Exhibit 10.04

 

OCCUPATIONAL HEALTH + REHABILITATION INC

 

1998 STOCK PLAN

(as amended December 16, 2004)

 

SECTION 1. Purpose

 

The purpose of the 1998 Stock Plan (the “Plan”) is to secure for Occupational
Health + Rehabilitation Inc (the “Company”), its parent (if any) and any
subsidiaries of the Company (collectively the “Related Companies”) the benefits
arising from capital stock ownership by those employees, directors, officers and
consultants of the Company and any Related Companies who will be responsible for
the Company’s future growth and continued success.

 

The Plan will provide a means whereby (a) employees of the Company and any
Related Companies may purchase stock in the Company pursuant to options which
qualify as “incentive stock options” (“Incentive Stock Options”) under Section
422 of the Internal Revenue Code of 1986, as amended (the “Code”), (b)
directors, employees and consultants of the Company and any Related Companies
may purchase stock in the Company pursuant to options granted hereunder which do
not qualify as Incentive Stock Options (“Non-Qualified Option” or “Non-Qualified
Options”); (c) directors, employees and consultants of the Company and any
Related Companies may be awarded stock in the Company (“Awards”); and (d)
directors, employees and consultants of the Company and any Related Companies
may receive stock appreciation rights (“SARs”). Both Incentive Stock Options and
Non-Qualified Options are referred to hereafter individually as an “Option” and
collectively as “Options.” As used herein, the terms “parent” and “subsidiary”
mean “parent corporation” and “subsidiary corporation” as those terms are
defined in Section 424 of the Code. Options, Awards and SARs are referred to
hereafter individually as a “Plan Benefit” and collectively as “Plan Benefits.”
Directors, employees and consultants of the Company and any Related Companies
are referred to herein as “Participants.”

 

SECTION 2. Administration

 

2.1 Board of Directors and the Committee. The Plan will be administered by the
Board of Directors of the Company whose construction and interpretation of the
terms and provisions hereof shall be final and conclusive. Any director to whom
a Plan Benefit is awarded shall be ineligible to vote upon his or her Plan
Benefit, but Plan Benefits may be granted to any such director by a vote of the
remainder of the directors, except as limited below. The Board of Directors may
in its sole discretion grant Options, issue shares upon exercise of such
Options, grant Awards and grant SARs all as provided in the Plan. The Board of
Directors shall have authority, subject to the express provisions of the Plan,
to construe the Plan and its related agreements, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Option, Award and SAR agreements, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any related 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 shall be liable for any
action or determination made in good faith. The Board of Directors may delegate
any or all of its powers under the Plan to a Compensation Committee or other
Committee (the “Committee”) appointed by the Board of Directors consisting of at
least two members of the Board of Directors. If Plan Benefits are to be approved
solely by a Committee, the members of the Committee shall at all times be: (i)
“outside directors” as that term is defined in Treas. Reg. §1.162-27(e)(3) (or
any successor regulation); and (ii) “non-employee directors” within the meaning
of Rule 16b-3 (or any successor rule) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), as such terms are interpreted from time to
time. If the Committee is so appointed, all references to the Board of Directors
herein shall mean and relate to such Committee, unless the context otherwise
requires.

 

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2.2 Compliance with Section 162(m) of the Code. Section 162(m) of the Code
generally limits the tax deductibility to publicly held companies of
compensation in excess of $1,000,000 paid to certain “covered employees”
(“Covered Employees”). It is the Company’s intention to preserve the
deductibility of such compensation to the extent it is reasonably practicable
and to the extent it is consistent with the Company’s compensation objectives.
For purposes of this Plan, Covered Employees of the Company shall be those
employees of the Company described in Section 162(m)(3) of the Code.

