EXHIBIT 10.65a
 
 
                        INTERNEURON PHARMACEUTICALS, INC.
 
                    1994 LONG-TERM INCENTIVE PLAN, AS AMENDED
 
 
1.                Purpose.
 
                  The  purpose  of this  plan  (the  "Plan")  is to  secure  for
INTERNEURON  PHARMACEUTICALS,  INC. (the  "Company")  and its  stockholders  the
benefits  arising  from  capital  stock  ownership  by  employees,  officers and
directors  of, and  consultants  or advisors to, the Company who are expected to
contribute to the Company's future growth and success.  Except where the context
otherwise  requires,  the term  "Company"  shall  include all present and future
subsidiaries  of the  Company as defined  in  Sections  424(e) and 424(f) of the
Internal  Revenue  Code of 1986,  as amended or replaced  from time to time (the
"Code").  Those  provisions of the Plan which make express  reference to Section
422 shall apply only to Incentive  Stock Options (as that term is defined in the
Plan).
 
2.                Type of Options and Administration.
 
                  (a) Types of  Options.  Options  granted  pursuant to the Plan
shall be  authorized  by action of the Board of  Directors  of the Company (or a
committee  designated by the Board of  Directors,  the  "Committee")  and may be
either  incentive  stock  options   ("Incentive   Stock  Options")  meeting  the
requirements of Section 422 of the Code or  non-statutory  options which are not
intended to meet the requirements of Section 422 of the Code.
 
                  (b) Administration. The Plan will be administered by the Board
of Directors or the Committee,  whose  construction  and  interpretation  of the
terms and provisions of the Plan shall be final and  conclusive.  The delegation
of  powers  to the  Committee  shall  be  consistent  with  applicable  laws  or
regulations (including, without limitation,  applicable state law and Rule 16b-3
("Rule  16b-3")  promulgated  under  the  Securities  Exchange  Act of 1934 (the
"Exchange Act"), or any successor rule). The Board of Directors or the Committee
may in its sole  discretion  grant  options to purchase  shares of the Company's
Common Stock,  $.001 par value per share ("Common  Stock") and issue shares upon
exercise of such options as provided in the Plan.  The Board of Directors or the
Committee shall have authority,  subject to the express  provisions of the Plan,
to construe the respective option  agreements and the Plan, to prescribe,  amend
and rescind rules and  regulations  relating to the Plan, to determine the terms
and provisions of the respective option agreements, which need not be identical,
and to make all other  determinations  in the judgment of the Board of Directors
or the Committee  necessary or desirable for the administration of the Plan. The
Board of  Directors  or the  Committee  may  correct  any  defect or supply  any
omission or reconcile any  inconsistency  in the Plan or in any option agreement
in the manner and to the extent it shall deem  expedient  to carry the Plan into
effect and it shall be the sole and final judge of such expediency.  No director
or person  acting  pursuant to authority  delegated by the Board of Directors or
the  Committee  shall be liable for any action or  determination  under the Plan
made in good faith. Subject to adjustment as
 
 
 
 
 
 
 
 
 
provided in Section 15 below,  the  aggregate  number of shares of Common  Stock
that may be subject to  Options  granted to any person in a calendar  year shall
not  exceed  25% of the  maximum  number of shares  which may be issued and sold
under the Plan, as set forth in Section 4 hereof, as such section may be amended
from time to time.
 
                  (c) Applicability of Rule 16b-3.  Those provisions of the Plan
which make  express  reference  to Rule 16b-3 shall apply to the Company only at
such time as the Company's  Common Stock is  registered  under the Exchange Act,
subject to the last sentence of Section  3(b),  and then only to such persons as
are  required  to file  reports  under  Section  16(a)  of the  Exchange  Act (a
"Reporting Person").
 
3.                Eligibility.
 
                  (a) General. Options may be granted to persons who are, at the
time of grant,  employees,  officers or directors of, or consultants or advisors
to, the Company or any subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Code ("Participants")  provided,  that Incentive Stock Options
may only be granted to individuals  who are employees of the Company (within the
meaning of Section 3401(c) of the Code). A person who has been granted an option
may, if he or she is otherwise  eligible,  be granted  additional options if the
Board of Directors or the Committee shall so determine.
 
