<PAGE>   1
                                                                    EXHIBIT 10.1

 
                                                                      APPENDIX A
 
                      PROJECT SOFTWARE & DEVELOPMENT, INC.
 
                           1999 EQUITY INCENTIVE PLAN
 
1.  INTRODUCTION: PURPOSES
 
     (a) This 1999 Equity Incentive Plan (the "1999 Plan" or "the Plan")
supersedes the 1994 Incentive and Nonqualified Stock Option Plan (the "1994
Plan") of Project Software & Development, Inc. (the "Company"). Options granted
under the 1994 Plan prior to the approval of the 1999 Plan shall continue to be
governed by the terms of the 1994 Plan as in effect immediately prior to the
date of such approval.
 
     (b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Bonuses, (iv) rights to purchase
Restricted Stock, (v) Stock Appreciation Rights, and (vi) other awards based
upon the Company's Common Stock on such terms and conditions as the Board of
Directors of the Company (the "Board") may determine.
 
     (c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
 
     (d) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c)
hereof, be either (i) Options granted pursuant to Sections 6 and 7 hereof,
including Incentive Stock Options and Nonstatutory Stock Options, (ii) Stock
Bonuses or rights to purchase restricted stock granted pursuant to Section 8
hereof, (iii) Stock Appreciation Rights granted pursuant to Section 9 hereof or
(iv) other stock based awards granted pursuant to Section 10 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and shall be in such form as required pursuant to
Sections 6 and 7 hereof, and a separate certificate will be issued for shares
purchased upon exercise of each type of Option.
 
2.  DEFINITIONS AND RULES OF INTERPRETATION
 
     (a) Definitions.
 
     For the purposes of the Plan, in addition to the definitions set forth
above, the following terms shall have the respective meanings set forth below:
 
          (i) "Affiliate" means any parent corporation or subsidiary
     corporation, whether now or hereafter existing, as those terms are defined
     in Sections 424(e) and (f) respectively, of the Code.
 
          (ii) "Board" means the Board of Directors of the Company.
 
          (iii) "Change in Control" means the occurrence of any one of the
     following events:
 
             (a) any "person" (as such term is used in Sections 13(d) and
        14(d)(2) of the Exchange Act) becomes a "beneficial owner" (as such term
        is defined in Rule 13d-3 promulgated under the Exchange Act) (other than
        the Company, any trustee or other fiduciary holding securities under an
        employee benefit plan of the Company, or any corporation owned, directly
        or indirectly, by the stockholders of the Company in substantially the
        same proportions as their ownership of stock of the Company), directly
        or indirectly, of securities of the Company representing fifty percent
        (50%) or more of the combined voting power of the Company's then
        outstanding securities; or
 
             (b) persons who constitute the Company's Board immediately prior to
        any tender offer, proxy contest, consent solicitation, business
        combination, merger or similar transaction cease to constitute
 
                                       A-1
<PAGE>   2
 
        at least a majority of the Board as a result of such tender offer, proxy
        contest, merger or similar transaction; or
 
             (c) the stockholders of the Company approve a merger or
        consolidation of the Company with any other corporation or other entity,
        other than a merger or consolidation which would result in the voting
        securities of the Company outstanding immediately prior thereto
        continuing to represent (either by remaining outstanding or by being
        converted into voting securities of the surviving entity) more than
        fifty percent (50%) of the combined voting power of the voting
        securities of the Company or such surviving entity outstanding
        immediately after such merger or consolidation; or
 
             (d) the stockholders of the Company approve a plan of complete
        liquidation of the Company or an agreement for the sale or disposition
        by the Company of all or substantially all of the Company's assets.
 
          (iv) "Change in Stock" means any change in the Company Common Stock
     subject to the Plan, or subject to any Stock Award, without receipt of
     consideration by the Company (through merger, consolidation,
     reorganization, recapitalization, reincorporation, stock dividend, stock
     split, spin-off, split-up, spin-out, dividend in property other than cash,
     liquidating dividend, combination of shares, exchange of shares, change in
     corporate structure or other transaction not involving the receipt of
     consideration by the Company); provided however, that the conversion of any
     convertible securities of the Company shall not be treated as a
     "transaction not involving the receipt of consideration by the Company."
 
          (v) "Code" means the Internal Revenue Code of 1986, as amended.
 
          (vi) "Committee" means the Committee appointed by the Board in
     accordance with subsection 3(c) of the Plan.
 
          (vii) "Company" means Project Software & Development, Inc. a
     corporation organized under the laws of Massachusetts.
 
          (viii) "Company Common Stock" means the common stock of the Company,
     par value $.01 per share
 
          (ix) "Concurrent Stock Appreciation Right" or "Concurrent Right" means
     a right granted pursuant to subsection 9(b)(ii) hereof.
 
          (x) "Consultant" means any person, including an advisor, engaged by
     the Company, or an Affiliate to render consulting services and who is
     compensated for such services, provided that the term "Consultant" shall
     not include a Director acting solely in his capacity as such.
 
          (xi) "Continuous Status as an Employee or Consultant" means the
     employment or relationship as Consultant is not interrupted or terminated
     by the Company or any Affiliate. The Committee, in its sole discretion, may
     determine whether Continuous Status as an Employee, or Consultant shall be
     considered interrupted in the case of any leave of absence approved by the
     Board, including sick leave, military leave, or any other personal leave;
     provided, however, that for purposes of Incentive Stock Options and Stock
     Appreciation Rights appurtenant thereto, any such leave may not exceed
     ninety (90) days, unless reemployment upon the expiration of such leave is
     guaranteed by contract or statute.
 
          (xii) "Director" means a member of the Board.
 
          (xiii) "Disability" means total and permanent disability as defined in
     Section 22(e)(3) of the Code.
 
          (xiv) "Employee" means any person, including Officers and Directors,
     employed by the Company or any Affiliate of the Company. Neither service as
     a Director nor payment of a director's fee by the Company shall be
     sufficient to constitute "employment" by the Company.
 