 

SECTION 3. Eligibility

 

3.1 Incentive Stock Options. Participants who are employees shall be eligible to
receive Incentive Stock Options pursuant to the Plan; provided that no person
shall be granted any Incentive Stock Option under the Plan who, at the time such
Option is granted, owns, directly or indirectly, Common Stock of the Company
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of its Related Companies, unless the requirements of
Section 6.6(b) hereof are satisfied. In determining whether this 10% threshold
has been reached, the stock attribution rules of Section 424(d) of the Code
shall apply. Directors who are not regular employees are not eligible to receive
Incentive Stock Options.

 

3.2 Non-Qualified Options, Awards and SARs. Non-Qualified Options, Awards and
SARs may be granted to any Participant.

 

3.3 Generally. The Board of Directors may take into consideration a
Participant’s individual circumstances in determining whether to grant an
Incentive Stock Option, a Non-Qualified Option, an Award or an SAR. Granting of
any Option, Award or SAR for any individual shall neither entitle that
individual to, nor disqualify that individual from, participation in any other
grant of Plan Benefits.

 

SECTION 4. Stock Subject to Plan

 

Subject to adjustment as provided in Sections 10 and 11 hereof, the stock to be
offered under the Plan shall consist of shares of the Company’s Common Stock,
$.001 par value, and the maximum number of shares which will be reserved for
issuance, and in respect of which Plan Benefits may be granted pursuant to the
provisions of the Plan, shall not exceed in the aggregate 1,020,000 shares. Such
shares may be authorized and unissued shares, treasury shares or shares
purchased on the open market. If an Option or SAR granted hereunder shall expire
or terminate for any reason without having been exercised in full, or if the
Company shall reacquire any unvested shares issued pursuant to Awards, the
unpurchased shares subject thereto and any unvested shares so reacquired shall
again be available for subsequent grants of Plan Benefits under the Plan. Stock
issued pursuant to the Plan may be subject to such restrictions on transfer,
repurchase rights or other restrictions as shall be determined by the Board of
Directors.

 

SECTION 5. Granting of Options, SARs and Awards

 

Plan Benefits may be granted under the Plan at any time after January 16, 1998
(the date of approval of the Plan by the Board of Directors), subject to
approval of the Plan by the stockholders of the Company, and prior to January
16, 2008; provided, however, that nothing in the Plan shall be construed to
obligate the Company to grant Plan Benefits to a Participant or anyone claiming
under or through a Participant. The date of grant of Plan Benefits under the
Plan will be the date specified by the Board of Directors at the time the Board
of Directors grants such Plan Benefits; provided, however, that such date shall
not be prior to the date on which the Board of Directors takes such action. The
Board of Directors shall have the right, with the consent of a Participant, to
convert an Incentive Stock Option granted under the Plan to a Non-Qualified
Option pursuant to Section 6.7. Plan Benefits may be granted alone or in
addition to other grants under the Plan.

 

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SECTION 6. Special Provisions Applicable to Options and SARs

 

6.1 Purchase Price and Shares Subject to Options and SARs.

 

(a) The purchase price per share of Common Stock deliverable upon the exercise
of an Option shall be determined by the Board of Directors; provided, however,
that (i) in the case of an Incentive Stock Option, the exercise price shall not
be less than 100% of the fair market value of such Common Stock on the day the
Option is granted (except as modified in Section 6.6(b) hereof), and (ii) in the
case of a Non-Qualified Option, the exercise price shall not be less than 50% of
the fair market value on the day such Option is granted.

 

(b) Options granted under the Plan may provide for the payment of the exercise
price by delivery of (i) cash or a check payable to the order of the Company in
an amount equal to the exercise price of such Options, (ii) shares of Common
Stock of the Company owned by the Participant having a fair market value equal
in amount to the exercise price of the Options being exercised, or (iii) any
combination of (i) and (ii). The fair market value of any shares of the
Company’s Common Stock which may be delivered upon exercise of an Option shall
be determined by the Board of Directors. The Board of Directors may also permit
Participants, either on a selective or aggregate basis, to simultaneously
exercise Options and sell the shares of Common Stock thereby acquired, pursuant
to a brokerage or similar arrangement, approved in advance by the Board of
Directors, and to use the proceeds from such sale as payment of the purchase
price of such shares.