                  (b) Grant of Options to Reporting Persons.  The selection of a
director or an officer who is a Reporting  Person (as the terms  "director"  and
"officer"  are defined for  purposes of Rule 16b-3) as a recipient of an option,
the timing of the option grant,  the exercise price of the option and the number
of shares  subject to the option shall be determined  either (i) by the Board of
Directors,  (ii) by a committee  consisting of two or more directors having full
authority to act in the matter or (iii)  pursuant to  provisions  for  automatic
grants set forth in Section 3(c) below.
 
                  (c) Directors'  Options.  Directors of the Company who are not
employees and who are not  stockholders  of the Company  beneficially  owning in
excess  of  5% of  the  outstanding  Common  Stock  of  the  Company  ("Eligible
Directors") will receive an option ("Director Option") to purchase 20,000 shares
of Common  Stock on the date that such  person is first  elected or  appointed a
director  ("Initial  Director  Option").   Commencing  on  the  day  immediately
following  the date of the annual  meeting  of  stockholders  for the  Company's
fiscal year ending  September 30, 1996,  each Eligible  Director will receive an
automatic  grant  ("Automatic  Grant") of a Director  Option to  purchase  5,000
shares of Common Stock,  other than  Eligible  Directors who received an Initial
Director  Option since the most recent  Automatic  Grant, on the day immediately
following  the date of each  annual  meeting  of  stockholders,  as long as such
director  is a member of the Board of  Directors.  The  exercise  price for each
share  subject to a Director  Option  shall be equal to the fair market value of
the Common Stock on the date of grant. Director Options shall become exercisable
in four equal annual  installments  commencing one year from the date the option
is granted and will expire the earlier of 10 years after the date of grant or 90
days after the termination of the director's service on the Board.
 
 
 
 
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4.                Stock Subject to Plan.
 
                  The stock  subject to options  granted under the Plan shall be
shares of  authorized  but  unissued  or  reacquired  Common  Stock.  Subject to
adjustment  as  provided in Section 15 below,  the  maximum  number of shares of
Common  Stock of the  Company  which  may be issued  and sold  under the Plan is
6,000,000 shares. If an option granted under the Plan shall expire, terminate or
is  cancelled  for any  reason  without  having  been  exercised  in  full,  the
unpurchased  shares  subject  to  such  option  shall  again  be  available  for
subsequent option grants under the Plan.
 
5.                Forms of Option Agreements.
 
                  As a condition to the grant of an option under the Plan,  each
recipient  of an  option  shall  execute  an option  agreement  in such form not
inconsistent  with the Plan as may be approved by the Board of  Directors or the
Committee. Such option agreements may differ among recipients.
 
6.                Purchase Price.
 
                  (a) General. The purchase price per share of stock deliverable
upon the exercise of an option shall be  determined by the Board of Directors or
the Committee at the time of grant of such option;  provided,  however,  that in
the case of an Incentive Stock Option, the exercise price shall not be less than
100% of the Fair Market  Value (as  hereinafter  defined) of such stock,  at the
time of grant of such option, or less than 110% of such Fair Market Value in the
case of options  described in Section  11(b).  "Fair Market Value" of a share of
Common Stock of the Company as of a specified  date for the purposes of the Plan
shall mean the  closing  price of a share of the Common  Stock on the  principal
securities  exchange (including the Nasdaq National Market) on which such shares
are traded on the day  immediately  preceding  the date as of which Fair  Market
Value is being  determined,  or on the next  preceding date on which such shares
are traded if no shares were traded on such immediately preceding day, or if the
shares are not traded on a  securities  exchange,  Fair  Market  Value  shall be
deemed to be the  average of the high bid and low asked  prices of the shares in
the  over-the-counter  market on the day  immediately  preceding  the date as of
which Fair Market Value is being  determined  or on the next  preceding  date on
which such high bid and low asked  prices were  recorded.  If the shares are not
publicly traded, Fair Market Value of a share of Common Stock (including, in the
case of any repurchase of shares,  any distributions  with respect thereto which
would be  repurchased  with the shares) shall be determined in good faith by the
Board of  Directors  or the  Committee.  In no case shall Fair  Market  Value be
determined with regard to restrictions  other than restrictions  which, by their
terms, will never lapse.
 