          (xv) "Exchange Act" means the Securities Exchange Act of 1934, as
     amended.
 
          (xvi) "Fair Market Value" means, the closing sales price as of the
     date of grant for Company Common Stock (or the closing bid, if no sales
     were reported) as quoted on the Nasdaq National Market
 
                                       A-2
<PAGE>   3
 
     or any similar organization or if Company Common Stock is listed on any
     national securities exchange, as quoted on such national securities
     exchange, as applicable, as reported in the Wall Street Journal or other
     source as the Board deems reliable, and if Company Common Stock is not
     traded on the Nasdaq National Market or any similar organization or on any
     national securities exchange, the value as determined in good faith by the
     Committee, based on the information available to it.
 
          (xvii) "Incentive Stock Option" means an Option intended to qualify as
     an incentive stock option within the meaning of Section 422 of the Code and
     the regulations promulgated thereunder.
 
          (xviii) "Independent Stock Appreciation Right" or "Independent Right"
     means a right granted under subsection 9(b)(iii) hereof.
 
          (xix) "Non-Employee Director" means a Director who either (i) is not a
     current Employee or Officer of the Company or its parent or subsidiary,
     does not receive compensation (directly or indirectly) from the Company or
     its parent or subsidiary for services rendered as a Consultant or in any
     capacity other than as a Director (except for an amount as to which
     disclosure would not be required under Item 404(a) of Regulation S-K (or
     any successor regulation of similar import) promulgated pursuant to the
     Securities Act ("Regulation S-K")), does not possess an interest in any
     other transaction as to which disclosure would be required under Item
     404(a) of Regulation S-K (or any successor regulation of similar import),
     and is not engaged in a business relationship as to which disclosure would
     be required under Item 404(b) of Regulation S-K (or any successor
     regulation of similar import); or (ii) is otherwise considered a
     "non-employee director" for purposes of Rule 16b-3 of the Exchange Act.
 
          (xx) "Nonstatutory Stock Option" means an Option not intended to
     qualify as an Incentive Stock Option.
 
          (xxi) "Officer" means a person who is an officer of the Company within
     the meaning of Section 16 of the Exchange Act and the rules and regulations
     promulgated thereunder.
 
          (xxii) "Option" means a stock option granted pursuant to the Plan.
 
          (xxiii) "Option Agreement" means a written agreement between the
     Company and an Optionee evidencing the terms and conditions of an
     individual Option grant. Each Option Agreement shall be subject to the
     terms and conditions of the Plan.
 
          (xxiv) "Optionee" means an Employee, Director or Consultant who holds
     an outstanding Option.
 
          (xxv) "Outside Director" means for any given date of grant a Director
     who either (i) is not then a current employee of the Company or an
     "affiliated corporation" (within the meaning of Treasury regulations
     promulgated under Section 162(m) of the Code), is not a former employee of
     the Company or an "affiliated corporation" receiving compensation from the
     Company or such affiliated corporation for prior services (other than
     benefits under a tax qualified pension plan) during the then current
     taxable year, was not an officer of the Company or an "affiliated
     corporation" at any time (other than as its Clerk or Assistant Clerk), and
     is not then currently receiving direct or indirect remuneration from the
     Company or an "affiliated corporation" for services in any capacity other
     than as a Director, and (ii) is otherwise considered an "outside director"
     for purposes of Section 162(m) of the Code.
 
          (xxvi) "Plan" or "1999 Plan" mean this 1999 Equity Incentive Plan.
 
          (xxvii) "Plan Year" means the calendar year.
 
          (xxiii) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
     successor to Rule 16b-3.
 
          (xxix) "Securities Act" means the Securities Act of 1933, as amended.
 
          (xxx) "Stock Appreciation Right" means any of the various types of
     rights which may be granted under Section 9 hereof.
 
          (xxxi) "Stock Award" means any right granted under the Plan, including
     any Option, any stock bonus, any right to purchase restricted stock, and
     any Stock Appreciation Right.
 
                                       A-3
<PAGE>   4
 
          (xxxii) "Stock Award Agreement" means a written agreement between the
     Company and a holder of a Stock Award evidencing the terms and conditions
     of an individual Stock Award grant. Each Stock Award Agreement shall be
     subject to the terms and conditions of the Plan.
 
          (xxxiii) "Stock Bonus" means any stock bonus of the type which may be
     granted under Section 8 hereof.
 
          (xxxiv) "Tandem Stock Appreciation Right" or "Tandem Right" means a
     right granted under subsection 9(b)(i) hereof.
 
     The foregoing terms are not the exclusive definitions as used in the Plan
and reference is made to other capitalized terms defined in the context of their
first use herein.
 
     (b) Rules of Interpretation.
 
     (i) The headings and subheadings used herein or in any Option or other
instrument evidencing a Stock Award are solely for convenience of reference and
shall not constitute a part of the Plan or such document or affect the meaning,
construction or effect of any provision thereof.
 
     (ii) All definitions set forth herein shall apply to the singular as well
as the plural form of such defined term, and all references to the masculine
gender shall include reference to the feminine or neuter gender and visa versa,
as the context may require.
 
     (iii) References to "including" means including without limiting the
generality of any description preceding such term.
 
     (iv) Unless otherwise expressly stipulated, any reference in the Plan to
any statute, act, regulation or specific provision thereof shall also extend to
any amendment, restatement or other modification to such statute, act,
regulation or specific provision thereof or any successor statute, act,
regulation or provision of similar import.
 
     (v) Unless otherwise expressly provided, any reference in the Plan to any
specific provision of any statute or act shall include any regulations
promulgated thereunder from time to time and interpretations thereof as may be
applicable to the Plan.
 
