<PAGE>
 
                               DAVOX CORPORATION

                                1996 STOCK PLAN
                                ---------------


   1.  Purpose. The purpose of the Davox Corporation 1996 Stock Plan (the
       -------                                                           
"Plan") is to encourage key employees of Davox Corporation (the "Company") and
of any present or future parent or subsidiary of the Company (collectively,
"Related Corporations") and other individuals who render services to the Company
or a Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of options
which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (b) the grant of options
which do not qualify as ISOs ("Non-Qualified Options"); (c) awards of stock in
the Company ("Awards"); and (d) opportunities to make direct purchases of stock
in the Company ("Purchases").  Both ISOs and Non-Qualified Options are referred
to hereafter individually as an "Option" and collectively as "Options."
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights."  As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.

   2.  Administration of the Plan.
       ---------------------------

       A.  Board or Committee Administration. The Plan shall be administered by
           ---------------------------------
   the Board of Directors of the Company (the "Board") or, subject to Paragraph
   2D (relating to compliance with Section 162(m) of the Code), by a committee
   appointed by the Board (the "Committee"). Hereinafter, all references in this
   Plan to the "Committee" shall mean the Board if no Committee has been
   appointed. Subject to ratification of the grant or authorization of each
   Stock Right by the Board (if so required by applicable state law), and
   subject to the terms of the Plan, the Committee shall have the authority to
   (i) determine to whom (from among the class of employees eligible under
   paragraph 3 to receive ISOs) ISOs shall be granted, and to whom (from among
   the class of individuals and entities eligible under paragraph 3 to receive
   Non-Qualified Options and Awards and to make Purchases) Non-Qualified
   Options, Awards and authorizations to make Purchases may be granted; (ii)
   determine the time or times at which Options or Awards shall be granted or
   Purchases made; (iii) determine the purchase price of shares subject to each
   Option or Purchase, which prices shall not be less than the minimum price
   specified in paragraph 6; (iv) determine whether each Option granted shall be
   an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 7) the
   time or times when each Option shall become exercisable and the duration of
   the exercise period; (vi) extend the period during which outstanding Options
   may be exercised; (vii) determine whether restrictions such as repurchase
   options are to be imposed on shares subject to Options, Awards and Purchases
   and the nature of such restrictions, if any, and (viii) interpret the Plan
   and prescribe and rescind rules and regulations relating to it. If the
   Committee determines to issue a Non-Qualified Option, it shall take whatever
   actions it deems necessary, under Section 422 of the Code and the regulations
   promulgated thereunder, to ensure that such Option is not treated as an ISO.
   The interpretation and construction by the Committee of any provisions of the
   Plan or of any Stock Right granted under it shall be final unless otherwise
   determined by the Board. 
<PAGE>
 
                                      -2-



   The Committee may from time to time adopt such rules and regulations for
   carrying out the Plan as it may deem advisable. No member of the Board or the
   Committee shall be liable for any action or determination made in good faith
   with respect to the Plan or any Stock Right granted under it.

            B.  Committee Actions.  The Committee may select one of its members
                -----------------                                              
   as its chairman, and shall hold meetings at such time and places as it may
   determine.  A majority of the Committee shall constitute a quorum and acts of
   a majority of the members of the Committee at a meeting at which a quorum is
   present, or acts reduced to or approved in writing by all the members of the
   Committee (if consistent with applicable state law), shall be the valid acts
   of the Committee.   From time to time the Board may increase the size of the
   Committee and appoint additional members thereof, remove members (with or
   without cause) and appoint new members in substitution therefor, fill
   vacancies however caused, or remove all members of the Committee and
   thereafter directly administer the Plan.

            C.  Grant of Stock Rights to Board Members.  Stock Rights may be
                --------------------------------------                      
   granted to members of the Board.  All grants of Stock Rights to members of
   the Board shall in all respects be made in accordance with the provisions of
   this Plan applicable to other eligible persons.   Members of the Board who
   either (i) are eligible to receive grants of Stock Rights pursuant to the
   Plan or (ii) have been granted Stock Rights may vote on any matters affecting
   the administration of the Plan or the grant of any Stock Rights pursuant to
   the Plan, except that no such member shall act upon the granting to himself
   or herself of Stock Rights, but any such member may be counted in determining
   the existence of a quorum at any meeting of the Board during which action is
   taken with respect to the granting to such member of Stock Rights.