                  (b) Payment of Purchase Price.  Options granted under the Plan
may provide for the payment of the exercise price by delivery of cash or a check
to the order of the  Company in an amount  equal to the  exercise  price of such
options,  or by any other means which the Board of  Directors  or the  Committee
determines are consistent with the purpose of the Plan and with
 
 
 
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applicable laws and regulations (including,  without limitation,  the provisions
of Rule 16b-3 and Regulation T promulgated by the Federal Reserve Board).
 
7.                Option Period.
 
                  Subject to earlier  termination as provided in the Plan,  each
option and all rights  thereunder shall expire on such date as determined by the
Board of  Directors  or the  Committee  and set forth in the  applicable  option
agreement, provided, that such date shall not be later than (10) ten years after
the date on which the option is granted.
 
8.                Exercise of Options.
 
                  Each option granted under the Plan shall be exercisable either
in full or in installments at such time or times and during such period as shall
be set forth in the option  agreement  evidencing  such  option,  subject to the
provisions of the Plan. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable,  the
Board of Directors or the  Committee may (i) in the  agreement  evidencing  such
option,  provide  for the  acceleration  of the  exercise  date or  dates of the
subject option upon the occurrence of specified events,  and/or (ii) at any time
prior to the complete termination of an option,  accelerate the exercise date or
dates of such option.
 
9.                Transferability of Options.
 
                  No  incentive  stock option  granted  under this Plan shall be
assignable or otherwise  transferable  by the optionee  except by will or by the
laws of descent and distribution or pursuant to a qualified  domestic  relations
order  as  defined  in the  Code or Title I of the  Employee  Retirement  Income
Security Act, or the rules  thereunder.  The Board of Directors or the Committee
may, in its discretion,  authorize all or a portion of any non-statutory options
to be  granted to an  optionee  to be on terms  which  permit  transfer  by such
optionee  to  (i)  the  spouse,   children  or  grandchildren  of  the  optionee
("Immediate  Family Members"),  (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (w) the options must be held
by the optionee for a period of at least one month prior to transfer,  (x) there
may be no  consideration  for any such transfer,  (y) the stock option agreement
pursuant  to which such  options  are  granted  must be approved by the Board of
Directors or the Committee,  and must expressly provide for transferability in a
manner consistent with this Section, and (z) subsequent transfers of transferred
options  shall  be  prohibited  except  by  will  or the  laws  of  descent  and
distribution or pursuant to a qualified  domestic  relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. Following transfer, any such options shall continue to be subject to
the same terms and conditions as were applicable  immediately prior to transfer,
provided  that for purposes of the Plan the term  "optionee"  shall be deemed to
refer to the  transferee.  The events of termination of employment of Section 10
hereof shall  continue to be applied with respect to the original  optionee.  An
option may be exercised during the lifetime of the optionee only by the original
optionee. In the event an optionee dies
 
 
 
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during his employment by the Company or any of its  subsidiaries,  or during the
three-month  period  following the date of termination of such  employment,  his
option  shall  thereafter  be  exercisable,  during the period  specified in the
option agreement, by his executors or administrators to the full extent to which
such option was  exercisable by the optionee at the time of his death during the
periods set forth in Section 10 or 11(d).
 
10.               Effect of Termination of Employment or Other Relationship.
 
                  Except as provided in Section  11(d) with respect to Incentive
Stock Options and except as otherwise determined by the Committee at the date of
grant of an Option,  and subject to the  provisions of the Plan, an optionee may
exercise an option at any time within six (6) months  following the  termination
of the optionee's  employment or other  relationship  with the Company or within
one (1)  year if such  termination  was due to the  death or  disability  of the
optionee but, except in the case of the optionee's death, in no event later than
the  expiration  date  of the  Option.  If  the  termination  of the  optionee's
employment is for cause or is otherwise attributable to a breach by the optionee
of an employment or  confidentiality  or  non-disclosure  agreement,  the option
shall expire  immediately  upon such  termination.  The Board of Directors shall
have the power to determine what constitutes a termination for cause or a breach
of an employment or  confidentiality  or  non-disclosure  agreement,  whether an
optionee has been  terminated  for cause or has breached such an agreement,  and
the date upon  which  such  termination  for cause or  breach  occurs.  Any such
determinations shall be final and conclusive and binding upon the optionee.
 