3.  ADMINISTRATION
 
     (a) Administration of the Plan shall be delegated to a committee composed
of not fewer than two (2) members (the "Committee"), all of the members of which
Committee shall be Non-Employee Directors and Outside Directors. The Committee
shall have, in connection with the administration of the Plan, the powers set
forth in the Plan, subject, however, to such resolutions, not inconsistent with
the provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revisit in the Board the
administration of the Plan. The Board shall have the authority to correct any
defect, omission or inconsistency in the Plan and to amend the Plan as provided
in Section 16. The Board shall have the authority to appoint the Committee and
to fill any vacancy created on the Committee by reason of the death, resignation
or removal of any member thereof by appointing an eligible successor.
Notwithstanding anything in this Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of the
Board the authority to grant Stock Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act and to eligible persons with respect
to whom the Company does not wish to comply with Section 162(m) of the Code.
 
     (b) The Committee shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
 
          (i) To determine from time to time which of the persons eligible under
     the Plan shall be granted Stock Awards; when and how Stock Awards shall be
     granted; whether a Stock Award will be an Incentive Stock Option, a
     Nonstatutory Stock Option, a Stock Bonus, a right to purchase restricted
     stock, a Stock Appreciation Right, another stock-based award or a
     combination of the foregoing; the provisions of each Stock Award granted
     (which need not be identical), including the time or times when a person
     shall be permitted to receive stock pursuant to a Stock Award; whether a
     person shall be permitted to
                                       A-4
<PAGE>   5
 
     receive stock upon exercise of an Independent Stock Appreciation Right; and
     the number of shares with respect to which Stock Awards shall be granted to
     each such person.
 
          (ii) To construe and interpret the Plan and Stock Awards granted under
     it, and to establish, amend and revoke rules and regulations for its
     administration. The Committee, in the exercise of this power, may correct
     any defect, omission or inconsistency in any Stock Award Agreement, in a
     manner and to the extent it shall deem necessary or expedient to make the
     Stock Award Agreement fully effective.
 
          (iii) To amend any Stock Award.
 
          (iv) Generally, to exercise such powers and to perform such acts as
     the Committee deems necessary or expedient to promote the best interests of
     the Company and which are not in conflict with the provisions of the Plan.
 
4.  SHARES SUBJECT TO THE PLAN.
 
     (a) Subject to the provisions of Section 15 hereof relating to adjustments
upon Changes in Stock, the number of shares of stock that may be issued pursuant
to Stock Awards under the Plan shall be equal to 925,000 shares of Company
Common Stock. If any Stock Award shall for any reason expire or otherwise
terminate without having been exercised in full, the Company Common Stock not
purchased shall again become available for issuance under the Plan.
Notwithstanding the foregoing, shares of Company Common Stock subject to Stock
Appreciation Rights exercised in accordance with Section 8 hereof shall not be
available for subsequent issuance under the Plan.
 
     (b) The Company Common Stock subject to the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares. Subject to Section
4(a) hereof, no more than one hundred thousand (100,000) shares of Company
Common Stock may be subject to Stock Bonus or restricted stock purchase.
 
5.  ELIGIBILITY.
 
     (a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Other Stock Awards may be granted to
Employees, Directors or Consultants, provided, however, that Stock Awards may be
granted to Non-Employee Directors only as provided in Section 7(a).
 
     (b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) Company Common Stock possessing more than ten
percent (10%) of the total combined voting power of all classes of capital stock
of the Company or of any of its Affiliates unless the exercise price of such
Incentive Stock Option is at least one hundred ten percent (110%) of the Fair
Market Value of such Company Common Stock at the date of grant and the Incentive
Stock Option is not exercisable after the expiration of five (5) years from the
date of grant.
 
     (c) No person shall be eligible to be granted Stock Awards covering more
than one hundred thousand (100,000) shares of Company Common Stock in any Plan
Year.
 
6.  OPTION PROVISIONS.
 
     Each Option Agreement shall be in such form and shall contain such terms
and conditions as the Committee shall deem appropriate. The provisions of
separate Option Agreements need not be identical, but each Option Agreement
shall include (through incorporation of provisions hereof by reference in the
Option Agreement or otherwise) the substance of each of the following provisions
except as otherwise specifically provided elsewhere in the Plan:
 
          (a) Term.  No Option shall be exercisable after the expiration of ten
     (10) years from the date it was granted.
 
          (b) Price.  Subject to subsection 5(b) hereof, the exercise price of
     each Incentive Stock Option shall be not less than one hundred percent
     (100%) of the Fair Market Value of the Company Common Stock subject to the
     Option on the date the Option is granted. The exercise price of each
     Nonstatutory Stock Option shall be set by the Committee at the time each
     Option is granted.
 
                                       A-5
<PAGE>   6
 
          (c) Consideration.  The purchase price of stock acquired pursuant to
     an Option shall be paid, to the extent permitted by applicable statutes and
     regulations, either: (i) in cash at the time the Option is exercised, or
     (ii) at the discretion of the Committee, either at the time of the grant or
     exercise of the Option, (A) by delivery to the Company of other Common
     Stock of the Company, (B) according to a deferred payment or other
     arrangement (which may include, without limiting the generality of the
     foregoing, the use of other Common Stock of the Company) with the person to
     whom the Option is granted or to whom the Option is transferred pursuant to
     subsection 6(d) hereof, or (C) in any other form of legal consideration
     that may be acceptable to the Committee on terms determined by the
     Committee.
 
          In the case of any deferred payment arrangement, interest shall be
     payable at least annually and shall be charged at the minimum rate of
     interest necessary to avoid the treatment as interest, under any applicable
     provisions of the Code, of any amounts other than amounts stated to be
     interest under the deferred payment arrangement.
 
