EVOQUA WATER TECHNOLOGIES CORP.
2017 EQUITY INCENTIVE PLAN
NONSTATUTORY STOCK OPTION - NOTICE OF GRANT
        
Evoqua Water Technologies Corp. (the “Company”), a Delaware corporation, hereby
grants to the Optionee set forth below (the “Optionee”) an option (the “Option”)
to purchase the number of Shares of common stock of the Company (“Shares”) set
forth below at the Option Price set forth below, pursuant to the terms and
conditions of this Notice of Grant (the “Notice”), the Nonstatutory Stock Option
Award Agreement attached hereto as Exhibit A (the “Award Agreement”), and the
Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (the “Plan”).

Date of Grant:    [●]
Name of Optionee:    [●]
Number of Shares
Subject to Option:    [●] Shares
Option Price
(Price Per Share):
$[●] per Share

Expiration Date:
10 year anniversary of the Date of Grant.

Vesting:
The Option shall vest pursuant to the terms and conditions set forth in Section
3 and Section 5 of the Award Agreement.

Vesting Start Date:
[●]

The Option shall be subject to the execution and return of this Notice by the
Optionee to the Company within 60 days of the date hereof (including by
utilizing an electronic signature and/or web-based approval and notice process
or any other process as may be authorized by the Company). This Option is a
non-qualified stock option and is not intended by the parties hereto to be, and
shall not be treated as, an “incentive stock option” within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended. Capitalized terms
used but not defined herein shall have the meaning attributed to such terms in
the Award Agreement or, if not defined therein, in the Plan, unless the context
requires otherwise. By executing this Notice, the Optionee acknowledges that his
or her agreement to the covenants set forth in Section 7 of the Award Agreement
is a material inducement to the Company in granting this Award to the Optionee.

This Notice may be executed by facsimile or electronic means (including, without
limitation, PDF) and in one or more counterparts, each of which shall be
considered an original instrument, but all of which together shall constitute
one and the same agreement, and shall become binding when one or more
counterparts have been signed by each of the parties hereto and delivered to the
other party hereto.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Notice of Grant as of
the Date of Grant set forth above.

EVOQUA WATER TECHNOLOGIES CORP.

By:    
Name:
Title:

OPTIONEE

By:        
Name: [●]

    

[SIGNATURE PAGE TO NOTICE OF GRANT FOR THE EVOQUA WATER TECHNOLOGIES CORP. 2017
EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION]

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Exhibit A

EVOQUA WATER TECHNOLOGIES CORP.
2017 EQUITY INCENTIVE PLAN
NONSTATUTORY STOCK OPTION
AWARD AGREEMENT

THIS NONSTATUTORY STOCK OPTION AWARD AGREEMENT (the “Award Agreement”) is
entered into by and among Evoqua Water Technologies Corp. (the “Company”) and
the individual set forth on the signature page to that certain Notice of Grant
(the “Notice”) to which this Award Agreement is attached. The terms and
conditions of the Option granted hereby, to the extent not controlled by the
terms and conditions contained in the Plan, shall be as set forth in the Notice
and this Award Agreement. Capitalized terms used but not defined herein shall
have the meaning attributed to such terms in the Notice or, if not defined
therein, in the Plan, unless the context requires otherwise.

1.
No Right to Continued Employee Status or Consultant Service

Nothing contained in this Award Agreement shall confer upon the Optionee the
right to the continuation of his or her Employee status, or, in the case of a
Consultant or Director, to the continuation of his or her service arrangement,
or in either case to interfere with the right of the Company or any of its
Subsidiaries or other affiliates to Terminate the Optionee.

2.
Term of Option

As a general matter, the Option will expire on the Expiration Date set forth in
the Notice and be deemed to have been forfeited by the Optionee. As provided
below, the Optionee’s right to exercise the Option may expire prior to the
Expiration Date if the Optionee Terminates, including in the event of the
Optionee’s Disability or death. This Award Agreement shall remain in effect
until the Option has fully vested and been exercised or any unexercised portion
thereof has been forfeited by the Optionee as provided in this Award Agreement.
No portion of this Option shall be exercisable after the Expiration Date, or
such earlier date as may be applicable, except as provided herein.