11.               Incentive Stock Options.
 
                  Options  granted  under  the Plan  which  are  intended  to be
Incentive Stock Options shall be subject to the following  additional  terms and
conditions:
 
                  (a) Express  Designation.  All Incentive Stock Options granted
under the Plan shall, at the time of grant,  be specifically  designated as such
in the option agreement covering such Incentive Stock Options.
 
                  (b) 10%  Stockholder.  If any  employee  to whom an  Incentive
Stock  Option  is to be  granted  under the Plan is, at the time of the grant of
such option,  the owner of stock  possessing more than 10% of the total combined
voting power of all classes of stock of the Company  (after  taking into account
the attribution of stock  ownership  rules of Section 424(d) of the Code),  then
the following  special  provisions  shall be  applicable to the Incentive  Stock
Option granted to such individual:
 
                         (i) The  purchase  price per share of the Common  Stock
                  subject to such Incentive  Stock Option shall not be less than
                  110% of the Fair Market  Value of one share of Common Stock at
                  the time of grant; and
 
 
 
 
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                        (ii) The option  exercise  period  shall not exceed five
                  years from the date of grant.
 
                  (c)  Dollar  Limitation.  For so long  as the  Code  shall  so
provide, options granted to any employee under the Plan (and any other incentive
stock option plans of the Company)  which are intended to  constitute  Incentive
Stock Options shall not  constitute  Incentive  Stock Options to the extent that
such options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value, as
of the respective date or dates of grant, of more than $100,000.
 
                  (d)  Termination  of  Employment,   Death  or  Disability.  No
Incentive  Stock Option may be exercised  unless,  at the time of such exercise,
the optionee is, and has been continuously since the date of grant of his or her
option, employed by the Company, except that:
 
                         (i) an Incentive  Stock Option may be exercised  within
                  the period of three months after the date the optionee  ceases
                  to be an employee of the Company (or within such lesser period
                  as  may be  specified  in the  applicable  option  agreement),
                  provided,  that the agreement  with respect to such option may
                  designate a longer exercise period and that the exercise after
                  such three-month  period shall be treated as the exercise of a
                  non-statutory option under the Plan;
 
                        (ii) if the  optionee  dies  while in the  employ of the
                  Company,  or within three months after the optionee  ceases to
                  be  such  an  employee,  the  Incentive  Stock  Option  may be
                  exercised by the person to whom it is  transferred  by will or
                  the laws of descent and distribution  within the period of one
                  year after the date of death (or within such lesser  period as
                  may be specified in the applicable option agreement); and
 
                       (iii)  if  the  optionee  becomes  disabled  (within  the
                  meaning  of  Section  22(e)(3)  of the  Code or any  successor
                  provisions  thereto)  while in the employ of the Company,  the
                  Incentive  Stock Option may be exercised  within the period of
                  one year  after  the date the  optionee  ceases  to be such an
                  employee  because of such  disability  (or within  such lesser
                  period  as  may  be   specified  in  the   applicable   option
                  agreement).
 
For all  purposes  of the Plan and any option  granted  hereunder,  "employment"
shall be defined in accordance with the provisions of Section  1.421-7(h) of the
Income Tax  Regulations  (or any  successor  regulations).  Notwithstanding  the
foregoing  provisions,  no Incentive  Stock  Option may be  exercised  after its
expiration date.
 
12.               Additional Provisions.
 
                  (a) Additional  Option  Provisions.  The Board of Directors or
the Committee  may, in its sole  discretion,  include  additional  provisions in
option agreements covering options
 
 
 
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granted under the Plan,  including without limitation  restrictions on transfer,
repurchase rights, rights of first refusal,  commitments to pay cash bonuses, to
make,  arrange for or guaranty  loans or to transfer other property to optionees
upon exercise of options, or such other provisions as shall be determined by the
Board of Directors or the Committee;  provided,  that such additional provisions
shall not be inconsistent  with any other term or condition of the Plan and such
additional  provisions  shall not cause any Incentive Stock Option granted under
the Plan to fail to qualify as an Incentive  Stock Option  within the meaning of
Section 422 of the Code.
 