          (d) Transferability.  An Incentive Stock Option shall not be
     transferable except by will or by the laws of descent and distribution, and
     shall be exercisable during the lifetime of the person to whom the
     Incentive Stock Option is granted only by such person. A Nonstatutory Stock
     Option may be transferable to the extent specified in the Option Agreement,
     in which case the Option may be transferred upon such terms and conditions
     as are set forth in the Option Agreement, as the Committee shall determine
     in its sole discretion, including (without limitation) pursuant to a
     "domestic relations order" within the meaning of such rules, regulations or
     interpretation of the Securities and Exchange Commission as are applicable
     for purposes of Section 16 of the Exchange Act, or to family members, or to
     trusts or other entities maintained for the benefit of family members.
     Notwithstanding the foregoing, the person to whom an Option is granted may,
     by delivering written notice to the Company, in a form satisfactory to the
     Company, designate a third party who, in the event of the death of the
     Optionee, shall thereafter be entitled to exercise the Option.
 
          (e) Vesting.  The total number of shares of stock subject to an Option
     may, but need not, be allotted in periodic installments (which may, but
     need not, be equal). The Option Agreement may provide that from time to
     time during each of such installment periods, the Option may become
     exercisable ("vest") with respect to some or all of the shares allotted to
     that period, and may be exercised with respect to some or all of the shares
     allotted to such period and/or any prior period as to which the Option
     became vested but was not fully exercised. The Option may be subject to
     such other terms and conditions on the time or times when it may be
     exercised (which may be based on performance or other criteria) as the
     Committee may deem appropriate. During the remainder of the term of the
     Option (if its term extends beyond the end of the installment periods), the
     Option may be exercised from time to time with respect to any shares then
     remaining subject to the Option. The provisions of this subsection 6(e) are
     subject to any Option provisions governing the minimum number of shares as
     to which an Option may be exercised.
 
          (f) Termination of Employment or Relationship as a Consultant.  In the
     event an Optionee's Continuous Status as an Employee or Consultant
     terminates (other than upon the Optionee's death or Disability), the
     Optionee may exercise his or her Option, but only within such period of
     time ending on the earlier of (i) the date three (3) months after
     termination of the Optionee's Continuous Status as an Employee or
     Consultant (or such longer (but only in the case of a Nonstatutory Stock
     Option) or shorter period of time specified in the Option Agreement), or
     (ii) the expiration of the Option's term, and only to the extent that the
     Optionee was entitled to exercise it at the date of termination (but in no
     event later than the expiration of the term of such Option as set forth in
     the Option Agreement). If, at the date of termination, the Optionee is not
     entitled to exercise his or her entire Option, the shares covered by the
     unexercisable portion of the Option shall revert to and again become
     available for issuance under the Plan. If, after termination, the Optionee
     does not exercise his or her Option within the time specified in the Option
     Agreement, the Option shall terminate, and the shares covered by such
     Option shall revert to and again become available for issuance under the
     Plan.
 
                                       A-6
<PAGE>   7
 
          (g) Disability of Optionee.  In the event an Optionee's Continuous
     Status as an Employee or Consultant terminates as a result of the
     Optionee's Disability, the Optionee may exercise his or her Option, but
     only within such period of time ending on the earlier of (i) the date
     twelve (12) months following such termination (or such longer or shorter
     period of time as specified in the Option Agreement), or (ii) the
     expiration of the term of the Option as set forth in the Option Agreement).
     If, at the date of termination, the Optionee is not entitled to exercise
     his or her entire Option, the shares covered by the unexercisable portion
     of the Option shall revert to the Plan. If, after termination, the Optionee
     does not exercise his or her Option within the time specified herein, the
     Option shall terminate, and the shares covered by such Option shall revert
     to and again become available for issuance under the Plan.
 
          (h) Death of Optionee.  In the event of the death of an Optionee
     during, or within a period specified in the Option Agreement after the
     termination of, the Optionee's Continuous Status as an Employee or
     Consultant, the Option may be exercised by the Optionee's estate, by a
     person who acquired the right to exercise the Option by bequest or
     inheritance, or by a person designated to exercise the Option upon the
     Optionee's death pursuant to subsection 6(d) hereof, but only within the
     period ending on the earlier of (i) the date twelve (12) months following
     the date of death (or such longer or shorter period specified in the Option
     Agreement) or (ii) the expiration of the term of such Option as set forth
     in the Option Agreement. If, at the time of death, the Optionee was not
     entitled to exercise his or her entire Option, the shares covered by the
     unexercisable portion of the Option shall revert to and again become
     available under the Plan. If, after death, the Option is not exercised
     within the time specified herein, the Option shall terminate, and the
     shares covered by such Option shall revert to and again become available
     for issuance under the Plan.
 
          (i) Early Exercise.  The Option Agreement may, but need not, include a
     provision whereby the Optionee may elect at any time while an Employee,
     Director or Consultant to exercise the Option as to any part or all of the
     shares subject to the Option prior to the full vesting of the Option. If
     such a provision is included in an Option Agreement, the Option Agreement
     shall also contain provisions establishing a vesting schedule for the
     purchased shares and a right of the Company to repurchase any unvested
     shares or, as a condition to the exercise of the relevant Option, requiring
     the Optionee to enter into an agreement with the Company establishing such
     vesting and such rights.
 
          (j) Withholding.  To the extent provided by the terms of an Option
     Agreement, the Optionee may satisfy any federal, state or local tax
     withholding obligation relating to the exercise of such Option by any of
     the following means or by a combination of such means: (1) tendering a cash
     payment; (2) authorizing the Company to withhold shares from the shares of
     the Common Stock otherwise issuable to the participant as a result of the
     exercise of the Option; or (3) delivering to the Company owned and
     unencumbered shares of the Common Stock of the Company.
 