3.
Vesting of Option

(a)    Vesting Schedule. Subject to the remainder of this Section 3 and Section
5 hereof, the Option will vest as to [●] percent on each of the first [●]
anniversaries of the Vesting Start Date, such that the Option shall become fully
(100%) vested as of the [●] anniversary of the Vesting Start Date, subject to
the Optionee not having Terminated as of the applicable vesting date.

Except as otherwise provided in Sections 3(b) and (c) and Section 5 hereof, if
the Optionee Terminates for any reason, the portion of the Option that has not
vested as of such date shall terminate upon such Termination and be deemed to
have been forfeited by the Optionee without consideration.

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(b)    Retirement Eligibility. Subject to Section 3(c) and Section 5 hereof, if
the Optionee has (x) (i) attained the age of 65 or (ii) attained the age of 55
and completed at least ten (10) consecutive years of service with the Company
and (y) delivered written notice to the Company on or after meeting the
requirements set forth in clause (x) of his or her intent to retire from the
Company (such notice, a “Retirement Notice”) at least six months prior to the
effective date of his or her retirement ((x) and (y), together, referred to as
becoming “Retirement Eligible”), the portion of the Option that has not vested
prior to the Optionee becoming Retirement Eligible shall continue to vest in
accordance with the vesting schedule set forth in Section 3(a) hereof, subject
to Section 3(c) hereof, notwithstanding the Optionee’s Termination for any
reason other than Cause prior to the date of his or her retirement.

(c)    Change in Control. Notwithstanding anything herein to the contrary, if
the Optionee is Terminated by the Company (or its successor) without Cause
within the 12-month period following a Change in Control, the portion of the
Option that has not vested as of the date of such Termination shall become fully
vested and exercisable as of the date of such Termination.

4.
Exercise

Prior to the Expiration Date and at any time prior to the Optionee’s
Termination, the Optionee may exercise all or a portion of the Option, to the
extent vested, by giving notice in the form, to the person, and using the
administrative method and the exercise procedures established by the Committee
from time to time (including any procedures utilizing an electronic signature
and/or web-based approval and notice process), specifying the number of Shares
to be acquired. The Optionee’s right to exercise the vested portion of the
Option following the date that of the Optionee’s Termination will depend on the
reason for such Termination, as described in Sections 5 and 6 below.

The Optionee must pay to the Company at the time of exercise the amount of the
Option Price for the number of Shares covered by the notice to exercise
(“Aggregate Option Price”). The Aggregate Option Price for any Shares purchased
pursuant to the exercise of an Option shall be paid in any or any combination of
the following forms: (w) cash or its equivalent (e.g., a check); (x) by making
arrangements through a registered broker-dealer pursuant to cashless exercise
procedures established by the Committee from time to time; (y) if permitted by
the Committee in its sole discretion, the transfer, either actually or by
attestation, to the Company of Shares that have been held by the Optionee for at
least six (6) months (or such lesser period as may be permitted by the
Committee) prior to the exercise of the Option, such transfer to be upon such
terms and conditions as determined by the Committee; or (z) in the form of other
property as determined by the Committee in its sole discretion. Any Shares
transferred to the Company as payment of the Aggregate Option Price shall be
valued at their Fair Market Value on the last business day preceding the date of
exercise of such Option. In addition, at the discretion of the Committee in its
sole discretion at the time of exercise, the Optionee may provide for the
payment of the Aggregate Option Price through Share withholding as a result of
which the number of Shares issued upon exercise of an Option would be reduced by
a number of Shares having a Fair Market Value equal to the Aggregate Option
Price. If requested by the Committee, the Optionee shall deliver this Award
Agreement to the Company, which shall endorse thereon a notation of such
exercise and return such Award Agreement to the Optionee. No fractional Shares
(or cash in lieu thereof) shall be issued upon exercise of an Option

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and the number of Shares that may be purchased upon exercise shall be rounded
down to the nearest number of whole Shares.

