Any such waiver shall result in the immediate vesting of the Participant&#146;s interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time,
whether before or after the Participant&#146;s cessation of Service or the attainment or non-attainment
of the applicable performance objectives. However, no vesting requirements tied to the attainment
of performance objectives may be waived with respect to shares which were intended at the time of
issuance to qualify as performance-based compensation under Code Section&nbsp;162(m), except in the
event of the Participant&#146;s Involuntary Termination or as otherwise provided in Section&nbsp;II of this
Article&nbsp;Three.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;Outstanding share right awards or restricted stock units under the Stock Issuance Program
shall automatically terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards or units, if the performance goals or Service requirements established
for such awards or units are not attained or satisfied. The Plan Administrator, however, shall
have the discretionary authority to issue vested shares of Common Stock under one or more
outstanding share right awards or restricted stock units as to which the designated performance
goals or Service requirements have not been attained or satisfied. However, no vesting
requirements tied to the attainment of performance goals may be waived with respect to awards or
units which were intended, at the time those awards or units were granted, to qualify as
performance-based compensation under Code Section&nbsp;162(m), except in
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the event of the Participant&#146;s Involuntary Termination or as otherwise provided in Section&nbsp;II
of this Article&nbsp;Three.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>II.&nbsp;CHANGE IN CONTROL/HOSTILE TAKE-OVER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. All of the Corporation&#146;s outstanding repurchase rights under the Stock Issuance Program
shall terminate automatically, and all the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Change in Control, except to the extent
(i)&nbsp;those repurchase rights are to be assigned to the successor corporation (or parent thereof) or
are otherwise to continue in full force and effect pursuant to the terms of the Change in Control
transaction or (ii)&nbsp;such accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. Each outstanding Award under the Stock Issuance Program which is assumed in connection with
a Change in Control or otherwise continued in effect shall be adjusted immediately after the
consummation of that Change in Control so as to apply to the number and class of securities into
which the shares of Common Stock subject to that Award immediately prior to the Change in Control
would have been converted in consummation of such Change in Control had those shares actually been
outstanding at that time, and appropriate adjustments shall also be made to the cash consideration
(if any) payable per share thereunder, provided the aggregate amount of such consideration shall
remain the same. To the extent the actual holders of the Corporation&#146;s outstanding Common Stock
receive cash consideration for their Common Stock in consummation of the Change in Control, the
successor corporation may, in connection with the assumption or continuation of the outstanding
Awards, substitute one or more shares of its own common stock with a fair market value equivalent
to the cash consideration paid per share of Common Stock in such Change in Control transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. If an Award under the Stock Issuance Program is not assumed or otherwise continued in
effect or replaced with a cash retention program of the successor corporation which preserves the
Fair Market Value of the underlying shares of Common Stock at the time of the Change in Control and
provides for the subsequent payout of that value in accordance with the same vesting schedule
applicable to those shares, then such Award shall vest, and the shares of Common Stock subject to
that Award shall be issued as fully-vested shares, immediately prior to the consummation of the
Change in Control.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. The Plan Administrator shall have the discretionary authority to structure one or more
unvested Awards under the Stock Issuance Program so that the shares of Common Stock subject to
those Awards shall automatically vest (or vest and become issuable) in whole or in part immediately
upon the occurrence of a Change in Control or upon the subsequent termination of the Participant&#146;s
Service by reason of an Involuntary Termination within a designated period following the effective
date of that Change in Control transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. The Plan Administrator shall also have the discretionary authority to structure one or more
unvested Awards under the Stock Issuance Program so that the shares of Common Stock subject to
those Awards shall automatically vest (or vest and become issuable) in
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">whole or in part immediately upon the occurrence of a Hostile Take-Over or upon the subsequent
termination of the Participant&#146;s Service by reason of an Involuntary Termination within a
designated period following the effective date of that Hostile Take-Over.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. The Plan Administrator&#146;s authority under Paragraphs D and E of this Section&nbsp;II shall also
extend to any Awards under the Stock Issuance Program which are intended to qualify as
performance-based compensation under Code Section&nbsp;162(m), even though the automatic vesting of
those issuances, units or awards pursuant to Paragraph&nbsp;D or E of this Section&nbsp;II may result in
their loss of performance-based status under Code Section&nbsp;162(m).