                  (b)  Acceleration,  Extension,  Etc. The Board of Directors or
the Committee may, in its sole  discretion,  (i) accelerate the date or dates on
which all or any  particular  option or  options  granted  under the Plan may be
exercised or (ii) extend the dates during which all, or any  particular,  option
or options granted under the Plan may be exercised;  provided,  however, that no
such  extension  shall be permitted if it would cause the Plan to fail to comply
with Section 422 of the Code or with Rule 16b-3 (if applicable).
 
13.               General Restrictions.
 
                  (a)  Investment  Representations.  The Company may require any
optionee,  as a condition of exercising such option, to give written  assurances
in substance and form satisfactory to the Company to the effect that such person
is acquiring the Common Stock subject to the option or award, for his or her own
account  for  investment  and not with  any  present  intention  of  selling  or
otherwise  distributing the same, and to such other effects as the Company deems
necessary or appropriate  in order to comply with federal and  applicable  state
securities  laws, or with  covenants or  representations  made by the Company in
connection with any public offering of its Common Stock, including any "lock-up"
or other restriction on transferability.
 
                  (b)  Compliance  With  Securities  Law.  Each Option  shall be
subject to the  requirement  that if, at any time,  counsel to the Company shall
determine that the listing,  registration or qualification of the shares subject
to such  option or award upon any  securities  exchange or  automated  quotation
system or under any state or federal  law,  or the  consent or  approval  of any
governmental   or  regulatory   body,  or  that  the  disclosure  of  non-public
information  or the  satisfaction  of any  other  condition  is  necessary  as a
condition  of, or in  connection  with the issuance of shares  thereunder,  such
option  may  not be  exercised,  in  whole  or in  part,  unless  such  listing,
registration,  qualification,  consent  or  approval,  or  satisfaction  of such
condition  shall have been effected or obtained on conditions  acceptable to the
Board of  Directors.  Nothing  herein  shall be deemed to require the Company to
apply  for or to obtain  such  listing,  registration  or  qualification,  or to
satisfy such condition.
 
14.               Rights as a Stockholder.
 
                  The holder of an option shall have no rights as a  stockholder
with respect to any shares covered by the option (including, without limitation,
any rights to receive dividends or non-cash  distributions  with respect to such
shares) until the date of issue of a stock certificate to
 
 
 
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him or her for such shares.  No adjustment  shall be made for dividends or other
rights for which the record date is prior to the date such stock  certificate is
issued.
 
15.               Adjustment Provisions for  Recapitalizations,  Reorganizations
                  and Related Transactions.
 
                  (a) Recapitalizations and Related Transactions. If, through or
as a result of any  recapitalization,  reclassification,  stock dividend,  stock
split,  reverse stock split or other similar  transaction,  (i) the  outstanding
shares of Common Stock are  increased,  decreased  or exchanged  for a different
number or kind of shares or other securities of the Company,  or (ii) additional
shares or new or different  shares or other non-cash assets are distributed with
respect to such shares of Common Stock or other  securities,  an appropriate and
proportionate  adjustment  shall be made in (x) the  maximum  number and kind of
shares reserved for issuance under or otherwise referred to in the Plan, (y) the
number and kind of shares or other  securities  subject to any then  outstanding
options  under the Plan,  and (z) the price for each  share  subject to any then
outstanding  options under the Plan,  without  changing the  aggregate  purchase
price  as  to  which  such  options  remain  exercisable.   Notwithstanding  the
foregoing,  no  adjustment  shall be made  pursuant  to this  Section 15 if such
adjustment  (i) would cause the Plan to fail to comply  with  Section 422 of the
Code or with Rule 16b-3 or (ii) would be  considered  as the  adoption  of a new
plan requiring stockholder approval.
 