5.
Termination of Service

(a)    Termination for Any Reason Other Than for Cause, or Due to Death or
Disability or Retirement. If the Optionee incurs a Termination for any reason,
whether voluntarily or involuntarily, without Cause, other than (i) as a result
of the Optionee’s death or Disability, (ii) due to the Optionee’s Retirement (as
defined below) or (iii) as described in Section 3(c), then the portion of this
Option that has previously vested but has not been exercised shall remain
exercisable during the Post-Termination Exercise Period.

(b)    Termination Due to Death or Disability. If the Optionee incurs a
Termination as a result of the Optionee’s death or Disability, the portion of
the Option that is unvested as of the date of the Optionee’s Termination shall
become fully vested and exercisable as of the date of Termination, and shall
remain exercisable during the Post-Termination Exercise Period.

(c)    Termination Due to Retirement. If the Optionee incurs a Termination for
any reason other than for Cause after attaining Retirement Eligibility (any such
Termination, a “Retirement”), any portion of the Option that is vested as of the
date of the Retirement or that becomes vested in accordance with Section 3(b) of
this Agreement shall remain exerciseable during the Post-Termination Exercise
Period.

(d)    Termination for Cause. If the Optionee incurs a Termination for Cause,
then this Option and all rights attached hereto shall be forfeited and terminate
immediately upon the effective date of such Termination for Cause.

6.
Post-Termination Exercise Period

(a)    If the Optionee Terminates, (i) the Option, other than the Vested Portion
of the Option, shall terminate and be of no further force and effect as of and
following the close of business on the date of such Termination, except as
otherwise provided in Sections 3(b) or (c) or Section 5, and (ii) the Vested
Portion of the Option shall be exercisable by the Optionee until the earlier of
(x) the expiration of the “Post-Termination Exercise Period” (as defined below)
and (y) the expiration of the Term. Any portion of the Vested Portion of the
Option that, following the Optionee’s Termination, is not exercised prior to the
expiration of the Post-Termination Exercise Period shall terminate at the end of
the Post-Termination Exercise Period, or the Expiration Date, if earlier.
Notwithstanding anything in this Agreement or the Plan to the contrary, the
Option, whether or not exercisable, shall immediately terminate (a) upon a
Termination of the Optionee by the Company or a Subsidiary of the Company for
Cause or (b) in the event that the Optionee violates any provision of Section 7
hereof.

(b)    “Post-Termination Exercise Period” shall mean: (x) in the event of the
Optionee’s Termination for any reason other than (i) for Cause, (ii) due to
death or Disability or (iii) Retirement, shall mean the period commencing on the
Optionee’s Termination and ending at

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the close of business on the forty-fifth (45th) day after the date of the
Optionee’s Termination; (y) in the event of the Optionee’s Termination due to
the Optionee’s death or Disability, the period commencing on the date of
Optionee’s death or Termination due to Disability and ending at the close of
business on the first anniversary of such date and (z) in the event of the
Optionee’s Termination due to Retirement, the period commencing on the date of
the Optionee’s Retirement and ending on Expiration Date.

7.
Prohibited Activities

(a)    No Sale or Transfer. Unless otherwise required by law, this Option shall
not be (i) sold, transferred or otherwise disposed of, (ii) pledged or otherwise
hypothecated or (iii) subject to attachment, execution or levy of any kind,
other than by will or by the laws of descent or distribution; provided, however,
that any transferred Option will be subject to all of the same terms and
conditions as provided in the Plan and this Award Agreement and the Optionee’s
estate or beneficiary appointed in accordance with the Plan will remain liable
for any withholding tax that may be imposed by any federal, state or local tax
authority.