</DIV>


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE FOUR</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>AUTOMATIC GRANT PROGRAM</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I.&nbsp;TERMS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <U><B>Grant Dates</B></U>. Grants shall be made pursuant to the Automatic Grant Program in
effect under this Article&nbsp;Four as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Each individual who is first elected or appointed as a non-employee Board member at any
time on or after the date of the 2006 Annual Meeting shall automatically be granted, on the date of
such initial election or appointment, a Non-Statutory Option to purchase not more than ten thousand
(10,000) shares of Common Stock and restricted stock units covering not more than three thousand
(3,000) shares of Common Stock, provided that individual has not previously been in the employ of
the Corporation or any Parent or Subsidiary. The actual number of shares for which such initial
option grant and restricted stock unit award shall be made shall (subject to the respective ten
thousand (10,000) and three thousand (3,000)-share limits) be determined by the Plan Administrator
at the time of each such grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;On the date of each annual shareholders meeting, beginning with the 2006 Annual Meeting,
each individual who is to continue to serve as a non-employee Board member, whether or not that
individual is standing for re-election to the Board at that particular annual meeting, shall
automatically be granted a Non-Statutory Option to purchase not more than three thousand (3,000)
shares of common stock and restricted stock units covering up to not more than an additional one
thousand (1,000) shares of Common Stock, provided that such individual has served as a non-employee
Board member for a period of at least six (6)&nbsp;months. There shall be no limit on the number of
such option grants and restricted stock unit awards any one continuing non-employee Board member
may receive over his or her period of Board service, and non-employee Board members who have
previously been in the employ of the Corporation (or any Parent or Subsidiary) shall be eligible to
receive one or more such annual option grants and restricted stock unit awards over their period of
continued Board service. The actual number of shares for which such annual option grants and
restricted stock unit awards are made to each continuing non-employee Board member shall (subject
to the respective three thousand (3,000) and one thousand (1,000)-share limits) be determined by
the Plan Administrator on or before the date of the annual shareholders meeting on which those
grants are to be made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <U><B>Exercise Price</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The exercise price per share for each option granted under this Article&nbsp;Four shall be equal
to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;The exercise price shall be payable in one or more of the alternative forms authorized
under the Discretionary Grant Program. Except to the extent the sale and remittance procedure
specified thereunder is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;<U><B>Option Term</B></U><B>. </B>Each option granted under this Article&nbsp;Four shall have a maximum term
of seven (7)&nbsp;years measured from the option grant date, subject to earlier termination following
the Optionee&#146;s cessation of Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;<U><B>Exercise and Vesting of Options</B></U><B>. </B>Each option granted under this Article&nbsp;Four shall
be immediately exercisable for any or all of the option shares. However, any unvested shares
purchased under the option shall be subject to repurchase by the Corporation, at the <B><I>lower </I></B>of (i)
the exercise price paid per share or (ii)&nbsp;the Fair Market Value per share of Common Stock at the
time of repurchase, upon the Optionee&#146;s cessation of Service prior to vesting in those shares. The
shares subject to each initial ten thousand (10,000)-share-or-less grant shall vest, and the
Corporation&#146;s repurchase right shall lapse, in four (4)&nbsp;successive equal annual installments upon
the Optionee&#146;s completion of each year of service as a non-employee Board member over the four
(4)-year period measured from the option grant date. The shares subject to each annual three
thousand (3,000)-share-or-less grant made to a non-employee Board member for his or her continued
Board service shall vest, and the Corporation&#146;s repurchase right shall lapse, in one installment
upon the <B><I>earlier </I></B>of (i)&nbsp;the Optionee&#146;s completion of one (1)-year of service as a non-employee
Board member measured from the grant date or (ii)&nbsp;the Optionee&#146;s continuation in such Board service
through the day immediately preceding the next annual shareholders meeting following such grant
date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;<U><B>Vesting of Restricted Stock Units and Issuance of Shares</B></U><B>. </B>Each restricted stock
unit award for up to three thousand (3,000) shares shall vest in a series of four (4)&nbsp;successive
equal annual installments upon the individual&#146;s completion of each year of service as a
non-employee Board member over the four (4)-year period measured from the date that award is made.
