OPTIONS OF THE CONSTITUENT AND SURVIVING CORPORATIONS. At the Effective Time, each option to purchase RAE Systems Common Stock ("RAE Systems Option"), whether vested or unvested, will be assumed by Nettaxi. Each such option so assumed by Nettaxi under this Agreement shall continue to have, and be subject to, the same terms and conditions set forth in the RAE Systems Inc. 1993 Stock Plan (the "RAE Systems Stock Plan") and any other document governing such option immediately prior to the Effective Time, except that (a) such option will be exercisable for that number of whole shares of Nettaxi Common Stock equal to the product of the number of shares of RAE Systems Common Stock that were issuable upon exercise of such option immediately prior to the Effective Time multiplied by the Exchange Ratio and rounded down to the nearest whole number of shares of Nettaxi Common Stock, (b) the per share exercise price for the shares of Nettaxi Common Stock issuable upon exercise of such assumed option will be equal to the quotient determined by dividing the exercise price per share of RAE Systems Common Stock at which such option was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole tenth of a cent and (c) any restriction on the exercisability of such RAE System Option shall continue in full force and effect, and the term, exercisability, vesting schedule and other provisions of such RAE System Option shall remain unchanged. Consistent with the terms of the RAE Systems Stock Plan and the documents governing the outstanding options, the Merger will not terminate any of the outstanding options under the RAE Systems Stock Plan or accelerate the exercisability or vesting of such options or the shares of Nettaxi Common Stock which will be subject to those options upon Nettaxi's assumption of the options in the Merger. It is the intention of the parties that the options so assumed by Nettaxi following the Effective Time will remain incentive stock options as defined in Section 422 of the Code to the extent such options qualified as incentive stock options prior to the Effective Time, and the parties hereto shall use their commercially reasonable efforts to carry out such intention.