(b)    Right to Terminate Option and Recovery. The Optionee understands and
agrees that the Company has granted this Option to the Optionee to reward the
Optionee for the Optionee’s future efforts and loyalty to the Company and its
affiliates by giving the Optionee the opportunity to participate in the
potential future appreciation of the Company. Accordingly, if (a) the Optionee
materially violates the Optionee’s obligations relating to the non-disclosure or
non-use of confidential or proprietary information under any Restrictive
Agreement to which the Optionee is a party, or (b) the Optionee materially
breaches or violates the Optionee’s obligations relating to non-disparagement
under any Restrictive Agreement to which the Optionee is a party, or (c) the
Optionee engages in any activity prohibited by this Section 7 of this Award
Agreement, or (d) the Optionee materially breaches or violates any
non-solicitation obligations under any Restrictive Agreement to which the
Optionee is a party, or (e) the Optionee is convicted of a felony against the
Company or any of its affiliates or (f) the Optionee breaches or violates any
non-competition obligations under any Restrictive Agreement to which the
Optionee is a party (as applicable), then, in addition to any other rights and
remedies available to the Company, the Company shall be entitled, at its option,
exercisable by written notice, to terminate the Option (including the vested
portion of the Option), or any unexercised portion thereof, which shall be of no
further force and effect. “Restrictive Agreement” shall mean (i) for any
Optionee who is not a resident of the State of California, any agreement between
the Company or any Subsidiary and the Optionee (including any prior option
agreement) that contains non-competition, non-solicitation, non-hire,
non-disparagement, or confidentiality restrictions applicable to the Optionee
and (ii) for any Optionee who is a resident of the State of California, any
agreement between the Company or any Subsidiary and the Optionee (including any
prior option agreement) that contains non-solicitation, non-hire,
non-disparagement, or confidentiality restrictions applicable to the Optionee.

(c)    Other Remedies. The Optionee specifically acknowledges and agrees that
its remedies under this Section 7 shall not prevent the Company or any
Subsidiary from seeking injunctive or other equitable relief in connection with
the Optionee’s breach of any Restrictive Agreement. In the event that the
provisions of this Section 7 should ever be deemed to exceed the

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limitation provided by applicable law, then the Optionee and the Company agree
that such provisions shall be reformed to set forth the maximum limitations
permitted.

8.
No Rights as Stockholder

The Optionee shall have no rights as a stockholder with respect to the Shares
covered by any exercise of this Option until the effective date of issuance of
the Shares and the entry of the Optionee’s name as a shareholder of record on
the books of the Company following exercise of this Option. Additionally, as a
condition to the issuance of any Shares covered by any exercise of this Option,
the Company reserves the right to require the Optionee to become party to the
Company’s Second Amended and Restated Stockholders’ Agreement dated as of
December 11, 2014 and the Company’s Second Amended and Restated Registration
Rights Agreement dated as of October 16, 2017, in each case, as may be amended
from time to time.
 
9.
Taxation Upon Exercise of Option; Tax Withholding; Parachute Tax Provisions

The Optionee understands that, upon exercise of this Option, the Optionee will
recognize income, for Federal, state and local income tax purposes, as
applicable, in an amount equal to the amount by which the Fair Market Value of
the Shares, determined as of the date of exercise, exceeds the Option Price. The
acceptance of the Shares by the Optionee shall constitute an agreement by the
Optionee to report such income in accordance with then applicable law and to
cooperate with Company and its subsidiaries in establishing the amount of such
income and corresponding deduction to the Company and/or its subsidiaries for
its income tax purposes.

The Optionee is responsible for all tax obligations that arise as a result of
the exercise of this Option. The Company may withhold from any amount payable to
the Optionee an amount sufficient to cover any Federal, state or local
withholding taxes which may become required with respect to such exercise or
take any other action it deems necessary to satisfy any income or other tax
withholding requirements as a result of the exercise this Option. The Company
shall have the right to require the payment of any such taxes and require that
the Optionee, or the Optionee’s beneficiary, to furnish information deemed
necessary by the Company to meet any tax reporting obligation as a condition to
exercise or before the issuance of any Shares pursuant to this Option. The
Optionee may pay his or her withholding tax obligation in connection with the
exercise of the Option, by making (w) a cash payment to the Company, or (x)
arrangements through a registered broker-dealer pursuant to cashless exercise
procedures established by the Committee from time to time. In addition, the
Committee, in its sole discretion, may allow the Optionee, to pay his or her
withholding tax obligation in connection with the exercise of the Option, by (y)
having withheld a portion of the Shares then issuable to him or her upon
exercise of the Option or (z) surrendering Shares that have been held by the
Optionee for at least six (6) months (or such lesser period as may be permitted
by the Committee) prior to the exercise of the Award, in each case having an
aggregate Fair Market Value equal to the withholding taxes.

