**EXHIBIT
10.40**
 
 **DSL.net,
Inc.**
 
 **AMENDED
AND RESTATED 2001 STOCK OPTION AND INCENTIVE PLAN**
 
 **as
amended as of February 9, 2005**
 
 
 **SECTION
1** **.** **Purpose** **.**
 
 The
purpose of the Amended and Restated 2001 Stock Option and Incentive Plan (the
"Plan") is to secure for DSL.net, Inc. (the "Company"), its parent (if any) and
any subsidiaries of the Company (collectively the "Related Corporations") the
benefits arising from capital stock ownership by those employees, directors,
officers and consultants of the Company and any Related Corporations 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
Corporations 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 Corporations may
purchase stock in the Company pursuant to options granted hereunder which do not
qualify as Incentive Stock Options ("Non-Qualified Options"); (c) directors,
employees and consultants of the Company and any Related Corporations may be
awarded stock in the Company ("Awards"); (d) directors, employees and
consultants of the Company and any Related Corporations may receive stock
appreciation rights ("SARs"); and (e) directors, employees and consultants of
the Company and any Related Corporations may make direct purchases of stock in
the Company ("Purchases"). 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, SARs and Purchases are referred to hereafter
individually as a "Plan Benefit" and collectively as "Plan Benefits." Directors,
employees and consultants of the Company and any Related Corporations 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 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, grant SARs and approve Purchases, 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, SAR and Purchase 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 to the President or Chief Executive Officer of the
Company the power to grant options to non-officers in accordance with written
guidelines approved by the Board of Directors. In addition, 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 the
Company has a class of stock registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), then members of the
Committee shall at all times be: (i) "outside directors" as such 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 Exchange Act, as such terms are interpreted from time to time;
provided, however that if the members of the Committee do not meet the
requirements set forth in (ii) above, then all decisions and acts of the
Committee shall be subject to and effective upon the approval of the Board of
Directors. If a Committee meeting the requirements of (i) and (ii) above is so
appointed, all references to the Board of Directors herein shall mean and relate
to such Committee, unless the context otherwise requires; provided,
however , that if
a Committee is appointed that does not meet the requirements of (i) and (ii)
above, then all decisions and acts of the Committee shall be subject to and
effective upon the approval of the Board of Directors.
 
 2.2Compliance
with Section 162(m) of the Code . Section
162(m) of the Code, added by the Omnibus Budget Reconciliation Act of 1993,
generally limits the tax deductibility to publicly held companies of
compensation in excess of $1,000,000 paid to certain "covered employees"
("Covered Employees"). If the Company is subject to Section 162(m) of the Code,
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 Corporations,
 
 -2-
 
 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, SARs and Purchases** **.** Non-Qualified Options, Awards, SARs and authorizations to make Purchases 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 or to approve a Purchase. Granting of
any Option, Award or SAR or approval of any Purchase 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, par value
$.0005 per share, and the maximum number of shares of stock 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
65,000,000 shares. Such shares may be authorized and unissued shares or may be
treasury shares. 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 or Purchases, 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, Awards and SARs and Approvals of Purchases** **.**
 
 Options,
Awards and SARs may be granted and Purchases may be approved under the Plan at
any time on or after November 28, 2001 and prior to November 28, 2011; provided,
however, that prior to the date the Plan is first approved by the Company’s
stockholders (i) no Incentive Stock Options shall be granted pursuant to the
Plan and (ii) no Plan Benefits shall be granted to a director or an officer of
the Company or any Related Corporations, unless with respect to such grant to an
officer, such grant is an inducement essential to such person’s entering into
one or more employment agreements with the Company or any Related Corporations
as a new employee. The date of grant of an Option, Award or SAR or approval of a
Purchase under the Plan will be the date specified by the Board of Directors at
the time the Board of Directors grants such Option, Award or SAR or approves
such Purchase; 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.
 