 

(c) If, at the time an Option is granted under the Plan, the Company’s Common
Stock is publicly traded, “fair market value” shall be determined as of the last
business day for which the prices or quotes discussed in this sentence are
available prior to the date such Option is granted (the “Determination Date”)
and shall mean (i) the average (on the Determination Date) of the high and low
prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if such Common Stock is then traded on a
national securities exchange; (ii) the last reported sale price (on the
Determination Date) of the Common Stock on The Nasdaq Stock Market if the Common
Stock is not then traded on a national securities exchange; or (iii) the closing
bid price (or average of bid prices) last quoted (on the Determination Date) by
an established quotation service for over-the-counter securities, if the Common
Stock is not reported on The Nasdaq Stock Market. However, if the Common Stock
is not publicly traded at the time an Option is granted under the Plan, “fair
market value” shall be deemed to be the fair value of the Common Stock as
determined by the Board of Directors after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at arm’s length.

 

(d) The maximum number of shares with respect to which Options or SARs may be
granted to any employee, including any transactions contemplated by Treas. Reg.
§1.162-27(e)(2)(vi), shall be limited to 100,000 shares in any calendar year.

 

6.2 Duration of Options and SARs. Subject to Section 6.6(b) hereof, each Option
and SAR and all rights thereunder shall be expressed to expire on such date as
the Board of Directors may determine, but in no event later than ten years from
the day on which the Option or SAR is granted and shall be subject to earlier
termination as provided herein.

 

6.3 Exercise of Options and SARs.

 

(a) Subject to Section 6.6(b) hereof, each Option and SAR granted under the Plan
shall be exercisable at such time or times and during such period as shall be
set forth in the instrument evidencing such Option or SAR, with vesting to occur
in equal annual installations over a four-year period unless otherwise approved
by the Board of Directors. To the extent that an Option or SAR is not exercised
by a Participant when it becomes initially exercisable, it shall not expire but
shall be carried forward and shall be exercisable, on a cumulative basis, until
the expiration of the exercise period. No partial exercise may be for less than
ten (10) full shares of Common Stock (or its equivalent).

 

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(b) The Board of Directors shall have the right to accelerate the date of
exercise of any installments of any Option or SAR; provided that the Board of
Directors shall not accelerate the exercise date of any installment of any
Option granted to a Participant as an Incentive Stock Option (and not previously
converted into a Non-Qualified Option pursuant to Section 6.7) if such
acceleration would violate the annual vesting limitation contained in Section
422(d)(1) of the Code, which provides generally that the aggregate fair market
value (determined at the time the Option is granted) of the stock with respect
to which Incentive Stock Options granted to any Participant are exercisable for
the first time by such Participant during any calendar year (under all plans of
the Company and any Related Companies) shall not exceed $100,000.

 

6.4 Nontransferability of Options and SARs. No Option or SAR granted under the
Plan shall be assignable or transferable by the Participant, either voluntarily
or by operation of law, except by will or the laws of descent and distribution
or, with respect to Non-Qualified Options and SARs, pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act (“ERISA”) or the rules promulgated thereunder or
unless the Participant’s non-qualified stock option agreement granting such
options (the “Non-Qualified Stock Option Agreement”) or the Participant’s SAR
agreement granting such SARs (the “SAR Agreement”) provides otherwise. Unless
otherwise provided by the Non-Qualified Stock Option Agreement or the SAR
Agreement, as applicable, during the life of the Participant, the Option or SAR
shall be exercisable only by him or her. If any Participant should attempt to
dispose of or encumber his or her Options or SARs, other than in accordance with
the applicable terms of a Non-Qualified Stock Option Agreement or SAR Agreement,
his or her interest in such Options or SARs shall terminate.