            D. Performance-Based Compensation.  The Board, in its discretion,
               ------------------------------                                
   may take such action as may be necessary to ensure that Stock Rights granted
   under the Plan qualify as "qualified performance-based compensation" within
   the meaning of Section 162(m) of the Code and applicable regulations
   promulgated thereunder ("Performance-Based Compensation").  Such action may
   include, in the Board's discretion, some or all of the following (i) if the
   Board determines that Stock Rights granted under the Plan generally shall
   constitute Performance-Based Compensation,  the Plan shall be administered,
   to the extent required for such Stock Rights to constitute Performance-Based
   Compensation, by a Committee consisting solely of two or more "outside
   directors" (as defined in applicable regulations promulgated under Section
   162(m) of the Code), (ii) if any Non-Qualified Options with an exercise price
   less than the fair market value per share of Common Stock are granted under
   the Plan and the Board determines that such Options should constitute
   Performance-Based Compensation, such options shall be made exercisable only
   upon the attainment of a pre-established, objective performance goal
   established by the Committee, and such grant shall be submitted for, and
   shall be contingent upon shareholder approval and (iii) Stock Rights granted
   under the Plan may be subject to such other terms and conditions as are
   necessary for compensation recognized in connection with the exercise or
   disposition of such Stock Right or the disposition of Common Stock acquired
   pursuant to such Stock Right, to constitute Performance-Based Compensation.
<PAGE>
 
                                      -3-


       3.  Eligible Employees and Others. ISOs may be granted only to employees
           -----------------------------
   of the Company or any Related Corporation. Non-Qualified Options, Awards and
   authorizations to make Purchases may be granted to any employee, officer or
   director (whether or not also an employee) or consultant of the Company or
   any Related Corporation. The Committee may take into consideration a
   recipient's individual circumstances in determining whether to grant a Stock
   Right. The granting of any Stock Right to any individual or entity shall
   neither entitle that individual or entity to, nor disqualify such individual
   or entity from, participation in any other grant of Stock Rights.

       4.  Stock.  The stock subject to Stock Rights shall be authorized but
           -----
   unissued shares of Common Stock of the Company, par value $.10 per share (the
   "Common Stock"), or shares of Common Stock reacquired by the Company in any
   manner. The aggregate number of shares which may be issued pursuant to the
   Plan is equal to the "Plan Share Limit" as defined below. If any Option
   granted under the Plan shall expire or terminate for any reason without
   having been exercised in full or shall cease for any reason to be exercisable
   in whole or in part or shall be repurchased by the Company, the unpurchased
   shares of Common Stock subject to such Option shall again be available for
   grants of Stock Rights under the Plan.

       For purposes of this Plan the "Plan Share Limit" shall be 600,000 shares,
   such total to include the number of shares that are available for grant,
   award or purchase under the Company's 1986 Stock Plan (the "Old Plan") at the
   time of expiration of the Old Plan.

       No employee of the Company or any Related Corporation may be granted
   Options to acquire, in the aggregate, more than 500,000 shares of Common
   Stock during any fiscal year of the Company. If any Option granted under the
   Plan shall expire or terminate for any reason without having been exercised
   in full or shall cease for any reason to be exercisable in whole or in part
   or shall be repurchased by the Company, the shares subject to such Option
   shall be included in the determination of the aggregate number of shares of
   Common Stock deemed to have been granted to such employee under the Plan.

       5.  Granting of Stock Rights. Stock Rights may be granted under the Plan
           ------------------------
   at any time on or after July 25, 1996 and prior to July 25, 2006. The date of
   grant of a Stock Right under the Plan will be the date specified by the
   Committee at the time it grants the Stock Right; provided, however, that such
   date shall not be prior to the date on which the Committee acts to approve
   the grant.