          (k) Re-Load Options.  Without in any way limiting the authority of the
     Committee to make or not to make grants of Options hereunder, the Committee
     shall have the authority (but not an obligation) to include as part of any
     Option Agreement a provision entitling the Optionee to a further Option (a
     "Re-Load Option") in the event the Optionee exercises the Option evidenced
     by the Option Agreement, in whole or in part, by surrendering other shares
     of Company Common Stock in accordance with the Plan and the terms and
     conditions of the Option Agreement. Any such Re-Load Option (i) shall be
     for a number of shares equal to the number of shares surrendered as part or
     all of the exercise price of such Option, (ii) shall have an expiration
     date which is the same as the expiration date of the Option the exercise of
     which gave rise to such Re-Load Option; and (iii) shall have an exercise
     price which is equal to one hundred percent (100%) of the Fair Market Value
     of the Company Common Stock subject to the Re-Load Option on the date of
     exercise of the original Option or, in the case of a Re-Load Option which
     is an Incentive Stock Option and which is granted to a 10% stockholder (as
     described in subsection 5(c) hereof), shall have an exercise price which is
     equal to one hundred ten percent (110%) of the Fair Market Value of the
     Company Common Stock subject to the Re-Load Option on the date of exercise
     of the original Option and shall have a term which is no longer than five
     (5) years.
 
                                       A-7
<PAGE>   8
 
     Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Committee may designate at the time of the grant of the
original Option, provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand dollar
($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 13(d) hereof and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) hereof
and shall be subject to such other terms and conditions as the Committee may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of the Options.
 
7.  OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.
 
     (a) Each Non-Employee Director, including Non-Employee Directors elected to
the Board at the meeting of the Company's stockholders at which this Plan is
approved (the "Approval Meeting"), upon first joining the Board, will
automatically be granted a Nonstatutory Stock Option to purchase 9,000 shares of
Company Common Stock with an exercise price equal to the Fair Market Value of
the Common Stock on the date of grant. Notwithstanding the preceding sentence,
in the event a Non-Employee Director joins the Board after the second Tuesday in
February in a given year such Non-Employee Director will receive a Nonstatutory
Stock Option for a number of shares equal to 9,000 multiplied by N/12 where "N"
is the number of months remaining between the date of election of such
Non-Employee Director and the next second Tuesday in February. In addition, each
Non-Employee Director who continues to serve as a director following any annual
meeting of stockholders of the Company or special meeting in lieu thereof at
which Directors are elected, including the Approval Meeting, will automatically
be granted, immediately following such meeting of stockholders, a Nonstatutory
Stock Option to purchase 9,000 shares of Company Common Stock at an exercise
price equal to the Fair Market Value of the Company Common Stock on the date of
grant. All Options granted under this Section 7(a) shall vest in full on the
date of grant and will expire on the date which is five years from the date of
grant.
 
     (b) The Committee shall adopt such provisions, in its sole discretion, as
to the time, any limitations or restrictions and the manner of the exercise or
vesting of Nonstatutory Stock Options granted under this Section 7 in respect of
the matters set forth under the provisions of Subsections 6(d), (j) and (k)
hereof.
 
8.  TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
 
     Each Stock Bonus or restricted stock purchase agreement related to a Stock
Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of Stock Bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each Stock
Bonus or restricted stock purchase agreement shall include (through
incorporation of provisions herein by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
 
          (a) Purchase Price.  The purchase price under each restricted stock
     purchase agreement shall be such amount as the Committee shall determine
     and designate in such agreement. Notwithstanding the foregoing, the
     Committee may determine that eligible participants in the Plan may be
     granted a Stock Award pursuant to a Stock Bonus agreement in consideration
     for past services actually rendered to the Company for its benefit.
 
          (b) Transferability.  Except as otherwise provided elsewhere in the
     Plan, no rights under a Stock Bonus or restricted stock purchase agreement
     shall be assignable by any participant under the Plan, either voluntarily
     or by operation of law, except by will or by the laws of descent and
     distribution, and shall be exercisable during the lifetime of the person to
     whom the rights are granted only by such person. The person to whom the
     Stock Award is granted, may, by delivering written notice to the Company,
     in a form satisfactory to the Company, designate a third party who, in the
     event of the death of such person, shall thereafter be entitled to exercise
     the rights held by such person under the Stock Bonus or restricted stock
     purchase agreement.
 
          (c) Consideration.  The purchase price of stock acquired pursuant to a
     Stock Award in the form of a stock purchase agreement shall be paid either:
     (i) in cash at the time of purchase; (ii) at the discretion

                                       A-8
<PAGE>   9
 
     of the Committee, according to a deferred payment or other arrangement with
     the person to whom the stock is sold; or (iii) in any other form of legal
     consideration that may be acceptable to the Committee in its discretion;
     including delivery of a promissory note of the Optionee to the Company on
     terms determined by the Committee. Notwithstanding the foregoing, the
     Committee may grant a Stock Award pursuant to a Stock Bonus agreement in
     consideration for past services actually rendered to the Company or for its
     benefit.
 
          (d) Vesting.  Shares of Company Common Stock sold or awarded under the
     Plan may, but need not, be subject to a repurchase option in favor of the
     Company in accordance with a vesting schedule to be determined by the
     Committee.
 
          (e) Termination of Employment or Relationship as a Consultant.  In the
     event a Participant's Continuous Status as an Employee or Consultant
     terminates, the Company may repurchase or otherwise reacquire any or all of
     the shares of Company Common Stock held by that person which have not
     vested as of the date of termination under the terms of the Stock Bonus or
     restricted stock purchase agreement between the Company and such person.
 
9.  STOCK APPRECIATION RIGHTS.
 
     (a) The Committee shall have full power and authority, exercisable in its
sole discretion, to grant Stock Appreciation Rights to Employees or Consultants
to the Company or its Affiliates under the Plan. Each such right shall entitle
the holder to a distribution based on the appreciation in the Fair Market Value
per share of a designated amount of Company Common Stock.
 
     (b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
 
          (i) Tandem Stock Appreciation Rights.  Tandem Rights will be granted
     appurtenant to an Option and will require the holder to elect between the
     exercise of the underlying Option for shares of Company Common Stock and
     the surrender, in whole or in part, of such Option for an appreciation
     distribution equal to the excess of (A) the Fair Market Value (on the date
     of Option surrender) of vested shares of Company Common Stock purchasable
     under the surrendered Option over (B) the aggregate exercise price payable
     for such shares.
 
