Document:

Stock Award Plan

                              Bandag, Incorporated

                          (As amended August 24, 1999)

Approved by Shareholders on 5-4-99
Amended 8-24-99

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Contents

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Article 1. Establishment, Objectives, and Duration                            1

Article 2. Definitions                                                        1

Article 3. Administration                                                     4

Article 4. Shares Subject to the Plan and Maximum Awards                      4

Article 5. Eligibility and Participation                                      5

Article 6. Stock Options                                                      5

Article 7. Restricted Stock                                                   6

Article 8. Performance Measures                                               8

Article 9. Beneficiary Designation                                            9

Article 10. Deferrals                                                         9

Article 11. Rights of Employees/Directors                                     9

Article 12. Change in Control                                                 9

Article 13. Amendment, Modification, and Termination                         10

Article 14. Withholding                                                      10

Article 15. Indemnification                                                  11

Article 16. Successors                                                       11

Article 17. Legal Construction                                               11

Approved by Shareholders on 5-4-99
Amended 8-24-99

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Bandag, Incorporated
Stock Award Plan

Article 1. Establishment, Objectives, and Duration
     1.1 Establishment of the Plan.  Bandag,  Incorporated,  an Iowa corporation
(hereinafter  referred to as the "Company"),  hereby  establishes a compensation
reward  plan  to be  known  as  the  "Bandag,  Incorporated  Stock  Award  Plan"
(hereinafter referred to as the "Plan"), as set forth in this document. The Plan
permits the grant of Nonqualified  Stock Options,  Incentive Stock Options,  and
Restricted Stock.

     Subject to approval by the  Company's  shareholders,  the Plan shall become
effective  as of February  8, 1999 (the  "Effective  Date") and shall  remain in
effect as provided in Section 1.3 hereof.

     1.2  Objectives of the Plan.  The objectives of the Plan are to 1) create a
better  link  between  the  interests  of the  Participants  and  the  Company's
shareholders;  2) promote  teamwork  and provide  Participants  with rewards for
excellence in the Company's  performance;  3) provide flexibility to the Company
in its ability to  compensate,  attract,  and retain the services of individuals
who  make  significant  contributions  to the  Company's  success;  and 4) allow
Participants to further share in the success of the Company.

     1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described  in Section 1.1  hereof,  and shall  remain in effect,  subject to the
right of the  Board of  Directors  to  amend or  terminate  the Plan at any time
pursuant  to Article 13 hereof,  until all Shares  subject to it shall have been
purchased or acquired according to the Plan's provisions.

Article 2. Definitions
     Whenever used in the Plan, the following  terms shall have the meanings set
forth below,  and when the meaning is intended,  the initial  letter of the word
shall be capitalized:

     2.1  "Award" means,  individually or collectively,  a grant under this Plan
          of Nonqualified Stock Options,  Incentive Stock Options, or Restricted
          Stock.

     2.2  "Award Agreement" means an agreement entered into by the Company and a
          Participant  setting  forth  the terms and  provisions  applicable  to
          Awards granted to the Participant under this Plan.

     2.3  "Board" or "Board of  Directors"  means the Board of  Directors of the
          Company.

     2.4  "Change in Control" of the Company shall be deemed to have occurred as
          of the  first  day  that any one or more of the  following  conditions
          shall have been satisfied:

          (a)  A sale, exchange, transfer, or other disposition of any ownership
               interest in the Company which  results in the "Carver  Family" as
               defined in  Section  4. (f).  (iv) of the  Restated  Articles  of
               Incorporation of the Company, owning, in the aggregate,  directly
               or  indirectly,  less

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Amended  8-24-99                             1
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               than  51%  voting  control  of the  Company;  provided  that  the
               conversion of Class B Common Stock into Common Stock  pursuant to
               Section 4. (f) of Article IV of the Company's  Restated  Articles
               of  Incorporation  shall  not be  deemed t be a "sale,  exchange,
               transfer or other disposition" for purposes of this Section 2.4;

          (b)  The  consummation  of a  transaction  that  results  in  a  sale,
               exchange, transfer, or other disposition of all, or substantially
               all, of the assets of the Company; or

          (b)  The  consummation of a transaction  that results in the merger or
               consolidation  of the Company with or into any other  corporation
               under   circumstances  where  the  shareholders  of  the  Company
               immediately  prior to such  merger  or  consolidation,  will own,
               directly  or  indirectly,  after  such  merger or  consolidation,
               securities  representing  less  than 51%  voting  control  of the
               corporation surviving any such merger or consolidation.