 

6.5 Effect of Termination of Employment or Death on Options and SARs.

 

(a) If a Participant ceases to be employed by the Company or a Related Company
for any reason, including retirement but other than death, any Option or SAR
granted to such Participant under the Plan shall immediately terminate;
provided, however, that any portion of such Option or SAR which was otherwise
exercisable on the date of termination of the Participant’s employment may be
exercised within the three-month period following the date on which the
Participant ceased to be so employed, but in no event after the expiration of
the exercise period. Any such exercise may be made only to the extent of the
number of shares subject to the Option or SAR which were purchasable or
exercisable on the date of such termination of employment. If the Participant
dies during such three-month period, the Option or SAR shall be exercisable by
the Participant’s personal representatives, heirs or legatees to the same extent
and during the same period that the Participant could have exercised the Option
or SAR on the date of his or her death.

 

(b) If the Participant dies while an employee of the Company or any Related
Company, any Option or SAR granted to such Participant under the Plan shall be
exercisable by the Participant’s personal representatives, heirs or legatees,
for the purchase of or exercise relative to that number of shares and to the
same extent that the Participant could have exercised the Option or SAR on the
date of his or her death. The Option or SAR or any unexercised portion thereof
shall terminate unless so exercised prior to the earlier of the expiration of
six months from the date of such death or the expiration of the exercise period.

 

6.6 Designation of Incentive Stock Options; Limitations. Options granted under
the Plan which are intended to be Incentive Stock Options qualifying under
Section 422 of the Code shall be designated as Incentive Stock Options and shall
be subject to the following additional terms and conditions:

 

(a) Dollar Limitation. The aggregate fair market value (determined at the time
the option is granted) of the Common Stock for which Incentive Stock Options are
exercisable for the first time during any calendar year by any person under the
Plan (and all other incentive stock option plans of the Company and any Related
Companies) shall not exceed $100,000. In the event that Section 422(d)(1) of the
Code is amended to alter the limitation set forth therein so that following such
amendment such limitation shall differ from the limitation set forth in this
Section 6.6(a), the limitation of this Section 6.6(a) shall be automatically
adjusted accordingly.

 

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(b) 10% Stockholder. If any Participant to whom an Incentive Stock Option is to
be granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any Related Companies, then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:

 

(i) The option 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 on the date of grant; and

 

(ii) The option exercise period shall not exceed five years from the date of
grant.

 

In determining whether the 10% threshold has been reached, the stock attribution
rules of Section 424(d) of the Code shall apply.

 

(c) Except as modified by the preceding provisions of this Section 6.6, all of
the provisions of the Plan shall be applicable to Incentive Stock Options
granted hereunder.

 

6.7 Conversion of Incentive Stock Options into Non-Qualified Options;
Termination of Incentive Stock Options. The Board of Directors, at the written
request of any Participant, may in its discretion take such actions as may be
necessary to convert such Participant’s Incentive Stock Options (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such Incentive Stock Options, regardless of whether the
Participant is an employee of the Company or a Related Company at the time of
such conversion. Such actions may include, but not be limited to, extending the
exercise period or reducing the exercise price of the appropriate installments
of such Options. At the time of such conversion, the Board of Directors (with
the consent of the Participant) may impose such conditions on the exercise of
the resulting Non-Qualified Options as the Board of Directors in its discretion
may determine, provided that such conditions shall not be inconsistent with the
Plan. Nothing in the Plan shall be deemed to give any Participant the right to
have such Participant’s Incentive Stock Options converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Board of
Directors takes appropriate action. The Board of Directors, with the consent of
the Participant, may also terminate any portion of any Incentive Stock Option
that has not been exercised at the time of such termination.