                  (b)  Reorganization,  Merger  and  Related  Transactions.  All
outstanding  Options under the Plan shall become fully  exercisable for a period
of sixty (60) days following the occurrence of any Trigger Event, whether or not
such  Options  are then  exercisable  under  the  provisions  of the  applicable
agreements relating thereto.  For purposes of the Plan, a "Trigger Event" is any
one of the following events:
 
                           (i) the date on which  shares  of  Common  Stock  are
         first  purchased  pursuant to a tender  offer or exchange  offer (other
         than such an offer by the Company, any Subsidiary, any employee benefit
         plan of the Company or of any  Subsidiary or any entity  holding shares
         or other securities of the Company for or pursuant to the terms of such
         plan),  whether or not such offer is approved or opposed by the Company
         and  regardless  of the  number of shares  purchased  pursuant  to such
         offer;
 
                           (ii) the date the Company acquires knowledge that any
         person or group deemed a person under  Section  13(d)-3 of the Exchange
         Act (other than the Company, any Subsidiary,  any employee benefit plan
         of the Company or of any  Subsidiary  or any entity  holding  shares of
         Common Stock or other  securities of the Company for or pursuant to the
         terms  of any  such  plan or any  individual  or  entity  or  group  or
         affiliate  thereof which  acquired its  beneficial  ownership  interest
         prior to the date the Plan was adopted by the Board),  in a transaction
         or series of transactions, has become the beneficial owner, directly or
         indirectly  (with beneficial  ownership  determined as provided in Rule
         13d-3, or any successor rule, under the Exchange Act), of securities of
         the Company entitling the person or group to 30% or more of all votes
 
 
 
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         (without  consideration  of the  rights  of any class or stock to elect
         directors by a separate  class vote) to which all  shareholders  of the
         Company  would be  entitled in the  election of the Board of  Directors
         were an election held on such date;
 
                           (iii) the date,  during any period of two consecutive
         years,  when individuals who at the beginning of such period constitute
         the  Board  of  Directors  of the  Company  cease  for  any  reason  to
         constitute at least a majority  thereof,  unless the  election,  or the
         nomination for election by the stockholders of the Company, of each new
         director was approved by a vote of at least two-thirds of the directors
         then  still in  office  who were  directors  at the  beginning  of such
         period; and
 
                           (iv) the date of approval by the  stockholders of the
         Company of an agreement (a "reorganization agreement") providing for:
 
                                    (A)  The  merger  or  consolidation  of  the
                  Company with another corporation where the stockholders of the
                  Company, immediately prior to the merger or consolidation,  do
                  not  beneficially   own,   immediately  after  the  merger  or
                  consolidation,  shares  of the  corporation  issuing  cash  or
                  securities  in the  merger  or  consolidation  entitling  such
                  stockholders   to  65%  or   more   of  all   votes   (without
                  consideration  of the  rights  of any  class of stock to elect
                  directors by a separate class vote) to which all  shareholders
                  of such  corporation  would be  entitled  in the  election  of
                  directors  or where the members of the Board of  Directors  of
                  the Company, immediately prior to the merger or consolidation,
                  do  not,   immediately  after  the  merger  or  consolidation,
                  constitute  a  majority  of  the  Board  of  Directors  of the
                  corporation  issuing  cash  or  securities  in the  merger  or
                  consolidation; or
 
                                    (B) The sale or other  disposition of all or
                  substantially all the assets of the Company.
 
                  (c) Board Authority to Make Adjustments. Any adjustments under
this Section 15 will be made by the Board of Directors,  whose  determination as
to what adjustments,  if any, will be made and the extent thereof will be final,
binding and  conclusive.  No fractional  shares will be issued under the Plan on
account of any such adjustments.
 
16.               Merger, Consolidation, Asset Sale, Liquidation, etc.
 
                  (a) General. In the event of a consolidation or merger or sale
of all or  substantially  all of the assets of the Company in which  outstanding
shares of Common Stock are exchanged for  securities,  cash or other property of
any other corporation or business entity or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation  assuming the  obligations of the Company,  may, in its  discretion,
take any one or more of the following actions, as to outstanding options: (i) in
the event of a merger  under the terms of which  holders of the Common  Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the
 
 
 
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"Merger  Price"),  make or provide for a cash payment to the optionees  equal to
the difference between (A) the Merger Price times the number of shares of Common
Stock subject to such  outstanding  options (to the extent then  exercisable  at
prices not in excess of the Merger Price) and (B) the aggregate  exercise  price
of all such outstanding options in exchange for the termination of such options,
and (ii) in the event the provisions of Section 15 are not  applicable,  provide
that all or any outstanding options shall become exercisable in full immediately
prior to such event and upon written notice to the  optionees,  provide that all
unexercised options will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified period following
the date of such notice.
 