Each restricted stock unit award for up to one thousand (1,000) shares shall vest in one
installment upon the earlier of (i)&nbsp;the individual&#146;s completion of one (1)-year of service as a
non-employee Board member measured from the date that award is made or (ii)&nbsp;the individual&#146;s
continuation in such Board service through the day immediately preceding the next annual
shareholders meeting following such grant date. However, each restricted stock unit award held by
an individual under the Automatic Grant Program will immediately vest in full upon his or her
cessation of Board service by reason of death or Permanent Disability. As the restricted stock
units under the Automatic Grant Program vest in one or more installments, the shares of Common
Stock underlying those vested units shall be promptly issued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;<U><B>Limited Transferability of Options</B></U><B>. </B>Each option under this Article&nbsp;Four may be
assigned in whole or in part during the Optionee&#146;s lifetime to one or more of his or her Family
Members or to a trust established exclusively for the Optionee and/or one or more such Family
Members, to the extent such assignment is in connection with the Optionee&#146;s estate plan or pursuant
to a domestic relations order. The assigned portion may only be exercised by the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">person or persons who acquire a proprietary interest in the option pursuant to the assignment.
The terms applicable to the assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate. The Optionee may also designate one or
more persons as the beneficiary or beneficiaries of his or her outstanding options under this
Article&nbsp;Four, and the options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee&#146;s death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options subject to all the
terms and conditions of the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be exercised following the
Optionee&#146;s death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.&nbsp;<U><B>Termination of Service</B></U><B>. </B>The following provisions shall govern the exercise of any
options held by the Optionee at the time the Optionee ceases Service:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Optionee (or, in the event of Optionee&#146;s death while holding the
option, the personal representative of the Optionee&#146;s estate or the person or
persons to whom the option is transferred pursuant to the Optionee&#146;s will or the
laws of inheritance or the designated beneficiary or beneficiaries of such option)
shall have a twelve (12)-month period following the date of such cessation of
Service in which to exercise such option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) During the twelve (12)-month exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of Common Stock
for which the option is exercisable at the time of the Optionee&#146;s cessation of
Service. However, should the Optionee cease to serve as a Board member by reason of
death or Permanent Disability, then all shares at the time subject to the option
shall immediately vest so that such option may, during the twelve (12)-month
exercise period following such cessation of Board service, be exercised for any or
all of those shares as fully vested shares of Common Stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) In no event shall the option remain exercisable after the expiration of
the option term. Upon the expiration of the twelve (12)-month exercise period or
(if earlier) upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee&#146;s cessation of
Service for any reason (other than cessation of Board service by reason of death or
Permanent Disability), terminate and cease to be outstanding to the extent the
option is not otherwise at that time exercisable for vested shares.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>II.&nbsp;CHANGE IN CONTROL/HOSTILE TAKE-OVER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. In the event of any Change in Control while the individual remains in Service, the
following provisions shall apply:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Should a Change in Control occur prior to the Optionee&#146;s cessation of
Service, then the shares of Common Stock at the time subject to each outstanding
option held by such Optionee under this Automatic Grant Program but not otherwise
vested shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become exercisable for all the
option shares as fully vested shares of Common Stock and may be exercised for any or
all of those vested shares. Immediately following the consummation of the Change in
Control, each automatic option grant shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in effect pursuant to the terms of the Change in Control
transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The shares of Common Stock which are at the time of such Change in Control
subject to any outstanding restricted stock units awarded to such individual under
the Automatic Grant Program shall, immediately prior to the effective date of the
Change in Control, vest in full and be issued to such individual as soon as
administratively practicable thereafter, but in no event later than fifteen (15)
business days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. In the event of a Hostile Take-Over while the individual remains in Service, the following
provisions shall apply:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The shares of Common Stock at the time subject to each outstanding option
held by such Optionee under this Automatic Grant Program but not otherwise vested
shall automatically vest in full so that each such option shall, immediately prior
to the effective date of the Hostile Take-Over, become exercisable for all the
option shares as fully vested shares of Common Stock and may be exercised for any or
all of those vested shares. Each such option shall remain exercisable for such
fully vested option shares until the expiration or sooner termination of the option