 

6.8 Stock Appreciation Rights. An SAR is the right to receive, without payment,
an amount equal to the excess, if any, of the fair market value of a share of
Common Stock on the date of exercise over the grant price, which amount will be
multiplied by the number of shares with respect to which the SARs shall have
been exercised. The grant of SARs under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the Board of
Directors shall deem desirable:

 

(a) Grant. SARs may be granted in tandem with, in addition to or completely
independent of any Plan Benefit.

 

(b) Grant Price. The grant price of an SAR may be the fair market value of a
share of Common Stock on the date of grant or such other price as the Board of
Directors may determine.

 

(c) Exercise. An SAR may be exercised by a Participant in accordance with
procedures established by the Board of Directors or as otherwise provided in any
agreement evidencing any SARs. The Board of Directors may provide that an SAR
shall be automatically exercised on one or more specified dates.

 

(d) Form of Payment. Payment upon exercise of an SAR may be made in cash, in
shares of Common Stock or any combination thereof, as the Board of Directors
shall determine, provided, however, that any SAR exercised upon or subsequent to
the occurrence of a Change in Control (as defined in Section 11(a) hereof) shall
be paid in cash.

 

(e) Fair Market Value. Fair market value shall be determined in accordance with
Section 6.1(c) with the “Determination Date” being determined by reference to
the date of grant or the date of exercise of an SAR, as applicable.

 

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6.9 Rights as a Stockholder. The holder of an Option or SAR shall have no rights
as a stockholder with respect to any shares covered by the Option or SAR until
the date of issue of a stock certificate to him or her for such shares. Except
as otherwise expressly provided in the Plan, 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.

 

6.10 Special Provisions Applicable to Non-Qualified Options and SARs Granted to
Covered Employees. In order for the full value of Non-Qualified Options or SARs
granted to Covered Employees other than Non-Qualified Options or SARs granted
pursuant to Section 8 hereof, to be deductible by the Company for federal income
tax purposes, the Company may intend for such Non-Qualified Options or SARs to
be treated as “qualified performance-based compensation” as described in Treas.
Reg. §1.162-27(e) (or any successor regulation). In such case, Non-Qualified
Options or SARs granted to Covered Employees shall be subject to the following
additional requirements:

 

(a) such options and rights shall be granted only by the Committee; and

 

(b) the exercise price of such Options and the grant price of such SARs granted
shall in no event be less than the fair market value of the Common Stock as of
the date of grant of such Options or SARs.

 

SECTION 7. Special Provisions Applicable to Awards

 

7.1 Grants of Awards. The Board of Directors may grant a Participant an Award
subject to such terms and conditions as the Board of Directors deems
appropriate, including, without limitation, restrictions on the pledging, sale,
assignment, transfer or other disposition of such shares and the requirement
that the Participant forfeit all or a portion of such shares back to the Company
upon termination of employment.

 

7.2 Conditions. Approvals of Awards may be subject to the following conditions:

 

(a) Each Participant receiving an Award shall enter into an agreement (a “Stock
Restriction Agreement”) with the Company, if required by the Board of Directors,
in a form specified by the Board of Directors agreeing to such terms and
conditions of the Award as the Board of Directors deems appropriate.

 

(b) Shares issued and transferred to a Participant pursuant to an Award may, if
required by the Board of Directors, be deposited with the Treasurer or other
officer of the Company designated by the Board of Directors to be held until the
lapse of the restrictions upon such shares, and each Participant shall execute
and deliver to the Company stock powers enabling the Company to exercise its
rights hereunder.

 

(c) Certificates for shares issued pursuant to an Award shall, if the Company
shall deem it advisable, bear a legend to the effect that they are issued
subject to specified restrictions.

 

(d) Certificates representing the shares issued pursuant to an Award shall be
registered in the name of the Participant and shall be owned by such
Participant. Such Participant shall be the holder of record of such shares for
all purposes, including voting and receipt of dividends paid with respect to
such shares.

 

(e) If required by the Board of Directors, no Participant receiving an Award
shall make, in connection with such Award, the election permitted under Section
83(b) of the Code.