       6.  Minimum Option Price; ISO Limitations.
           ------------------------------------- 

           A.  Price for Non-Qualified Options, Awards and Purchases.  Subject
               -----------------------------------------------------          
   to Paragraph 2D (relating to compliance with Section 162(m) of the Code), the
   exercise price per share specified in the agreement relating to each Non-
   Qualified Option granted, and the purchase price per share of stock granted
   in any Award or authorized as a Purchase, under the Plan may be less than the
   fair market value of the Common Stock of the Company on the date of grant,
   provided that, in no event shall such exercise price or such purchase price
   be less than the minimum legal consideration required therefor under the laws
   of any 
<PAGE>
 
                                      -4-

   jurisdiction in which the Company or its successors in interest may be
   organized. The Committee may, in its discretion, subject any Stock Right
   granted under the Plan to any terms or conditions necessary for compensation
   recognized in connection with the exercise of such Stock Right or the
   disposition of Common Stock acquired pursuant to such Stock Right, to
   constitute qualified performance-based compensation under Section 162(m) of
   the Code and applicable regulations promulgated thereunder.

       B.  Price for ISOs.  The exercise price per share specified in the
           --------------                                                
   agreement relating to each ISO granted under the Plan shall not be less than
   the fair market value per share of Common Stock on the date of such grant.
   In the case of an ISO to be granted to an employee owning stock possessing
   more than ten percent (10%) of the total combined voting power of all classes
   of stock of the Company or any Related Corporation, the price per share
   specified in the agreement relating to such ISO shall not be less than one
   hundred ten percent (110%) of the fair market value per share of Common Stock
   on the date of grant.  For purposes of determining stock ownership under this
   paragraph, the rules of Section 424(d) of the Code shall apply.  The date of
   grant for purposes of this subparagraph shall mean the date that the Company
   or a Related Corporation completes the corporate action constituting an offer
   of stock for sale to an individual.

       C.   $100,000 Annual Limitation on ISO Vesting.  Each eligible employee
            -----------------------------------------                         
   may be granted Options treated as ISOs only to the extent that, in the
   aggregate under this Plan and all incentive stock option plans of the Company
   and any Related Corporation, ISOs do not become exercisable for the first
   time by such employee during any calendar year with respect to stock having a
   fair market value (determined at the time the ISOs were granted) in excess of
   $100,000.  The Company intends to designate any Options granted in excess of
   such limitation as Non-Qualified Options and the Company shall issue separate
   certificates to the optionee with respect to Options that are Non-Qualified
   Options and Options that are ISOs.

       D.  Determination of Fair Market Value.  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 date of grant or, if the
   prices or quotes discussed in this sentence are unavailable for such date,
   the last business day for which such prices or quotes are available prior to
   the date of grant and shall mean (i) the average (on that 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 the Common Stock is then
   traded on a national securities exchange; or (ii) the last reported sale
   price (on that date) of the Common Stock on the Nasdaq National 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 that
   date) by an established quotation service for over-the-counter securities, if
   the Common Stock is not reported on the Nasdaq National Market.  If the
   Common Stock is not publicly traded at the time an Option is granted under
   the Plan, "fair market value" shall mean the fair value of the Common Stock
   as determined by the Committee 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.
<PAGE>
 
                                      -5-


       7.  Option Duration.  Subject to earlier termination as provided in
           ---------------                                                
   paragraphs 9 and 10 or in the agreement relating to such Option, each Option
   shall expire on the date specified by the Committee, but not more than (i)
   ten years from the date of grant in the case of Options generally and (ii)
   five years from the date of grant in the case of ISOs granted to an employee
   owning stock possessing more than ten percent (10%) of the total combined
   voting power of all classes of stock of the Company or any Related
   Corporation, as determined under paragraph 6(B). Subject to earlier
   termination as provided in paragraphs 9 and 10, the term of each ISO shall be
   the term set forth in the original instrument granting such ISO, except with
   respect to any part of such ISO that is converted into a Non-Qualified Option
   pursuant to paragraph 16.

       8.  Exercise of Option. Subject to the provisions of Paragraphs 9 through
           ------------------
   12, each Option granted under the Plan shall be exercisable as follows:

            A.  Vesting.  The Option shall either be fully exercisable on the
                -------                                                      
       date of grant or shall become exercisable thereafter in such installments
       as the Committee may specify.

            B.  Full Vesting of Installments.  Once an installment becomes
                ----------------------------                              
       exercisable it shall remain exercisable until expiration or termination
       of the Option, unless otherwise specified by the Committee.