 -3-
 
 **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 stock deliverable upon the exercise of an Option
shall be determined by the Board of Directors, 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 of such stock on the day the option is
granted (except as modified in Section 6.6(b) hereof). The Board of Directors
may delegate to the Chief Executive Officer of the Company the power to
determine the exercise price of an option in accordance with written guidelines
approved by the Board of Directors.
 
 (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, either to the Company or 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.
 
 -4-
 (d)  If the
Company is subject to Section 162(m) of the Code, the maximum number of shares
with respect to which Options or SARs may be granted to any employee, including
any cancellations or repricings which may occur, shall be limited to 8,000,000
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. 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).
 
 (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 Corporations) shall not exceed $100,000. To the extent the aggregate
fair market value 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 Corporations) exceeds $100,000, such Options shall be treated as
Non-Qualified Options.
 
 **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
 
 -5-
 
 or the
SAR Agreement, 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** **.**
 
 (a)  Except as
provided in any applicable option agreement, if a Participant ceases to be
employed by the Company or a Related Corporation 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 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 Corporation,
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 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 Corporations) shall
not exceed $100,000. To the extent the aggregate fair market value of the Common
Stock for 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 Corporations) exceeds $100,000,
such Options shall be treated as Non-
 
 -6-
 
 Qualified
Options. 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.
 
 (b)  10%
Stockholder . If any
employee to whom an Incentive Stock Option is to 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 Corporations, 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 Corporation 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** **.** A 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
 
 -7-
 
 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 a 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 . A 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.
 
 (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.
 
 **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** **.**
 
 If the
Company is subject to Section 162(m) of the Code, in order for the full value of
Non-Qualified Options or SARs granted to Covered Employees 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
 
 -8-
 (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.
 
 **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
 
 -9-
 
 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.
 
 **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 Corporations 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, consistent with
applicable laws, to decide in each case to what extent leaves of absence shall
be deemed a termination of employment.
 
 
 **SECTION
8** **.** **Special
Provisions Applicable to Purchases** **.**
 
 All
approvals of Purchases which provide that the Company has a right to repurchase
the shares subject to such Purchase (the "Restricted Shares") shall be subject
to the terms and conditions set forth in the related agreement (the "Stock
Purchase Restriction Agreement") approved by the Board of Directors, and shall
be subject to the other terms and conditions of this Section 8.
 
 **8.1**  **Conditions** **.** All
approvals of Purchases shall be subject to the following
conditions:
 
 (a)  Prior to
the issuance and transfer of Restricted Shares, the Participant shall pay to the
Company the purchase price (the "Purchase Price") of the Restricted Shares in
cash or in such other manner as shall be as approved by the Board of
Directors.
 
 (b)  Restricted
Shares issued and transferred to a Participant 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 Restricted Shares, and each Participant shall execute and
deliver to the Company stock powers enabling the Company to exercise its rights
hereunder.
 
 (c)  Certificates
for Restricted Shares 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 Restricted Shares 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 Restricted Shares for all purposes, including
voting and receipt of dividends paid with respect to such Restricted
Shares.
 
 **8.2**  **Nontransferability** **.** A
Participant's Restricted Shares may not be sold, assigned, transferred,
alienated, commuted, or otherwise disposed of (except, subject to the provisions
of such Participant's Stock Purchase 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
 
 -10-
 
 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
Restricted 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 Restricted Shares prior to the lapse of the restrictions
imposed on such Restricted Shares, his or her interest in the Restricted Shares
awarded to him or her shall terminate. ****
 
 
 **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 Purchase 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 l933, as amended, 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** **.** If the
Company has a class of stock registered pursuant to Section 12 of the Exchange
Act, 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.
 
  -11-
  
 **SECTION
11** **.** **Reorganization** **.**
 
 (a)  In case
the Company is merged or consolidated with another corporation and the Company
is not the surviving corporation, or, in case the property or stock of the
Company is acquired by any other corporation, or in 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, either (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 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.
 