 

7.3 Nontransferability. Shares issued pursuant to an Award may not be sold,
assigned, transferred, alienated, commuted, anticipated, or otherwise disposed
of (except, subject to the provisions of such Participant’s Stock Restriction
Agreement, by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of ERISA or
the rules promulgated thereunder), or pledged or hypothecated as collateral for
a loan or as security for the performance of any obligation, or be otherwise
encumbered, and are not subject to attachment, garnishment, execution or other
legal or equitable process, prior to the lapse of restrictions on such shares,
and any attempt at action in contravention of this Section shall be null and
void. If any Participant should attempt to dispose of or encumber his or her
shares issued pursuant to an Award prior to the lapse of the restrictions
imposed on such shares, his or her interest in such shares shall terminate.

 

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7.4 Effect of Termination of Employment or Death on Awards. If, prior to the
lapse of restrictions applicable to Awards, the Participant ceases to be an
employee of the Company or the Related Companies for any reason, Awards to such
Participant, as to which restrictions have not lapsed, shall be forfeited to the
Company, effective on the date of the Participant’s termination of employment.
The Board of Directors shall have the sole power to decide in each case to what
extent leaves of absence shall be deemed a termination of employment.

 

SECTION 8. Performance Objectives

 

The Committee may, in its discretion, designate any Plan Benefit that is subject
to the achievement of performance conditions as a performance-based Plan Benefit
subject to this Section 8, in order to qualify such Plan Benefit as “qualified
performance-based compensation” as described in Treas. Reg. §1.162-27(e) (or any
successor regulation). The performance objectives for a Plan Benefit subject to
this Section 8 shall consist of one or more business criteria and a targeted
level or levels of performance with respect to such criteria, as specified by
the Committee but subject to this Section 8. Such performance objectives shall
be objective and shall otherwise meet the requirements of Section 162(m)(4)(C)
of the Code and regulations thereunder. Business criteria used by the Committee
in establishing such performance objectives shall be selected exclusively from
among the following:

 

  (1) Pre-tax income;

 

  (2) Operating profit;

 

  (3) Return to stockholders;

 

  (4) Return on equity;

 

  (5) Earnings per share;

 

  (6) Revenues and revenue growth;

 

  (7) Cash flow

 

  (8) Company-created income (for example, income due to Company-initiated cost
reductions or productivity improvements)

 

  (9) Stock price; and/or

 

  (10) Strategic business criteria, consisting of one or more objectives based
on region or center performance compared to budget, meeting specified revenue,
market penetration, business expansion goals, cost targets, and goals relating
to affiliations, joint ventures, acquisitions and divestitures.

 

The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Achievement of performance objectives
with respect to such Plan Benefits shall be measured over such periods as the
Committee may specify. Performance objectives may differ for such Plan Benefits
to different Participants. The Committee shall specify the weighing to be given
to each performance objective for purposes of determining the final amount
payable with respect to any such Plan Benefit. The Committee may, in its
discretion, reduce the amount of a payout otherwise to be made in connection
with a Plan Benefit subject to this Section 8, but may not exercise discretion
to increase such amount, and the Committee may consider other performance
criteria in exercising such discretion. All determinations by the Committee as
to the achievement of performance objectives shall be in writing. Any Plan
Benefit designated as performance-based pursuant to this Section 8 shall be
granted only by the Committee, and the Committee may not delegate any
responsibility with respect to a Plan Benefit subject to this Section 8.

 

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SECTION 9. Requirements of Law

 

9.1 Violations of Law. No shares shall be issued and delivered upon exercise of
any Option or the making of any Award or the payment of any SAR unless and
until, in the opinion of counsel for the Company, any applicable registration
requirements of the Securities Act of 1933, any applicable listing requirements
of any national securities exchange on which stock of the same class is then
listed, and any other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery, shall have been fully complied
with. Each Participant may, by accepting Plan Benefits, be required to represent
and agree in writing, for himself or herself and for his or her transferees by
will or the laws of descent and distribution, that the stock acquired by him,
her or them is being acquired for investment. The requirement for any such
representation may be waived at any time by the Board of Directors.