                  (b)  Substitute  Options.  The Company may grant options under
the Plan in  substitution  for options held by employees of another  corporation
who become  employees of the Company,  or a  subsidiary  of the Company,  as the
result  of a merger  or  consolidation  of the  employing  corporation  with the
Company or a subsidiary of the Company, or as a result of the acquisition by the
Company,  or one of its  subsidiaries,  of  property  or stock of the  employing
corporation.  The Company may direct that substitute  options be granted on such
terms and  conditions  as the Board of Directors  considers  appropriate  in the
circumstances.
 
17.               No Special Employment Rights.
 
                  Nothing  contained  in the Plan or in any option  shall confer
upon any  optionee  any right  with  respect to the  continuation  of his or her
employment  by the Company or interfere in any way with the right of the Company
at any  time to  terminate  such  employment  or to  increase  or  decrease  the
compensation of the optionee.
 
18.               Other Employee Benefits.
 
                  Except as to plans which by their terms  include  such amounts
as  compensation,  the amount of any  compensation  deemed to be  received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not  constitute  compensation  with respect to which any
other  employee  benefits of such employee are  determined,  including,  without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary  continuation  plan, except as otherwise  specifically  determined by the
Board of Directors.
 
19.               Amendment of the Plan.
 
                  (a) The Board of Directors  may at any time,  and from time to
time, modify or amend the Plan in any respect; provided, however, that if at any
time the approval of the  stockholders  of the Company is required under Section
422 of the Code or any  successor  provision  with  respect to  Incentive  Stock
Options,  or under  Rule  16b-3,  the Board of  Directors  may not  effect  such
modification or amendment without such approval; and provided, further, that the
provisions  of Section 3(c) hereof shall not be amended more than once every six
months,
 
 
 
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other than to comport with changes in the Code, the Employer  Retirement  Income
Security Act of 1974, as amended, or the rules thereunder.
 
                  (b) The  modification  or  amendment  of the Plan  shall  not,
without the  consent of an  optionee,  affect his or her rights  under an option
previously granted to him or her. With the consent of the optionee affected, the
Board of  Directors  may amend  outstanding  option  agreements  in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or  modify  (i) the  terms  and  provisions  of the Plan and of any  outstanding
Incentive  Stock  Options  granted  under the Plan to the  extent  necessary  to
qualify any or all such options for such favorable  federal income tax treatment
(including  deferral of taxation  upon  exercise)  as may be afforded  incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any  outstanding  option to the extent  necessary  to ensure the
qualification of the Plan under Rule 16b-3.
 
20.               Withholding.
 
                  (a) The Company  shall have the right to deduct from  payments
of any kind  otherwise due to the optionee any federal,  state or local taxes of
any kind  required by law to be withheld  with respect to any shares issued upon
exercise  of  options  under the Plan.  Subject  to the  prior  approval  of the
Company,  which may be  withheld  by the  Company  in its sole  discretion,  the
optionee  may elect to satisfy  such  obligations,  in whole or in part,  (i) by
causing  the  Company to  withhold  shares of Common  Stock  otherwise  issuable
pursuant  to the  exercise  of an option or (ii) by  delivering  to the  Company
shares of Common Stock already owned by the optionee. The shares so delivered or
withheld shall have a Fair Market Value equal to such withholding  obligation as
of the date  that the  amount  of tax to be  withheld  is to be  determined.  An
optionee  who has made an  election  pursuant  to this  Section  20(a)  may only
satisfy his or her withholding  obligation with shares of Common Stock which are
not subject to any repurchase,  forfeiture, unfulfilled vesting or other similar
requirements.
 