In connection with the grant of this Option, the parties wish to memorialize
their agreement regarding the treatment of any potential golden parachute
payments as set forth in Exhibit 1 attached hereto.

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10.
Securities Laws; Tolling of Exercise Period Expiration

(a)    Upon the acquisition of any Shares pursuant to the exercise of the
Option, the Optionee will make such written representations, warranties, and
agreements as the Committee may reasonably request in order to comply with
securities laws or with this Award Agreement. Optionee hereby agrees not to
offer, sell or otherwise attempt to dispose of any Shares issued to the Optionee
upon exercise of the Option in any way which would: (x) require the Company to
file any registration statement with the Securities and Exchange Commission (or
any similar filing under state law or the laws of any other county) or to amend
or supplement any such filing or (y) violate or cause the Company to violate the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, or any other Federal,
state or local law, or the laws of any other country. The Company reserves the
right to place restrictions on any Shares the Optionee may receive as a result
of the exercise of the Option.

(b)    Notwithstanding any provision contained in this Award Agreement or the
Plan to the contrary,

(i)    if, following the Optionee’s Termination, all or a portion of the
exercise period applicable to the Option occurs during a time when the Optionee
cannot exercise the Option without violating (w) an applicable Federal, state or
local law, (x) the rules related to a blackout period declared by the Company,
(y) any agreed to lock-up arrangement, or (z) other similar circumstance, in
each case, the exercise period applicable to the Option will be tolled for the
number of days that such prohibitions or restrictions apply, such that the
exercise period will be extended by the same number of days as were subject to
the prohibitions or restrictions; provided, however, that the exercise period
may not be extended due to such tolling past the Expiration Date of the Option
as set forth above; and

(ii)    if the Expiration Date is set to occur during a time that the Optionee
cannot exercise the Option without violating an applicable Federal, state or
local law (and the Option has not previously been exercised or otherwise
terminated), the exercise period will be tolled until such time as the violation
would no longer apply; provided, however, that the exercise period applicable to
the Option in this event will be fifteen (15) days from the date such potential
violation is longer applicable.

11.
Modification, Extension and Renewal of Options

Except as set forth in Section 12(b) hereof, this Award Agreement may not be
modified, amended, terminated and no provision hereof may be waived in whole or
in part except by a written agreement signed by the Company and the Optionee and
no modification shall, without the consent of the Optionee, alter to the
Optionee’s material detriment or materially impair any rights of the Optionee
under this Award Agreement except to the extent permitted under the Plan.

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12.
Notices

Unless otherwise provided herein, any notices or other communication given or
made pursuant to the Notice, this Award Agreement or the Plan shall be in
writing and shall be deemed to have been duly given (i) as of the date
delivered, if personally delivered (including receipted courier service) or
overnight delivery service, with confirmation of receipt; (ii) on the date the
delivering party receives confirmation, if delivered by facsimile to the number
indicated or by email to the address indicated or through an electronic
administrative system designated by the Company; (iii) one (1) business day
after being sent by reputable commercial overnight delivery service courier,
with confirmation of receipt; or (iv) three (3) business days after being mailed
by registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below:
 
(a)    If to the Company at the address below:

Evoqua Water Technologies Corp.
210 Sixth Avenue
Pittsburgh, Pennsylvania
Phone: (724) 772-0044
Attention: General Counsel
    
(b)    If to the Optionee, at the most recent address, facsimile number or email
contained in the Company’s records.

13.
Award Agreement Subject to Plan and Applicable Law

(a)    This Option is made pursuant to the Plan and shall be interpreted to
comply therewith. A copy of the Plan is attached hereto. Any provision of this
Option inconsistent with the Plan shall be considered void and replaced with the
applicable provision of the Plan. The Plan shall control in the event there
shall be any conflict between the Plan, the Notice, and this Award Agreement,
and it shall control as to any matters not contained in this Award Agreement.
The Committee shall have authority to make constructions of this Award
Agreement, and to correct any defect or supply any omission or reconcile any
inconsistency in this Award Agreement, and to prescribe rules and regulations
relating to the administration of this Award and other Awards granted under the
Plan.

