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OPTELECOM, INC.1994 Plan 1. Purpose of the Plan. The Optelecom, Inc. 1994 Stock Award Plan (the "Plan") is intended to attract, retain, motivate and reward employees and officers of, and consultants to, Optelecom, Inc. (the "Company") who are and will be contributing to the success of the business; to provide competitive incentive compensation opportunities; and to further opportunities for stock ownership by such employees, officers, and consultants in order to increase their proprietary interest in the Company. Accordingly, the Company may from time to time, grant to selected employees, officers and consultants ("participants") awards ("awards") of shares of Common Stock of the Company $.03 par value ("Stock"), subject to the terms and conditions hereinafter provided. 2. Administration of the Plan. This Plan will be administered by a committee comprised of non- employee members of the Board of Directors of the Company ("Committee"). The Committee is authorized to interpret the Plan and may from time to time adopt such rules and regulations for carrying out the Plan as it deems appropriate, including rules and regulations to comply with the requirements of Rule 16b-3 under the Securities Exchange Act of 1934. No member of the Committee shall be eligible to receive awards under the Plan. Decisions of the Committee in connection with the administration of the Plan shall be final, conclusive, and binding upon all parties including the Company, stockholders, employees and consultants. Subject to the terms, provisions, and conditions of the Plan as set forth herein, the Committee shall have sole discretion and authority: (a) to select the employees, officers, and consultants to be awarded Stock (it being understood that more than one award may be granted to the same person); (b) to determine the number of shares to be awarded to each recipient; (c) to determine the time or times when the awards may be granted; and (d) to prescribe the form of stock legend for the certificates of shares of Stock or other instruments, if any, evidencing any awards granted under this Plan. 3. Stock Subject to the Plan. The aggregate number of shares of Stock which may be awarded under the Plan shall not exceed 100,000 shares of Stock of the Company. Shares to be awarded under the Plan shall be made available, at the discretion of the Committee, either from the authorized but unissued shares of Stock of the Company or from shares of Stock reacquired by the Company, including shares purchased in the open market. 4. Eligibility. Stock shall be awarded only to employees of and consultants to the Company (the term "employees" shall include officers as well as other key employees of the Company, and shall include directors who are also key employees of the Company). 5. Awards and Certificates. Each recipient shall be issued a certificate in respect of shares of Stock awarded under the Plan. Each certificate shall be registered in the name of the participant, and shall bear an appropriate restrictive legend on its face, which legend shall be subject to removal pursuant to an effective registration statement or an opinion of counsel satisfactory to the Company that such registration is not required. The Company may register, on behalf of the recipients, shares issued pursuant to the Plan. 6. Termination and Amendment. The Committee may amend, suspend, or terminate the Plan at any time provided that no such modification without the approval of stockholders shall: (a) increase the maximum number of shares of Stock which are available for awards under the Plan; (b) extend the period during which awards may be granted under the Plan beyond June 30, 2004; or (c) impair the rights of any recipient under any award. 7. Miscellaneous. (a) Nothing in the Plan shall require the Company to issue or transfer any shares pursuant to an award if such issuance or transfer would, in the opinion of the Committee, constitute or result in a violation of any applicable statute or regulation of any jurisdiction relating to the disposition of securities. (b) Notwithstanding any other provision of the Plan, the Committee may at any time make or provide for such adjustment to the Plan, to the number of shares available thereunder, or to any awards of Stock as it shall deem appropriate, to prevent dilution or enlargement of rights, including adjustments in the event of changes in the number or outstanding shares of Stock by reason of stock dividends or distributions, stock splits or other combinations or subdivisions of stock, recapitalization, issuances by reclassification, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations, liquidations, or other similar corporate changes. Any such determination by the Committee shall be conclusive. (c) No employee, consultant or other person shall have any claim or right to be granted shares of Stock under the Plan, and neither the Plan nor any action taken thereunder shall be construed as giving any participant, recipient, employee, consultant or other person any right to be retained in the employ of or by the Company. (d) Income realized as a result of an award of stock shall not be included in the recipient's earnings for the purpose of any benefit plan in which the recipient may be enrolled or for which the recipient may become eligible unless otherwise specifically provided for in such plan. (e) If and when a recipient is required to pay the Company an amount required to be withheld under any federal, state or local income tax laws in connection with an award of stock under the Plan, the Committee may, in its sole discretion and subject to such rules as it may adopt, permit the participant to satisfy the obligation, in whole or in part, by electing to have the Company withhold shares of Common Stock having a fair market value equal to the amount required to be withheld. The election to have shares withheld must be made on or before the date the amount of tax to be withheld is determined. 8. Effective Date and Term of the Plan. The effective date of the Plan shall be July 1, 1994, subject to approval by the stockholders of the Company at the 1994 Annual Meeting of Stockholders. Notwithstanding the foregoing, awards of Stock may be made by the Committee as provided herein, subject to such subsequent stockholder approval. No awards of Stock may be made under the Plan after June 30, 2004. Optelecom, Inc. 3/24/94