          (ii) Concurrent Stock Appreciation Rights.  Concurrent Rights will be
     granted appurtenant to an Option and may apply to all or any portion of the
     shares of Company Common Stock subject to the underlying Option and will be
     exercised automatically at the same time the Option is exercised for those
     shares. The appreciation distribution to which the holder of such
     concurrent right shall be entitled upon exercise of the underlying Option
     shall be in an amount equal to such portion as shall be determined by the
     Board or the Committee at the time of grant of the excess of (A) the
     aggregate Fair Market Value (at date of exercise) of the vested shares
     purchased under the underlying Option with such concurrent rights over (B)
     the aggregate exercise price paid for those shares.
 
          (iii) Independent Stock Appreciation Rights.  Independent Rights may
     be granted independently of any Option and will entitle the holder upon
     exercise to an appreciation distribution equal in amount to the excess of
     (A) the aggregate Fair Market Value (at date of exercise) of a number of
     shares of Company Common Stock equal to the number of vested share
     equivalents exercised at such time (as described in subsection 8(c)(iii))
     hereof over (B) the aggregate Fair Market Value of such number of shares of
     Company Common Stock at the date of grant.
 
     (c) The terms and conditions applicable to each Tandem Right, Concurrent
Right and Independent Right shall be as follows:
 
          (i) TANDEM RIGHTS:
 
             A.  Tandem Rights may be tied to either Incentive Stock Options or
        Nonstatutory Stock Options. Each such right shall, except as
        specifically set forth below, be subject to the same terms and
        conditions applicable to the particular Option to which it pertains. If
        Tandem Rights are granted appurtenant to an Incentive Stock Option, they
        shall satisfy any applicable Treasury Regulations so as not to
        disqualify such Option as an Incentive Stock Option under the Code.

                                       A-9
<PAGE>   10
 
             B.  The appreciation distribution payable on the exercised Tandem
        Right shall be in cash in an amount equal to the excess of (i) the Fair
        Market Value (on the date of the Option surrender) of the number of
        shares of Company Common Stock covered by that portion of the
        surrendered Option in which the Optionee is vested over (ii) the
        aggregate exercise price payable for such vested shares.
 
          (ii) CONCURRENT RIGHTS:
 
             A.  Concurrent Rights may be tied to any or all of the shares of
        Company Common Stock subject to any Incentive Stock Option or
        Nonstatutory Stock Option grant made under the Plan. A Concurrent Right
        shall, except as specifically set forth below, be subject to the same
        terms and conditions applicable to the particular option grant to which
        it pertains.
 
             B.  A Concurrent Right shall be automatically exercised at the same
        time as the underlying Option is exercised with respect to the
        particular shares of Company Common Stock to which the Concurrent Right
        pertains.
 
             C.  The appreciation distribution payable on an exercised
        Concurrent Right shall be in cash in an amount equal to such portion as
        shall be determined by the Board or the Committee at the time of grant
        of the excess of (i) the aggregate Fair Market Value (on the date the
        Option is exercised) of the vested shares of Company Common Stock
        purchased under the underlying Option which have Concurrent Rights
        appurtenant to them over (ii) the aggregate exercise price paid for such
        shares.
 
          (iii) INDEPENDENT RIGHTS:
 
             A.  Independent Rights shall, except as specifically set forth
        below, be subject to the same terms and conditions applicable to
        Nonstatutory Stock Options as set forth in Section 6 hereof. They shall
        be denominated in share equivalents.
 
             B.  The appreciation distribution payable on the exercised
        Independent Right shall be in cash in an amount equal to the excess of
        (I) the aggregate Fair Market Value (on the date of the exercise of the
        Independent Right) of a number of shares of Company Common Stock equal
        to the number of share equivalents in which the holder is vested under
        such Independent Right, and with respect to which the holder is
        exercising the Independent Right on such date, over (II) the aggregate
        Fair Market Value (on the date of the grant of the Independent Right) of
        such number of shares of Company Common Stock.
 
          (iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS AND
     INDEPENDENT RIGHTS:
 
             A.  To exercise any outstanding Tandem, Concurrent or Independent
        Right, the holder must provide written notice of exercise to the Company
        in compliance with the provisions of the instrument evidencing such
        right.
 
             B.  If a Tandem, Concurrent, or Independent Right is granted to an
        individual who is at the time subject to Section 16(b) of the Exchange
        Act (a "Section 16(b) Insider"), then the instrument of grant shall
        incorporate all the terms and conditions at the time necessary to assure
        that the subsequent exercise of such right shall qualify for the
        safe-harbor exemption from short-swing profit liability provided by Rule
        16b-3.
 
             C.  Except as otherwise provided in this Section 9, no limitation
        shall exist on the aggregate amount of cash payments the Company may
        make under the Plan in connection with the exercise of Tandem,
        Concurrent or Independent Rights.
 
10.  OTHER STOCK-BASED AWARDS.
 
     The Committee shall have the right to grant other Awards based upon Company
Common Stock having such terms and conditions as the Committee may determine,
including the grant of shares based upon certain conditions and grant of
securities convertible into Company Common Stock.
 
                                      A-10
<PAGE>   11
 
11.  CANCELLATION AND RE-GRANT OF OPTIONS.
 
     (a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and the grant in
substitution therefor of new Options and/or Stock Appreciation Rights under the
Plan covering the same or different numbers of shares of Company Common Stock,
but having an exercise price per share not less than eighty five percent (85%)
of the Fair Market Value (one hundred percent (100%)) of the Fair Market Value
in the case of an Incentive Stock Option or, in the case of an Incentive Stock
Option granted to a 10% stockholder (as described in subsection 5(c) hereof, not
less than one hundred ten percent (110%) of the Fair Market Value) per share of
Company Common Stock on the new grant date.
 