term.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The shares of Common Stock which are at the time of the Hostile Take-Over
subject to any restricted stock units awarded to such individual under this
Automatic Grant Program shall, immediately prior to the effective date of the
Hostile Take-Over, vest in full and be issued to such individual as soon as
administratively practicable thereafter, but in no event later than fifteen (15)
business days.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. All outstanding repurchase rights under this Automatic Grant Program shall automatically
terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Change in Control or Hostile Take-Over.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. Each option which is assumed in connection with a Change in Control or otherwise continued
in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities which would have been issuable to the Optionee in consummation
of such Change in Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be made to the exercise price payable per share under
each outstanding option, <U>provided</U> the aggregate exercise price payable for such securities
shall remain the same. To the extent the actual holders of the Corporation&#146;s outstanding Common
Stock receive cash consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption or continuation of the outstanding
options under the Automatic Grant Program, substitute one or more shares of its own common stock
with a fair market value equivalent to the cash consideration paid per share of Common Stock in
such Change in Control transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>III. REMAINING TERMS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The remaining terms of each grant shall be the same as the terms in effect for option grants
made under the Discretionary Grant Program, including the prohibition on repricing contained in
Section&nbsp;V of Article&nbsp;Two.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IV.&nbsp;ALTERNATIVE AWARDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee shall have full power and authority to award, in lieu of one or
more initial or annual automatic option grants under this Article&nbsp;Four, unvested shares of Common
Stock or restricted stock units which in each instance have an aggregate Fair Market Value
substantially equal to the fair value (as determined for financial reporting purposes in accordance
with Financial Accounting Standard 123R or any successor standard) of the automatic option grant
which such award replaces. Any such alternative award shall be made at the same time the automatic
option grant or restricted stock unit award which it replaces would have been made, and the vesting
provisions (including vesting acceleration) applicable to such award shall be substantially the
same as in effect for the automatic option grant or restricted stock unit award so replaced.
</DIV>


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE FIVE</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I.&nbsp;TAX WITHHOLDING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Corporation&#146;s obligation to deliver shares of Common Stock upon the issuance, exercise
or vesting of an Award under the Plan shall be subject to the satisfaction of all applicable income
and employment tax withholding requirements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Plan Administrator may, in its discretion, provide any or all Optionees and
Participants to whom Awards are made under the Plan (other than the Awards made under the Automatic
Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the
Withholding Taxes to which such individuals may become subject in connection with the issuance,
exercise or vesting of those Awards. Such right may be provided to any such holder in either or
both of the following formats:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Stock Withholding</U>: The election to have the Corporation withhold, from the shares of
Common Stock otherwise issuable upon the issuance, exercise or vesting of such Award, a portion of
those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes
(not to exceed one hundred percent (100%)) designated by such individual. The shares of Common
Stock so withheld shall reduce the number of shares of Common Stock authorized for issuance under
the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Stock Delivery</U>: The election to deliver to the Corporation, at the time of the
issuance, exercise or vesting of the Award, one or more shares of Common Stock previously acquired
by such holder (other than in connection with the issuance exercise or vesting of the shares
triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of
the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the individual. The
shares of Common Stock so delivered shall not be added to the shares of Common Stock authorized for
issuance under the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>II.&nbsp;SHARE ESCROW/LEGENDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unvested shares may, in the Plan Administrator&#146;s discretion, be held in escrow by the
Corporation until the Participant&#146;s interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those unvested shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>III. EFFECTIVE DATE AND TERM OF THE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Plan shall become effective on the Plan Effective Date.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Plan shall serve as the successor to the Predecessor Plans, and no further option grants
or stock issuances shall be made under the Predecessor Plans if this Plan is approved by the
stockholders at the 2006 Annual Meeting. Such stockholder approval be obtained, then all options
outstanding under the Predecessor Plans at the time of the 2006 Annual Meeting shall be transferred
to this Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. The Plan shall terminate upon the <U>earliest</U> to occur of (i)&nbsp;February&nbsp;22, 2016, (ii)