     2.5  "Code" means the Internal  Revenue Code of 1986,  as amended from time
          to time.

     2.6  "Committee"  means any committee  appointed by the Board to administer
          the Plan,  as specified in Article 3 herein,  except for any Awards to
          Directors which shall only be granted by the Board. Any such committee
          shall be comprised entirely of Directors.

     2.7  "Company" means Bandag, Incorporated,  an Iowa corporation,  including
          any and all  Subsidiaries,  and any  successor  thereto as provided in
          Article 16 herein.

     2.8  "Director"  means  any  individual  who is a  member  of the  Board of
          Directors of the Company or any  Subsidiary and who is not an employee
          of the Company or any Subsidiary.

     2.9  "Disability"  shall  have the  meaning  ascribed  to such  term in the
          Company's  or  Subsidiary's  long-term  disability  plan  governing  a
          Participant,  or if no such  plan  exists,  at the  discretion  of the
          Board.

     2.10 "Effective  Date"  shall  have the  meaning  ascribed  to such term in
          Section 1.1 hereof.

     2.11 "Employee" means any employee of the Company or a Subsidiary.

     2.12 "Exchange Act" means the  Securities  Exchange Act of 1934, as amended
          from time to time, or any successor act thereto.

     2.13 "Fair Market Value" of a Share shall be determined on the basis of the
          average  of the  opening  and  closing  sale  prices on the  principal
          securities exchange or market on which the Shares are traded or, if no
          such sale prices are available on the relevant date,  then on the last
          previous day on which a sale was  reported.  If the above  methods are
          otherwise

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Amended  8-24-99                             2
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          inapplicable,  then  the Fair  market  Value  of the  Shares  shall be
          determined in good faith by the Board.

     2.14 "Incentive  Stock Option" or "ISO" means an option to purchase  Shares
          granted under Article 6 herein and which is designated as an Incentive
          Stock  Option and which is intended to meet the  requirements  of Code
          Section 422.

     2.15 "Nonqualified  Stock  Option"  or "NQSO"  means an option to  purchase
          Shares  granted  under  Article 6 herein and which is not  intended to
          meet the requirements of Code Section 422.

     2.16 "Option"  means an  Incentive  Stock  Option or a  Nonqualified  Stock
          Option, as described in Article 6 herein.

     2.17 "Option  Price" means the price at which a Share may be purchased by a
          Participant pursuant to an Option.

     2.18 "Participant"  means an Employee or Director who has been  selected to
          receive an Award or who has  outstanding  an Award  granted  under the
          Plan.

     2.19 "Performance-Based  Exception" means the  performance-based  exception
          from the tax deductibility limitations of Code Section 162(m).

     2.20 "Period of Restriction"  means the period during which the transfer of
          Shares  of  Restricted  Stock is  limited  in some way  (based  on the
          passage of time, the  achievement of  performance  goals,  or upon the
          occurrence  of  other  events  as  determined  by  the  Board,  at its
          discretion),  and the Shares  are  subject  to a  substantial  risk of
          forfeiture, as provided in Article 7 herein.

     2.21 "Restricted Stock" means an Award granted to a Participant pursuant to
          Article 7 herein.

     2.22 "Retirement" means the Participant's  termination of employment (other
          than due to death or  Disability)  on or after age 60 with ten or more
          years  of  service  for  vesting  purposes  as  determined  under  any
          qualified  retirement  plan of the Company or any Subsidiary  covering
          the Participant.

     2.23 "Shares" means the shares of Class A common stock of the Company.

     2.24 "Subsidiary"  means any  company  during  any  period in which it is a
          "subsidiary  corporation"  (as that term is  defined  in Code  Section
          424(f)) with respect to the Company.