(b)    For the avoidance of doubt, with respect to any Optionee outside of the
U.S., if the application of the vesting provision as set forth in Section 3(b)
hereof is invalid or impracticable under applicable local law, the terms of
Section 3(b) hereof shall either be amended or be deemed not to apply to such
Optionee, as determined in the sole discretion of the Committee. All
determinations made and actions taken with respect to this Section 12(b) shall
be made in the sole discretion of the Committee.

(c)    This Option shall be governed by the laws of the State of Delaware,
without regard to the conflicts of law principles thereof, and subject to the
exclusive jurisdiction of the

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courts therein. The Optionee hereby consents to personal jurisdiction in any
action brought in any court, federal or state, within the State of Delaware
having subject matter jurisdiction in the matter.

14.
Headings and Capitalized Terms

Unless otherwise provided herein, capitalized terms used herein that are defined
in the Plan and not defined herein shall have the meanings set forth in the
Plan. Headings are for convenience only and are not deemed to be part of this
Award Agreement. Unless otherwise indicated, any reference to a Section herein
is a reference to a Section of this Award Agreement.
 
15.
Severability and Reformation

If any provision of this Award Agreement shall be determined by a court of law
of competent jurisdiction to be unenforceable for any reason, such
unenforceability shall not affect the enforceability of any of the remaining
provisions hereof; and this Award Agreement, to the fullest extent lawful, shall
be reformed and construed as if such unenforceable provision, or part thereof,
had never been contained herein, and such provision or part thereof shall be
reformed or construed so that it would be enforceable to the maximum extent
legally possible.

16.
Binding Effect

This Award Agreement shall be binding upon the parties hereto, together with
their personal executors, administrator, successors, personal representatives,
heirs and permitted assigns.

17.
Entire Agreement

This Award Agreement, together with the Plan, supersedes all prior written and
oral agreements and understandings among the parties as to its subject matter
and constitutes the entire agreement of the parties with respect to the subject
matter hereof. If there is any conflict between the Notice, this Award Agreement
and the Plan, then the applicable terms of the Plan shall govern.
 
18.
Waiver

Waiver by any party of any breach of this Award Agreement or failure to exercise
any right hereunder shall not be deemed to be a waiver of any other breach or
right whether or not of the same or a similar nature. The failure of any party
to take action by reason of such breach or to exercise any such right shall not
deprive the party of the right to take action at any time while or after such
breach or condition giving rise to such rights continues.

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Exhibit 1

PARACHUTE TAX PROVISIONS

This Exhibit 1 sets forth the terms and provisions applicable to the Optionee
pursuant to the provisions of Section 9 of the Award Agreement. This Exhibit 1
shall be subject in all respects to the terms and conditions of the Award
Agreement.

(a)    To the extent that the Optionee, would otherwise be eligible to receive a
payment or benefit pursuant to the terms of this Award Agreement, any employment
or other agreement with the Company or any Subsidiary or otherwise in connection
with, or arising out of, the Optionee’s employment with the Company or a change
in ownership or effective control of the Company or of a substantial portion of
its assets (any such payment or benefit, a “Parachute Payment”), that a
nationally recognized United States public accounting firm selected by the
Company (the “Accountants”) determines, but for this sentence would be subject
to excise tax imposed by Section 4999 of the Code (the “Excise Tax”), subject to
clause (c) below, then the Company shall pay to the Optionee whichever of the
following two alternative forms of payment would result in the Optionee’s
receipt, on an after-tax basis, of the greater amount of the Parachute Payment
notwithstanding that all or some portion of the Parachute Payment may be subject
to the Excise Tax: (1) payment in full of the entire amount of the Parachute
Payment (a “Full Payment”), or (2) payment of only a part of the Parachute
Payment so that the Optionee receives the largest payment possible without the
imposition of the Excise Tax (a “Reduced Payment”).