 (b)  Notwithstanding
anything herein to the contrary, in the event that following or in connection
with a Change-in-Control (as defined below), a Participant’s employment with, or
service as a director or consultant of, the Company is (i) terminated by the
Company for any reason other than Cause (as defined below), or (ii) terminated
by the Participant for Good Reason (as defined below), any portion of a
Participant’s Plan Benefit which would otherwise vest or become exercisable
solely with the passage of time and the Participant’s continued employment with
or service as a director or consultant of the Company, shall immediately vest
and become fully exercisable and all rights relevant to such Plan Benefit shall
accrue immediately to such Participant, unless otherwise explicitly provided in
the applicable Award agreement. The term "Cause" shall mean (i) habitual
intoxication, (ii) illegal drug use or addiction, (iii) conviction of a felony
(or plea of guilty or nolo contendere), (iv) material failure or inability to
perform one’s agreements, duties or obligations as an employee, director or
consultant, other than from illness or injury, and (v) willful misconduct or
negligence in the performance of one’s agreements, duties or obligations as an
employee, director or consultant. The term "Change-in-Control" shall mean: (i)
any sale, lease, exchange or other transfer (in one transaction or series of
transactions)
 
 -12-
 
 of all or
substantially all of the assets of the Company; (ii) individuals who, as of the
date hereof, constitute the entire Board of Directors of the Company (the
"Incumbent Directors") cease for any reason to constitute at least a majority of
the Board of Directors, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the then Incumbent Directors shall
be, for the purposes of this provision, considered as though such individual
were an Incumbent Director; (iii) any consolidation or merger of the Company
with any other entity (including, without limitation, a triangular merger) where
the stockholders of the Company immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger, beneficially
own, directly or indirectly, shares representing fifty percent (50%) of the
combined voting power of all of the outstanding securities of the entity issuing
cash or securities in the consolidation or merger (or its ultimate parent
corporation, if any); (iv) a person, including a "person" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than the Company or an employee benefit plan sponsored by the
Company, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
forty percent (40%) or more of the total voting power represented by the
Company’s then outstanding voting securities, except for a person who was a
beneficial owner of forty percent (40%) or more of the total voting power of the
Company’s outstanding voting securities on April 29, 1999; or (v) the Board of
Directors of the Company, by a vote of a majority of all the Directors, adopts a
resolution to the effect that a "Change-in-Control" has occurred for purposes of
this Agreement. The term "Good Reason" shall mean that (i) the Participant’s
compensation has been materially reduced, (ii) the Participant’s position,
duties or responsibilities have been materially changed, (iii) the Participant,
if an employee of the Company, has been required to move his or her principal
residence because his primary place of employment is moved to a location greater
than thirty (30) miles away from its then current location, (iv) the Company has
not paid to the Participant when due any salary, bonus or other material benefit
due to him or her, or (v) there exists a breach by the Company of any material
term or provision of any employment agreement between it and the Participant,
provided, however, that, in any such event, the Participant shall notify the
Company of such event and give it fifteen (15) days to remedy the situation
before terminating his or her employment.
 
 
 **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
Corporation) or interfere in any way with the right of the Company (or any
Related Corporation), 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.
 
 -13-
 
 **SECTION
13** **.** **Amendment
of the Plan** **.**
 
 The Board
of Directors may at any time and from time to time 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 an optionee is required if such amendment or modification would
cause unfavorable income tax treatment for such optionee.
 
 
 **SECTION
14** **.** **Withholding** **.**
 
 The
Company's obligation to deliver shares of stock upon the exercise of any Option
or the granting of an Award or to make payment upon any exercise of any SAR or
making of a Purchase 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** **.** This
Plan, which amends and restates the 2001 Stock Option and Incentive Plan
approved by the Board of Directors on November 28, 2001, became effective on
November 28, 2001. Subject to the limitations set forth in Section 5, Options
may be granted under the Plan at any time on or after the effective date and
before the date fixed herein for termination of the Plan.
 
 **15.2**  **Duration** **.** Unless
sooner terminated in accordance with Section l1 hereof, the Plan shall terminate
upon the earlier of (i) November 28, 2011 or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to any
Awards or Purchases 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
Connecticut.


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