the date on which all shares available for issuance under the Plan shall have been issued as fully
vested shares or (iii)&nbsp;the termination of all outstanding Awards in connection with a Change in
Control. Should the Plan terminate on February&nbsp;22, 2016, then all Awards outstanding at that time
shall continue to have force and effect in accordance with the provisions of the documents
evidencing those Awards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IV.&nbsp;AMENDMENT OF THE PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Board shall have complete and exclusive power and authority to amend or modify the Plan
in any or all respects. However, no such amendment or modification shall adversely affect the
rights and obligations with respect to Awards at the time outstanding under the Plan unless the
Optionee or the Participant consents to such amendment or modification. In addition, amendments to
the Plan will be subject to stockholder approval to the extent required under applicable law or
regulation or pursuant to the listing standards of the stock exchange (or the Nasdaq National
Market) on which the Common Stock is at the time primarily traded.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The Compensation Committee of the Board shall have the discretionary authority to adopt and
implement from time to time such addenda or subplans to the Plan as it may deem necessary in order
to bring the Plan into compliance with applicable laws and regulations of any foreign jurisdictions
in which grants or awards are to be made under the Plan and/or to obtain favorable tax treatment in
those foreign jurisdictions for the individuals to whom the grants or awards are made.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. Awards may be made under the Plan that involve shares of Common Stock in excess of the
number of shares then available for issuance under the Plan, provided no shares shall actually be
issued pursuant to those Awards until the number of shares of Common Stock available for issuance
under the Plan is sufficiently increased by shareholder approval of an amendment of the Plan
authorizing such increase. If shareholder approval is required and is not obtained within twelve
(12)&nbsp;months after the date the first excess Award is made, then all Awards granted on the basis of
such excess shares shall terminate and cease to be outstanding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>V.&nbsp;USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any cash proceeds received by the Corporation from the sale of shares of Common Stock under
the Plan shall be used for general corporate purposes.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>VI.&nbsp;REGULATORY APPROVALS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The implementation of the Plan, the grant of any Award and the issuance of shares of Common
Stock in connection with the issuance, exercise or vesting of any Award made under the Plan shall
be subject to the Corporation&#146;s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the Awards made under the Plan and the shares of
Common Stock issuable pursuant to those Awards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. No shares of Common Stock or other assets shall be issued or delivered under the Plan
unless and until there shall have been compliance with all applicable requirements of applicable
securities laws, including the filing and effectiveness of the Form S-8 registration statement for
the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any
Stock Exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed
for trading.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>VII. NO EMPLOYMENT/SERVICE RIGHTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in
Service for any period of specific duration or interfere with or otherwise restrict in any way the
rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of
the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate
such person&#146;s Service at any time for any reason, with or without cause.
</DIV>


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>APPENDIX </B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following definitions shall be in effect under the Plan:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <U><B>Annual Meeting</B></U> shall mean the annual meeting of the Corporation&#146;s shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <U><B>Automatic Grant Program</B></U> shall mean the automatic option grant program in effect
under Article&nbsp;Four of the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. <U><B>Award</B></U> shall mean any of the following stock or stock-based awards authorized for
issuance or grant under the Plan: stock option, stock appreciation right, direct stock issuance,
restricted stock or restricted stock unit award or other stock-based award.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. <U><B>Board</B></U> shall mean the Corporation&#146;s Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. <U><B>Change in Control</B></U> shall mean a change in ownership or control of the Corporation
effected through any of the following transactions:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a merger, consolidation or other reorganization approved by the
Corporation&#146;s shareholders, <U>unless</U> securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who beneficially
owned the Corporation&#146;s outstanding voting securities immediately prior to such
transaction,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a shareholder-approved sale, transfer or other disposition (including in
whole or in part through one or more licensing arrangements) of all or substantially
all of the Corporation&#146;s assets, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the closing of any transaction or series of related transactions pursuant
to which any person or any group of persons comprising a &#147;group&#148; within the meaning
of Rule&nbsp;13d-5(b)(1) of the 1934 Act (other than the Corporation or a person that,
prior to such transaction or series of related transactions, directly or indirectly