(b)    If a reduction in the Parachute Payment is necessary pursuant to clause
(a), then the reduction shall occur in the following order: (1) cancellation of
acceleration of vesting on any equity awards for which the exercise price
exceeds the then fair market value of the underlying equity; (2) reduction of
cash payments (with such reduction being applied to the payments in the reverse
order in which they would otherwise be made, that is, later payments shall be
reduced before earlier payments); and (3) cancellation of acceleration of
vesting of equity awards not covered under (1) above; provided, however, that in
the event that acceleration of vesting of equity awards is to be cancelled,
acceleration of vesting of full value awards shall be cancelled before
acceleration of options and stock appreciation rights and within each class such
acceleration of vesting shall be cancelled in the reverse order of the date of
grant of such equity awards, that is, later equity awards shall be canceled
before earlier equity awards; and provided, further, that to the extent
permitted by Code Section 409A and Sections 280G and 4999 of the Code, if a
different reduction procedure would be permitted without violating Code Section
409A or losing the benefit of the reduction under Sections 280G and 4999 of the
Code, the Optionee may designate a different order of reduction.

(c)    For purposes of determining whether any of the Parachute Payments
(collectively the “Total Payments”) will be subject to the Excise Tax and the
amount of such Excise Tax, (i) the Total Payments shall be treated as “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and all
“parachute payments” in excess of the “base amount” (as defined under Section
280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless
and except to the extent that, in the opinion of the Accountants, such Total
Payments (in whole or in part): (1) do not constitute “parachute payments,”
including giving effect to the recalculation of stock options

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in accordance with Treasury Regulation Section 1.280G-1, Q&A 33, (2) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the “base amount” or (3) are
otherwise not subject to the Excise Tax, and (ii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G of the Code.

(d)    All determinations hereunder shall be made by the Accountants, which
determinations shall be final and binding upon the Company and the Optionee.

(e)    The federal tax returns filed by the Optionee (and any filing made by a
consolidated tax group which includes the Company) shall be prepared and filed
on a basis consistent with the determination of the Accountants with respect to
the Excise Tax payable by the Optionee. The Optionee shall make proper payment
of the amount of any Excise Tax, and at the request of the Company, provide to
the Company true and correct copies (with any amendments) of his or her federal
income tax return as filed with the Internal Revenue Service, and such other
documents reasonably requested by the Company, evidencing such payment (provided
that the Optionee may delete information unrelated to the Parachute Payment or
Excise Tax and provided, further that the Company at all times shall treat such
returns as confidential and use such return only for purpose contemplated by
this paragraph).

(f)    In the event of any controversy with the Internal Revenue Service (or
other taxing authority) with regard to the Excise Tax, the Optionee shall permit
the Company to control issues related to the Excise Tax (at its expense),
provided that such issues do not potentially materially adversely affect the
Optionee but the Optionee shall control any other issues. In the event that the
issues are interrelated, the Optionee and the Company shall in good faith
cooperate so as not to jeopardize resolution of either issue. In the event of
any conference with any taxing authority as to the Excise Tax or associated
income taxes, the Optionee shall permit the representative of the Company to
accompany the Optionee, and the Optionee and his representative shall cooperate
with the Company and its representative.

(g)    The Company shall be responsible for all charges of the Accountants.

(h)    The Company and the Optionee shall promptly deliver to each other copies
of any written communications, and summaries of any verbal communications, with
any taxing authority regarding the Excise Tax covered by this Exhibit 1.

(i)    Nothing in this Exhibit 1 is intended to violate the Sarbanes-Oxley Act
of 2002 and to the extent that any advance or repayment obligation hereunder
would do so, such obligation shall be modified so as to make the advance a
nonrefundable payment to the Optionee and the repayment obligation null and
void.

(j)    Notwithstanding the foregoing, any payment or reimbursement made pursuant
to this Exhibit 1 shall be paid to the Optionee promptly and in no event later
than the end of the calendar year next following the calendar year in which the
related tax is paid by the Optionee or where no taxes are required to be
remitted, the end of the Optionee’s calendar year following the Optionee’s

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calendar year in which the audit is completed or there is a final and
nonappealable settlement or other resolution of the litigation.

(k)    The provisions of this Exhibit 1 shall survive the termination of the
Optionee’s employment with the Company for any reason and the termination of the
Award Agreement.