            C.  Partial Exercise.  Each Option or installment may be exercised
                ----------------                                              
       at any time or from time to time, in whole or in part, for up to the
       total number of shares with respect to which it is then exercisable.

            D.  Acceleration of Vesting.  The Committee shall have the right to
                -----------------------                                        
       accelerate the date that any installment of any Option becomes
       exercisable; provided that the Committee shall not, without the consent
       of an optionee, accelerate the permitted exercise date of any installment
       of any Option granted to any employee as an ISO (and not previously
       converted into a Non-Qualified Option pursuant to paragraph 16) if such
       acceleration would violate the annual vesting limitation contained in
       Section 422(d) of the Code, as described in paragraph 6(C).

   9.  Termination of Employment.  Unless otherwise specified in the agreement
       -------------------------                                              
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate on the earlier of (a) three
months after the  date of termination of his or her employment, or (b)  their
specified expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant to
paragraph 16.  For purposes of this paragraph 9, employment shall be considered
as continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute or
by contract.  A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under this
paragraph 9, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence.  ISOs granted under the Plan 
<PAGE>
 
                                      -6-


shall not be affected by any change of employment within or among the Company
and Related Corporations, so long as the optionee continues to be an employee of
the Company or any Related Corporation. Nothing in the Plan shall be deemed to
give any grantee of any Stock Right the right to be retained in employment or
other service by the Company or any Related Corporation for any period of time.

   10.  Death; Disability.
        ----------------- 

           A.  Death.  If an ISO optionee ceases to be employed by the Company
               -----                                                          
   and all Related Corporations by reason of his or her death, any ISO owned by
   such optionee may be exercised, to the extent otherwise exercisable on the
   date of death, by the estate, personal representative or beneficiary who has
   acquired the ISO by will or by the laws of descent and distribution, until
   the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
   from the date of the optionee's death.

           B.  Disability. If an ISO optionee ceases to be employed by the
               ----------
   Company and all Related Corporations by reason of his or her disability, such
   optionee shall have the right to exercise any ISO held by him or her on the
   date of termination of employment, for the number of shares for which he or
   she could have exercised it on that date, until the earlier of (i) the
   specified expiration date of the ISO or (ii) 180 days from the date of the
   termination of the optionee's employment. For the purposes of the Plan, the
   term "disability" shall mean "permanent and total disability" as defined in
   Section 22(e)(3) of the Code or any successor statute.

   11. Assignability.  No Stock Right shall be assignable or transferable by the
       -------------                                                            
grantee except by will, by the laws of descent and distribution or, in the case
of Non-Qualified Options only, pursuant to a valid domestic relations order.
Except as set forth in the previous sentence, during the lifetime of a grantee
each Stock Right shall be exercisable only by such grantee.

   12. Terms and Conditions of Options.  Options shall be evidenced by
       -------------------------------                                
instruments (which need not be identical) in such forms as the Committee may
from time to time approve.  Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options.  The Committee may specify that any Non-
Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine.  The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments.  The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.

   13. Adjustments.  Upon the occurrence of any of the following events, an
       -----------                                                         
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
<PAGE>
 
                                      -7-

   A.  Stock Dividends and Stock Splits.  If the shares of Common Stock
       --------------------------------                                
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.

   B.   Consolidations or Mergers.  If the Company is to be consolidated
        -------------------------                                       
with or acquired by another entity in a merger or other reorganization in which
the holders of the outstanding voting stock of the Company immediately preceding
the consummation of such event, shall, immediately following such event, hold,
as a group, less than a majority of the voting securities of the surviving or
successor entity, or in the event of a sale of all or substantially all of the
Company's assets or otherwise (each, an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed the fair
market value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable or to be
exercisable as a result of the Acquisition, within a specified number of days of
the date of such notice, at the end of which period the Options shall terminate;
or (iii) terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of the Acquisition)
over the exercise price thereof.

   C.  Recapitalization or Reorganization. In the event of a recapitalization or
       ----------------------------------
reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock,
an optionee upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such recapitalization
or reorganization.