     (b) Shares of Company Common Stock subject to an Option or Stock
Appreciation Right canceled under this Section 11 shall continue to be counted
against the maximum award of Options and Stock Appreciation Rights permitted to
be granted to a person pursuant to subsection 5(c) hereof. The repricing of an
Option and/or Stock Appreciation Right under this Section 11, resulting in a
reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such repricing, both the
original and the substituted Options and Stock Appreciation Rights shall be
counted against the maximum awards of Options and Stock Appreciation Rights
permitted to be granted to a person pursuant to subsection 5(c) hereof. The
provisions of this subsection 11(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
 
12.  COVENANTS OF THE COMPANY.
 
     (a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Company Common Stock required to satisfy
such Stock Awards up to the number of shares of Company Common Stock authorized
under the Plan.
 
     (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of Company Common Stock under the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act or any securities law of any state either the Plan, any Stock
Award or any stock issued or issuable pursuant to any such Stock Award. The
Company shall not be required to sell or issue any shares under any Stock Award
if the issuance of such shares shall constitute a violation by the holder of the
Stock Award or by the Company of any provision of any law or regulation of any
governmental authority. In the event the shares of Company Common Stock issuable
on exercise of Stock Award are not registered under the Securities Act, the
Company may imprint upon any certificate representing shares so issued any
legend which counsel for the Company considers necessary or advisable to comply
with the Securities Act and with applicable state securities laws. The Company
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act; and in the event any shares are so
registered the Company may remove any legend on certificates representing such
shares.
 
13.  USE OF PROCEEDS FROM STOCK.
 
     Proceeds from the sale of Company Common Stock pursuant to Stock Awards
shall constitute general funds of the Company.
 
14.  MISCELLANEOUS.
 
     (a) The Committee shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
 
     (b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) hereof shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of
 
                                      A-11
<PAGE>   12
 
Company Common Stock subject to such Option unless and until such person has
satisfied all requirements for exercise of the Option pursuant to its terms.
 
     (c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant, Optionee,
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant) or
shall affect the right of the Company or any Affiliate to terminate the
employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee, with or without cause.
 
     (d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Company Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
 
15.  ADJUSTMENTS UPON CHANGE IN STOCK.
 
     In the event of any Change in Stock, the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan
pursuant to subsection 4(a) hereof and the maximum number of shares subject to
Options and Stock Awards pursuant to subsection 5(c) hereof, and the outstanding
Stock Awards will be appropriately adjusted in the class(es) and number of
shares and price per share of stock subject to such outstanding Stock Awards.
Such adjustments shall be made by the Committee, the determination of which
shall be final, binding and conclusive.
 
16.  VESTING AND PAYMENT UPON CHANGE IN CONTROL.
 
     (a) After a merger of one or more corporations with or into the Company or
after a consolidation of the Company and one or more corporations in which the
stockholders of the Company immediately prior to such merger or consolidation
own after such merger or consolidation shares representing at least fifty
percent (50%) of the voting power of the Company or the surviving or resulting
corporation, as the case may be, each holder of an outstanding Option shall, at
no additional cost, be entitled upon exercise of such Option to receive in lieu
of the shares of Company Common Stock as to which such Option was exercisable
immediately prior to such event, the number and class of shares of stock or
other securities, cash or property (including, without limitation, shares of
stock or other securities of another corporation or Company Common Stock) to
which such holder would have been entitled pursuant to the terms of the
agreement of merger or consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of a number of shares
of Company Common Stock equal to the number of shares for which such Option
shall be so exercised.
 
     (b) Upon and following the occurrence of a Change of Control, the time for
exercise of each unvested installment of any then outstanding Option or Stock
Appreciation Right shall be accelerated, so that:
 
          (i) immediately upon such Change of Control, if the Optionee or the
     holder is then an employee or consultant of the Company twenty-five percent
     (25%) of any such unvested installment shall be exercisable;
 
          (ii) on the date that is nine months after such Change in Control, if
     the Optionee or the holder is then an employee or consultant of the Company
     one third (33'%) of any installment of such Option or Stock Appreciation
     Right that has not yet vested in accordance with its original terms or by
     virtue of this Section 16 shall become exercisable;
 
          (iii) on the date that is eighteen months after such Change in
     Control, if the Optionee or the holder is then an employee or consultant of
     the Company fifty percent (50%) of any installment of such Option or Stock
     Appreciation Right that has not yet vested in accordance with its original
     terms or by virtue of this Section 16 shall become exercisable; and
 
          (iv) on the second anniversary of such Change in Control, if the
     Optionee or the holder is then an employee or consultant of the Company any
     remaining installment of such Option or Stock Appreciation
 
                                      A-12
<PAGE>   13
 
     Right that has not yet vested in accordance with its original terms or by
     virtue of this Section 16 shall become exercisable.
 
     The foregoing clauses (i) through (iv) are intended to provide for vesting
that is in addition to, and not in lieu of, the vesting schedule originally
provided in any Option or Stock Appreciation Right outstanding at the time of a
Change in Control, and, except to the extent accelerated by such clauses, each
such Option or Stock Appreciation Right shall continue to vest in accordance
with its original terms.
 
     (c) Upon the occurrence of a Change of Control, the restrictions and
conditions contained in any Stock Bonus granted to a then current Employee or
Consultant or restricted stock purchase agreement related to a Stock Award to
which a then current Employee or Consultant is a party shall automatically be
appropriately modified so that under the terms thereof additional shares of
Company Common Stock vest in a manner essentially equivalent to the additional
vesting provided for in Section 16(b) for Options and Stock Appreciation Rights.
The determination of the Committee as to such modifications shall be final,
binding and conclusive.
 