controls, is controlled by or is under common control with, the Corporation) becomes
directly or indirectly the beneficial owner (within the meaning of Rule&nbsp;13d-3 of the
1934 Act) of securities possessing (or convertible into or exercisable for
securities possessing) more than fifty percent (50%) of the total combined voting
power of the Corporation&#146;s securities (as measured in terms of the power to vote
with respect to the election of Board members) outstanding immediately after the
consummation of such transaction or
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">series of related transactions, whether such transaction involves a direct
issuance from the Corporation or the acquisition of outstanding securities held by
one or more of the Corporation&#146;s existing shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F. <U><B>Code</B></U> shall mean the Internal Revenue Code of 1986, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G. <U><B>Common Stock</B></U> shall mean the Corporation&#146;s common stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H. <U><B>Compensation Committee</B></U> shall mean the Compensation Committee of the Board comprised
of two (2)&nbsp;or more non-employee Board members.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I. <U><B>Corporation</B></U> shall mean American Shared Hospital Services, a California corporation,
and any corporate successor to all or substantially all of the assets or voting stock of American
Shared Hospital Services which has by appropriate action assumed the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. <U><B>Discretionary Grant Program</B></U> shall mean the discretionary grant program in effect
under Article&nbsp;Two of the Plan pursuant to which stock options and stock appreciation rights may be
granted to one or more eligible individuals.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;K. <U><B>Eligible Director</B></U> shall mean a non-employee Board member eligible to participate in
the Automatic Grant Program in accordance with the eligibility provisions of Articles One and Four.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;L. <U><B>Employee</B></U> shall mean an individual who is in the employ of the Corporation (or any
Parent or Subsidiary, whether now existing or subsequently established), subject to the control and
direction of the employer entity as to both the work to be performed and the manner and method of
performance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M. <U><B>Exercise Date</B></U> shall mean the date on which the Corporation shall have received
written notice of the option exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;N. <U><B>Fair Market Value</B></U> per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) If the Common Stock is at the time traded on the NASDAQ National Market,
then the Fair Market Value shall be the closing selling price per share of Common
Stock at the close of regular hours trading (i.e., before after- hours trading
begins) on the NASDAQ National Market on the date in question, as such price is
reported by the National Association of Securities Dealers. If there is no closing
selling price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which such
quotation exists.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock at the
close of regular hours trading (i.e., before after-hours trading begins) on the date
in question on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such quotation
exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;O. <U><B>Family Member</B></U> means, with respect to a particular Optionee or Participant, any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P. <U><B>Hostile Take-Over</B></U> shall mean a change in ownership or control of the Corporation
effected through either of the following transactions:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be comprised of
individuals who either (A)&nbsp;have been Board members continuously since the beginning
of such period or (B)&nbsp;have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in clause
(A)&nbsp;who were still in office at the time the Board approved such election or
nomination, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule&nbsp;13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation&#146;s outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation&#146;s shareholders which the Board does not
recommend such shareholders to accept.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Q. <U><B>Incentive Option</B></U> shall mean an option which satisfies the requirements of Code
Section&nbsp;422.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R. <U><B>Involuntary Termination</B></U> shall mean the termination of the Service of any individual
which occurs by reason of:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) such individual&#146;s involuntary dismissal or discharge by the Corporation (or
any Parent or Subsidiary) for reasons other than Misconduct, or
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) such individual&#146;s voluntary resignation following (A)&nbsp;a change in his or
her position with the Corporation (or any Parent or Subsidiary) which materially
reduces his or her duties and responsibilities or the level of management to which
he or she reports, (B)&nbsp;a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonus under any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C)&nbsp;a relocation
of such individual&#146;s place of employment by more than fifty (50)&nbsp;miles, provided and
only if such change, reduction or relocation is effected by the Corporation (or any
Parent or Subsidiary) without the individual&#146;s consent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S. <U><B>Misconduct</B></U> shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any
other intentional misconduct by such person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not
in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to
discharge or dismiss any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions
shall not be deemed, for purposes of the Plan, to constitute grounds for termination for
Misconduct.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T. <U><B>1934 Act</B></U> shall mean the Securities Exchange Act of 1934, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U. <U><B>Non-Statutory Option</B></U> shall mean an option not intended to satisfy the requirements
of Code Section&nbsp;422.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;V. <U><B>Optionee</B></U> shall mean any person to whom an option is granted under the Discretionary
Grant or Automatic Grant Program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;W. <U><B>Parent</B></U> shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;X. <U><B>Participant</B></U> shall mean any person who is issued shares of Common Stock or
restricted stock units or other stock-based awards under the Stock Issuance Program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Y. <U><B>Permanent Disability or Permanently Disabled</B></U> shall mean the inability of the
Optionee or the Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death or to be of
continuous duration of twelve (12)&nbsp;months or more. However, solely for purposes of the Automatic
Grant Program, Permanent Disability or Permanently Disabled shall mean the
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inability of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12)&nbsp;months or more.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Z. <U><B>Plan</B></U> shall mean the Corporation&#146;s 2006 Stock Incentive Plan, as set forth in this
document.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AA. <U><B>Plan Administrator</B></U> shall mean the particular entity, whether the Compensation
Committee, the Board or the Secondary Board Committee, which is authorized to administer the
Discretionary Grant and Stock Issuance Programs with respect to one or more classes of eligible
persons, to the extent such entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BB. <U><B>Plan Effective Date</B></U> shall mean the date on which the Plan is approved by the
shareholders at the 2006 Annual Meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CC. <U><B>Predecessor Plans</B></U> shall mean (i)&nbsp;the Corporation&#146;s 2001 Stock Option Plan and (ii)
the Corporation&#146;s 1995 Stock Option Plan, as each such Plan is in effect immediately prior to the
2006 Annual Meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DD. <U><B>Secondary Board Committee</B></U> shall mean a committee of one or more Board members
appointed by the Board to administer the Discretionary Grant and Stock Issuance Programs with
respect to eligible persons other than Section&nbsp;16 Insiders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EE. <U><B>Section&nbsp;16 Insider</B></U> shall mean an officer or director of the Corporation subject to
the short-swing profit liabilities of Section&nbsp;16 of the 1934 Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FF. <U><B>Service</B></U> shall mean the performance of services for the Corporation (or any Parent
or Subsidiary, whether now existing or subsequently established) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or independent advisor,
except to the extent otherwise specifically provided in the documents evidencing the option grant
or stock issuance. For purposes of the Plan, an Optionee or Participant shall be deemed to cease
Service immediately upon the occurrence of the either of the following events: (i)&nbsp;the Optionee or
Participant no longer performs services in any of the foregoing capacities for the Corporation or
any Parent or Subsidiary or (ii)&nbsp;the entity for which the Optionee or Participant is performing
such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee
or Participant may subsequently continue to perform services for that entity. Service shall not be
deemed to cease during a period of military leave, sick leave or other personal leave approved by
the Corporation; provided, <U>however</U>, that should such leave of absence exceed three (3)
months, then for purposes of determining the period within which an Incentive Option may be
exercised as such under the federal tax laws, the Optionee&#146;s Service shall be deemed to cease on
the first day immediately following the expiration of such three (3)-month period, unless Optionee
is provided with the right to return to
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Service following such leave either by statute or by written contract. Except to the extent
otherwise required by law or expressly authorized by the Plan Administrator or by the Corporation&#146;s
written policy on leaves of absence, no Service credit shall be given for vesting purposes for any
period the Optionee or Participant is on a leave of absence.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GG. <U><B>Stock Exchange</B></U> shall mean either the American Stock Exchange or the New York Stock
Exchange.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;HH. <U><B>Stock Issuance Agreement</B></U> shall mean the agreement entered into by the Corporation
and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance
Program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;II. <U><B>Stock Issuance Program</B></U> shall mean the stock issuance program in effect under
Article&nbsp;Three of the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;JJ. <U><B>Subsidiary</B></U> shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KK. <U><B>10% Shareholder</B></U> shall mean the owner of stock (as determined under Code Section
424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation (or any Parent or Subsidiary).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LL. <U><B>Withholding Taxes</B></U> shall mean the applicable income and employment withholding
taxes to which to which the Optionee or Participant may become subject in connection with the
issuance, exercise or vesting of the Award made to him or her under the Plan.
</DIV>



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