   D.   Modification of ISOs. Notwithstanding the foregoing, any adjustments
        --------------------
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only
after the Committee, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs or would cause adverse tax consequences to the holders, it may refrain from
making such adjustments.
<PAGE>
 
                                      -8-


       E.  Dissolution or Liquidation. In the event of the proposed dissolution
           --------------------------
   or liquidation of the Company, each Option will terminate immediately prior
   to the consummation of such proposed action or at such other time and subject
   to such other conditions as shall be determined by the Committee.

       F.   Issuances of Securities.  Except as expressly provided herein, no
            -----------------------                                          
   issuance by the Company of shares of stock of any class, or securities
   convertible into shares of stock of any class, shall affect, and no
   adjustment by reason thereof shall be made with respect to, the number or
   price of shares subject to Options.  No adjustments shall be made for
   dividends paid in cash or in property other than securities of the Company.

       G.   Fractional Shares. No fractional shares shall be issued under the
            -----------------
   Plan and the optionee shall receive from the Company cash in lieu of such
   fractional shares.

       H.   Adjustments.  Upon the happening of any of the events described in
            -----------                                                       
   subparagraphs A, B or C above, the class and aggregate number of shares set
   forth in paragraph 4 hereof that are subject to Stock Rights which previously
   have been or subsequently may be granted under the Plan shall also be
   appropriately adjusted to reflect the events described in such subparagraphs.
   The Committee or the Successor Board shall determine the specific adjustments
   to be made under this paragraph 13 and, subject to paragraph 2, its
   determination shall be conclusive.

   14. Means of Exercising Options.  An Option (or any part or installment
       ---------------------------                                        
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate.  Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied by
full payment of the purchase price therefor either (a) in United States dollars
in cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question.  The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares.  Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
<PAGE>
 
                                      -9-


   15. Term and Amendment of Plan.  This Plan was adopted by the Board on July
       --------------------------                                             
25, 1996, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent.  If the
approval of stockholders is not obtained prior to July 25, 1997, any grants of
ISOs under the Plan made prior to that date shall be Non-Qualified Options.  The
Plan shall expire at the end of the day on July 24, 2006 (except as to Options
outstanding on that date).  Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan.  The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased (except by adjustment pursuant to paragraph 13); (b)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may not
be modified; (c) the provisions of paragraph 6(B) regarding the exercise price
at which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended.  Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of a
grantee, without such grantee's consent, under any Stock Right previously
granted to such grantee.

   16.  Modifications of ISOs; Conversion of ISOs into Non-Qualified Options.
        -------------------------------------------------------------------- 
Subject to Paragraph 13D, without the prior written consent of the holder of an
ISO, the Committee shall not alter the terms of such ISO (including the means of
exercising such ISO) if such alteration would constitute a modification (within
the meaning of Section 424(h)(3) of the Code).  The Committee, at the written
request or with the written consent of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (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 ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion.  Such
actions may include, but shall not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such ISOs.  At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action.  Upon the taking of such action, the
Company shall issue separate certificates to the optionee with respect to
Options that are Non-Qualified Options and Options that are ISOs.

   17. Application Of Funds.  The proceeds received by the Company from the sale
       --------------------                                                     
of shares pursuant to Options granted and Purchases authorized under the Plan
shall be used for general corporate purposes.

   18. Notice to Company of Disqualifying Disposition.  By accepting an ISO
       ----------------------------------------------                      
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such 
<PAGE>
 
                                     -10-


optionee makes a Disqualifying Disposition (as described in Sections 421, 422
and 424 of the Code and regulations thereunder) of any stock acquired pursuant
to the exercise of ISOs granted under the Plan. A Disqualifying Disposition is
generally any disposition occurring on or before the later of (a) the date two
years following the date the ISO was granted or (b) the date one year following
the date the ISO was exercised.

   19. Withholding of Additional Income Taxes.  Upon the exercise of a Non-
       --------------------------------------                             
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income.  The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding.  Such arrangement may include payment by the grantee in cash
or by check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Common Stock
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of a Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.

   20. Governmental Regulation.  The Company's obligation to sell and deliver
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shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.

   Government regulations may impose reporting or other obligations on the
Company with respect to the Plan.  For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.

   21. Governing Law.  The validity and construction of the Plan and the
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instruments evidencing Options shall be governed by the laws of the State of
Delaware, or the laws of any jurisdiction in which the Company or its successors
in interest may be organized.