     The foregoing subparagraph (c) is intended to provide for vesting that is
in addition to, and not in lieu of, the vesting schedule originally provided in
any Stock Bonus or restricted stock purchase agreement related to a Stock Award
outstanding at the time of a Change in Control, and, except to the extent
accelerated by such clauses, each such Stock Bonus or restricted stock purchase
agreement related to a Stock Award shall continue to vest in accordance with its
original terms.
 
     (d) If the Company is merged with or into or consolidated with another
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation; or
if the Company is liquidated, or sells or otherwise disposes of substantially
all of its assets to another corporation while unexercised Options remain
outstanding under the Plan, then either in such event:
 
          (i) subject to the provisions of clause (iii) below, after the
     effective date of such merger, consolidation, liquidation, sale or
     disposition, as the case may be, each holder of an outstanding Option shall
     be entitled, upon exercise of such Option, to receive, in lieu of the
     shares of Company Common Stock as to which such Option was exercisable
     immediately prior to such event, the number and class of shares of stock or
     other securities, cash or property (including, without limitation, shares
     of stock or other securities of another corporation or common stock) to
     which such holder would have been entitled pursuant to the terms of the
     merger, consolidation, liquidation, sale or disposition if, immediately
     prior to such event, such holder had been the holder of a number of shares
     of Company Common Stock equal to the number of shares as to which such
     Option shall be so exercised;
 
          (ii) the Committee may accelerate the time for exercise of some or all
     unexercised and unexpired Options or Stock Appreciation Rights so that from
     and after a date prior to the effective date of such merger, consolidation,
     liquidation, sale or disposition, as the case may be, specified by the
     Committee such accelerated Options or Stock Appreciation Rights shall be
     exercisable in full; or
 
          (iii) all outstanding Options and Stock Appreciation Rights,
     respectively, may be cancelled by the Committee as of the effective date of
     any such merger, consolidation, liquidation, sale or disposition provided
     that (x) notice of such cancellation shall be given to each holder of an
     Option or Stock Appreciation Right, respectively, and (y) each holder of an
     Option or Stock Appreciation Right shall have the right to exercise such
     Option or Stock Appreciation Right to the extent that the same is then
     exercisable or, if the Committee shall have accelerated the time for
     exercise of all unexercised and unexpired Options or Stock Appreciation
     Rights, respectively, in full during the 10-day period preceding the
     effective date of such merger, consolidation, liquidation, sale or
     disposition.
 
     (e) If, within two years following a Change in Control, the employment of
any Optionee who immediately prior to such Change in Control was employed by the
Company as an Officer (each such Optionee being hereafter referred to as a
"Designated Executive") shall be terminated by the Company other than for cause,
or shall be terminated by the Designated Executive for Good Reason, then in such
event all
                                      A-13
<PAGE>   14
 
unvested Options, Stock Appreciation Rights, Stock Bonuses and other Stock
Awards held by such Designated Executive at the date of such termination shall
thereupon immediately become exercisable in full. For purposes of this
paragraph, "Good Reason" for termination by a Designated Executive of his
employment shall be deemed to have existed only if (i) within two years after a
Change in Control, the Company, or any successor entity then employing the
Designated Executive, shall materially diminish the responsibilities and
authority of the Designated Executive or, shall materially reduce the rate of
compensation of the Designated Executive (including by way of a change in the
method of determining the eligibility of such Designated Executive to earn bonus
or incentive compensation), in either case as compared with his responsibilities
and authority or rate of compensation, as the case may be, in effect immediately
prior to such Change in Control, and (ii) within thirty (30) days following such
diminution or reduction the Designated Executive shall resign from his
employment by the Company or such successor entity.
 
     (f) If, within two years following a Change in Control, a Non-Employee
Director is terminated or resigns from the Board of Directors for Good Reason,
then in such event all unvested Options held by such Non-Employee Director at
the date of such resignation shall thereupon immediately become exercisable in
full. For purposes of this paragraph, "Good Reason" for resignation by a
Non-Employee Director shall be deemed to have existed only if (i) within two
years after a Change in Control, the Company, or any successor entity, shall
materially diminish the responsibilities and authority of the Non-Employee
Director or shall materially reduce the rate of compensation of the Non-Employee
Director, in either case as compared with his responsibilities and authority or
rate of compensation, as the case may be, in effect immediately prior to such
Change in Control, and (ii) within thirty (30) days following such diminution or
reduction the Non-Employee Director shall resign from his position as a
Director.
 
17.  AMENDMENT OF THE PLAN AND STOCK AWARDS.
 
     (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 hereof relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3, or
the listing or eligibility for quotation requirements of the Nasdaq National
Market or any similar organization or of any national securities exchange upon
which shares of Company Common Stock are listed or eligible for trading.
 
     (b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
 
     (c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
 
     (d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
 
     (e) The Committee at any time, and from time to time, may amend the terms
of any one or more Stock Awards; provided, however, that the rights and
obligations under any Stock Award shall not be altered or impaired by any such
amendment unless (i) the Company requests the consent of the person to whom the
Stock Award was granted and (ii) such person consents in writing.
 
18.  TERMINATION OR SUSPENSION OF THE PLAN.
 
     (a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 4, 2009. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
 
                                      A-14
<PAGE>   15
 
     (b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with consent of the person to whom the Stock Award was granted.
 
19.  LOCK-UP AGREEMENT.
 
     The Committee may in its discretion specify upon granting an Option that
upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, the Optionee shall agree in writing that
for a period of time (not to exceed 180 days) from the effective date of any
registration of securities of the Company, the Optionee will not sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares issued pursuant to the exercise of such Option, without the prior
written consent of the Company or such underwriters, as the case may be.
 
20.  GOVERNING LAW.
 
     The provisions of the Plan and all Stock Awards made hereunder shall be
governed by and interpreted in accordance with the internal laws of the
Commonwealth of Massachusetts without regard to any applicable conflicts of law
principles thereof.
 
                                      A-15