Article 3. Administration
     3.1 General.  The Plan shall be  administered  by the Board, or (subject to
the  following)  by any  Committee  appointed  by the Board.  The members of the
Committee  shall be  appointed  from  time to time by,  and  shall  serve at the
discretion  of, the Board of Directors.  The Board may delegate

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Amended  8-24-99                             3
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to  the  Committee  any or all of  the  administration  of the  Plan;  provided,
however,  that the  administration of the Plan with respect to Awards granted to
Directors may not be so delegated. To the extent that the Board has delegated to
the Committee any authority and  responsibility  under the Plan,  all applicable
references to the Board in the Plan shall be to the Committee.

     3.2  Authority  of the Board.  Except as limited by law or by the  Restated
Articles  of  Incorporation  or  Bylaws  of  the  Company,  and  subject  to the
provisions  herein,  the Board  shall  have full power to select  Employees  and
Directors who shall  participate  in the Plan;  determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan;  construe  and  interpret  the Plan and any  agreement  or  instrument
entered into under the Plan;  establish,  amend,  or waive rules and regulations
for the Plan's  administration;  and  (subject to the  provisions  of Article 13
herein) amend the terms and conditions of any  outstanding  Award as provided in
the Plan. Further,  the Board shall make all other  determinations  which may be
necessary or advisable for the  administration  of the Plan. As permitted by law
(and  subject to Section 3.1 herein),  the Board may  delegate its  authority as
identified herein.

     3.3 Decisions  Binding.  All determinations and decisions made by the Board
pursuant to the provisions of the Plan and all related orders and resolutions of
the Board shall be final,  conclusive and binding on all persons,  including the
Company, its stockholders, Directors, Employees, Participants, and their estates
and beneficiaries.

Article 4. Shares Subject to the Plan and Maximum Awards
     4.1  Number of Shares  Available  for  Grants.  Subject  to  adjustment  as
provided  in Section  4.2  herein,  the  number of Shares  hereby  reserved  for
issuance  to  Participants  under  the  Plan  shall  be  nine  hundred  thousand
(900,000), no more than three hundred thousand (300,000) of which may be granted
in the form of Restricted Shares. The Shares may be authorized, but unissued, or
reacquired  Shares.  The Board shall determine the  appropriate  methodology for
calculating  the number of shares  issued  pursuant  to the Plan.  If any Shares
covered by an Award are forfeited or if any Award otherwise terminates,  expires
or is  cancelled  prior to the  delivery of all the  Shares,  then the number of
Shares  counted  against  the  number  of  Shares  available  under  the Plan in
connection with the grant of such Award,  to the extent of any such  forfeiture,
termination,  expiration or cancellation,  shall again be available for granting
of additional  Awards under the Plan. Unless and until the Board determines that
an Award shall not be designed to comply with the  Performance-Based  Exception,
the following rules shall apply to grants of such Awards under the Plan:

          (a)  Stock Options: The maximum aggregate number of Shares that may be
               granted  in the  form of Stock  Options,  pursuant  to any  Award
               granted  in any one  fiscal  year to any one  single  Participant
               shall be ninety thousand (90,000).

          (b)  Restricted  Stock:  The maximum  aggregate  grant with respect to
               Awards of Restricted  Stock granted in any one fiscal year to any
               one single Participant shall be thirty thousand (30,000).

     4.2  Adjustments  in  Authorized  Shares.  In the  event of any  change  in
corporate  capitalization,  such as a stock split,  or a corporate  transaction,
such as any merger,  consolidation,  separation,  including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code

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Amended  8-24-99                             4
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Section  368) or any  partial  or  complete  liquidation  of the  Company,  such
adjustment  shall  be made in the  number  and  class  of  Shares  which  may be
delivered  under  Section 4.1, in the number and class of and/or price of Shares
subject to  outstanding  Awards  granted under the Plan, and in the Award limits
set  forth  in  subsections  4.1(a)  and  4.1(b),  as  may be  determined  to be
appropriate  and  equitable  by the Board,  in its sole  discretion,  to prevent
dilution or enlargement of rights; provided,  however, that the number of Shares
subject to any Award shall always be a whole number.