 

9.2 Compliance with Rule 16b-3. The intent of this Plan is to qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent any
provision of the Plan does not comply with the requirements of Rule 16b-3, it
shall be deemed inoperative to the extent permitted by law and deemed advisable
by the Board of Directors and shall not affect the validity of the Plan. In the
event Rule 16b-3 is revised or replaced, the Board of Directors may exercise
discretion to modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.

 

SECTION 10. Recapitalization

 

In the event that dividends are payable in Common Stock of the Company or in the
event there are splits, sub-divisions or combinations of shares of Common Stock
of the Company, the number of shares available under the Plan shall be increased
or decreased proportionately, as the case may be, and the number of shares
deliverable upon the exercise thereafter of any Option previously granted shall
be increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price, and the number of shares to which granted SARs
relate shall be increased or decreased proportionately, as the case may be, and
the grant price of such SARs shall be decreased or increased proportionately, as
the case may be.

 

SECTION 11. Change in Control and Reorganization

 

(a) For purposes of this Plan, a “Change in Control” shall mean (i) the
acquisition by a third person, including a “person” as defined in Section
13(d)(3) of the Exchange Act, of beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the total number of votes that
may be cast for the election of the directors of the Company; or (ii) as the
result of, or in connection with, any tender or exchange offer, merger,
consolidation or other business combination, sale of assets or one or more
contested elections, or any combination of the foregoing transactions, the
persons who were directors of the Company shall cease to constitute a majority
of the Board of the Company. In the event of a Change in Control of the Company,
except as the Board of Directors may expressly provide otherwise at the time of
the Change in Control or in a Participant’s agreement governing an Option, Award
or SAR, (i) vesting of Options and SARs shall accelerate such that (1) upon the
Change in Control, the Participant would be entitled to exercise his or her
Options and/or SARs to the extent of 50% of the number of shares not otherwise
exercisable at the time of the Change in Control, (2) beginning six months after
the Change in Control, the Participant would be entitled to exercise his or her
Options and/or SARs to the extent of an additional 25% of the number of shares
not otherwise exercisable at the time of the Change in Control, and (3)
beginning eighteen months after the Change in Control, the Participant would be
entitled to exercise his or her Options and/or SARs to the extent of an
additional 25% of the number of shares not otherwise exercisable at the time of
the Change in Control; in each case, unless such Options and/or SARs would vest
sooner pursuant to the terms of their original grant, in which case they shall
vest at such earlier date, but in no event will Options or SARs vest prior to
six months from the date of grant; and (ii) a Participant who is an officer of
the Company (including the controller) who is terminated other than for cause or
who resigns because of a significant diminution of his or her duties and
responsibilities, in either case within 180 days before a Change in Control or
within eighteen months after a Change in Control and in conjunction with such
Change in Control, shall be

 

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entitled to exercise his or her Options and/or SARs to the extent of 100% of the
number of shares covered thereby. For purposes of this Plan, “cause” shall mean
(x) conviction of a felony, (y) commission of an act of fraud or embezzlement
against the Company or the commission of any other action with the intent to
injure the Company, and (z) material misconduct in the performance of the
Participant’s duties or any material neglect of his or her duties to the
Company.