                  (b) The  acceptance of shares of Common Stock upon exercise of
an Incentive  Stock Option shall  constitute an agreement by the optionee (i) to
notify the Company if any or all of such shares are  disposed of by the optionee
within two years  from the date the  option was  granted or within one year from
the date the shares were issued to the optionee  pursuant to the exercise of the
option, and (ii) if required by law, to remit to the Company, at the time of and
in the case of any  such  disposition,  an  amount  sufficient  to  satisfy  the
Company's  federal,  state and local withholding tax obligations with respect to
such  disposition,  whether or not, as to both (i) and (ii),  the optionee is in
the employ of the Company at the time of such disposition.
 
                  (c) Notwithstanding the foregoing,  in the case of a Reporting
Person whose  options have been granted in  accordance  with the  provisions  of
Section  3(b) herein,  no election to use shares for the payment of  withholding
taxes  shall  be  effective  unless  made  in  compliance  with  any  applicable
requirements of Rule 16b-3.
 
 
 
 
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21.               Cancellation and New Grant of Options, Etc.
 
                  The Board of Directors shall have the authority to effect,  at
any time and from time to time, with the consent of the affected optionees,  (i)
the cancellation of any or all outstanding  options under the Plan and the grant
in  substitution  therefor of new options  under the Plan  covering  the same or
different  numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise  price per share of the
cancelled  options or (ii) the amendment of the terms of any and all outstanding
options  under the Plan to provide an option  exercise  price per share which is
higher  or  lower  than  the  then-current  exercise  price  per  share  of such
outstanding options.
 
22.               Effective Date and Duration of the Plan.
 
                  (a)  Effective  Date.  The Plan shall  become  effective  when
adopted by the Board of Directors,  but no Incentive  Stock Option granted under
the Plan  shall  become  exercisable  unless  and until the Plan shall have been
approved by the  Company's  stockholders.  If such  stockholder  approval is not
obtained  within  twelve  months  after the date of the Board's  adoption of the
Plan,  no  options  previously  granted  under  the Plan  shall be  deemed to be
Incentive  Stock  Options  and no  Incentive  Stock  Options  shall  be  granted
thereafter.  Amendments to the Plan not  requiring  stockholder  approval  shall
become  effective when adopted by the Board of Directors;  amendments  requiring
stockholder  approval (as provided in Section 21) shall  become  effective  when
adopted by the Board of Directors,  but no Incentive  Stock Option granted after
the date of such  amendment  shall become  exercisable  (to the extent that such
amendment to the Plan was required to enable the Company to grant such Incentive
Stock Option to a particular  optionee)  unless and until such  amendment  shall
have been approved by the Company's  stockholders.  If such stockholder approval
is not obtained within twelve months of the Board's  adoption of such amendment,
any Incentive Stock Options granted on or after the date of such amendment shall
terminate  to the extent that such  amendment to the Plan was required to enable
the  Company  to grant such  option to a  particular  optionee.  Subject to this
limitation,  options  may be  granted  under  the  Plan at any  time  after  the
effective date and before the date fixed for termination of the Plan.
 
                  (b) Termination.  Unless sooner  terminated in accordance with
Section  16,  the Plan  shall  terminate  upon the  earlier  of (i) the close of
business  on the day next  preceding  the tenth  anniversary  of the date of its
adoption  by the  Board of  Directors,  or (ii) the  date on  which  all  shares
available  for  issuance  under the Plan shall have been issued  pursuant to the
exercise  or  cancellation  of options  granted  under the Plan.  If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
 
23.               Provision for Foreign Participants.
 
                  The Board of Directors may, without amending the Plan,  modify
awards or options granted to participants who are foreign  nationals or employed
outside the United States to recognize  differences in laws, rules,  regulations
or customs  of such  foreign  jurisdictions  with  respect  to tax,  securities,
currency, employee benefit or other matters.
 
 
 
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24.               Governing Law.
 
                  The provisions of this Plan shall be governed and construed in
accordance  with  the  laws of the  State  of  Delaware  without  regard  to the
principles of conflicts of laws.
 
                  Adopted  by the Board of  Directors  on  September  23,  1994;
amended by the Board of Directors December 18, 1996.
 
 
 
 
 

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