 

(b) In the case of any tender or exchange offer, merger, consolidation or other
business combination or sale of all or substantially all of the assets of the
Company, which does not constitute a Change in Control, or in the case of a
reorganization or 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 hereunder, shall, as to outstanding Plan Benefits, (i) make
appropriate provision for the protection of any such outstanding Plan Benefits
by the substitution on an equitable basis of appropriate stock of the Company or
of the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect of the shares of Common Stock of the Company; provided only
that the excess of the aggregate fair market value of the shares subject to the
Plan Benefits immediately after such substitution over the purchase price
thereof is not more than the excess of the aggregate fair market value of the
shares subject to such Plan Benefits immediately before such substitution over
the purchase price thereof, (ii) upon written notice to the Participants,
provide that all unexercised Plan Benefits must be exercised within a specified
number of days of the date of such notice or such Plan Benefits will be
terminated, or (iii) upon written notice to the Participants, provide that the
Company or the merged, consolidated or otherwise reorganized corporation shall
have the right, upon the effective date of any such merger, consolidation, sale
of assets or reorganization, to purchase all Plan Benefits held by each
Participant and unexercised as of that date at an amount equal to the aggregate
fair market value on such date of the shares subject to the Plan Benefits held
by such Participant over the aggregate purchase or grant price therefor, such
amount to be paid in cash or, if stock of the merged, consolidated or otherwise
reorganized corporation is issuable in respect of the shares of the Common Stock
of the Company, then, in the discretion of the Board of Directors, in stock of
such merged, consolidated or otherwise reorganized corporation equal in fair
market value to the aforesaid amount. In any such case the Board of Directors
shall, in good faith, determine fair market value and may, in its discretion,
advance the lapse of any waiting or installment periods and exercise dates.

 

SECTION 12. No Special Employment Rights

 

Nothing contained in the Plan or in any Plan Benefit documentation shall confer
upon any Participant receiving a grant of any Plan Benefit any right with
respect to the continuation of his or her employment by the Company (or any
Related Company) or interfere in any way with the right of the Company (or any
Related Company), subject to the terms of any separate employment agreement to
the contrary, at any time to terminate such employment or to increase or
decrease the compensation of the Participant from the rate in existence at the
time of the grant of any Plan Benefit. Whether an authorized leave of absence or
absence in military or government service shall constitute termination of
employment shall be determined by the Board of Directors, in accordance with any
applicable laws.

 

SECTION 13. Amendment of the Plan

 

The Board of Directors may at any time and from time to time suspend or
terminate all or any portion of the Plan or modify or amend the Plan in any
respect. The termination or any modification or amendment of the Plan shall not,
without the consent of a recipient of any Plan Benefit, affect his or her rights
under any Plan Benefit previously granted. With the consent of the affected
Participant, the Board of Directors may amend outstanding agreements relating to
any Plan Benefit in a manner not inconsistent with the Plan. The Board of
Directors hereby reserves the right to amend or modify the terms and provisions
of the Plan and of any outstanding Options to the extent necessary to qualify
any or all Options under the Plan 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, provided, however, that
the consent of a Participant is required if such amendment or modification would
cause unfavorable income tax treatment for such Participant.

 

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SECTION 14. Withholding

 

The Company’s obligation to deliver shares of stock upon the exercise of any
Option or SAR or the granting of an Award and to make payment upon exercise of
any SAR shall be subject to the satisfaction by the Participant of all
applicable federal, state and local income and employment tax withholding
requirements.

 

SECTION 15. Effective Date and Duration of the Plan

 

15.1 Effective Date. The Plan shall become effective as of January 16, 1998 (the
date of approval of the Plan by the Board of Directors), subject to approval of
the Plan by the stockholders of the Company.

 

15.2 Duration. Unless sooner terminated in accordance with Section 13 hereof,
the Plan shall terminate upon the earlier of (i) the tenth anniversary of the
effective date or (ii) the date on which all shares available for issuance under
the Plan shall have been issued pursuant to any Awards or the exercise or
cancellation of Options and SARs granted hereunder. If the date of termination
is determined under (i) above, then Plan Benefits outstanding on such date shall
continue to have force and effect in accordance with the provisions of the
instruments evidencing such Plan Benefits.

 

SECTION 16. Governing Law

 

The Plan and all actions taken thereunder shall be governed by the laws of the
State of Delaware.

 

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