Article 5. Eligibility and Participation
     5.1 Eligibility.  Persons eligible to participate in this Plan shall be all
Employees and Directors.

     5.2 Actual Participation.  Subject to the provisions of the Plan, the Board
may, from time to time,  select from all Employees and Directors,  those to whom
Awards shall be granted and shall determine the nature and amount of each Award.

Article 6. Stock Options
     6.1 Grant of  Options.  Subject  to the terms and  provisions  of the Plan,
Options may be granted to Participants in such number,  and upon such terms, and
at any time and from time to time as shall be determined by the Board.

     6.2 Award  Agreement.  Each  Option  grant shall be  evidenced  by an Award
Agreement that shall specify the Option Price,  the duration of the Option,  the
number of Shares to which the Option pertains,  and such other provisions as the
Board shall determine. The Award Agreement also shall specify whether the Option
is  intended  to be an ISO within the  meaning of Code  Section  422, or an NQSO
whose grant is intended not to fall under the provisions of Code Section 422.

     6.3 Option  Price.  The Option Price for each grant of an Option under this
Plan shall be at least  equal to one hundred  percent  (100%) of the Fair Market
Value of a Share on the date the Option is granted.

     6.4 Duration of Options.  Each Option granted to a Participant shall expire
at such  time as the  Board  shall  determine  at the time of  grant;  provided,
however,  that no  Option  shall be  exercisable  later  than the  tenth  (10th)
anniversary date of its grant.

     6.5  Exercise of Options.  Options  granted  under this  Article 6 shall be
exercisable at such times and be subject to such  restrictions and conditions as
the Board shall in each  instance  approve,  which need not be the same for each
grant or for each Participant.

     6.6 Payment. Options granted under this Article 6 shall be exercised by the
delivery  of a written  notice of  exercise to the  Company,  setting  forth the
number  of  Shares  with  respect  to  which  the  Option  is to  be  exercised,
accompanied  by full  payment  for the  Shares,  except  that,  in the case of a
cashless  exercise  as  described  below,  payment  shall  be  made  as  soon as
practicable after exercise.

     The  Option  Price  upon  exercise  of any  Option  shall be payable to the
Company  in full  either:  (a) in cash or its  equivalent,  or (b) by  tendering
previously  acquired  shares of stock of the Company  having an  aggregate  Fair
Market Value at the time of exercise  equal to the total Option Price

Approved by Shareholders on 5-4-99
Amended  8-24-99                             5
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(provided  that the shares of stock of the Company  which are tendered must have
been held by the  Participant  for at least six (6) months prior to their tender
to satisfy the Option Price), or (c) by a combination of (a) and (b).

     The Board also may allow cashless  exercises as permitted under the Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other  means  which the Board  determines  to be  consistent  with the
Plan's purpose and applicable law.

     Subject to any governing rules or regulations, as soon as practicable after
receipt of a written  notification  of exercise  and full  payment,  the Company
shall deliver to the Participant,  in the Participant's name, Share certificates
in an  appropriate  amount based upon the number of Shares  purchased  under the
Option(s).

     6.7  Restrictions  on Share  Transferability.  The  Board may  impose  such
restrictions  on any  Shares  acquired  pursuant  to the  exercise  of an Option
granted  under  this  Article  6 as it may deem  advisable,  including,  without
limitation,  restrictions  under applicable  federal  securities laws, under the
requirements  of any stock  exchange  or market  upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.

     6.8  Termination  of  Employment/Directorship.   Each  Participant's  Award
Agreement  shall set forth the  extent to which the  Participant  shall have the
right  to  exercise  the  Option  following  termination  of  the  Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole  discretion of the Board,  shall be included in the Award  Agreement
entered into with each Participant, need not be uniform among all Options issued
pursuant to this  Article 6, and may reflect  distinctions  based on the reasons
for termination.

     6.9 Nontransferability of Options.

          (a)  Incentive  Stock  Options.  No ISO granted  under the Plan may be
     sold,   transferred,   pledged,   assigned,   or  otherwise   alienated  or
     hypothecated,   other  than  by  will  or  by  the  laws  of  descent   and
     distribution.  Further,  all ISOs granted to a  Participant  under the Plan
     shall be exercisable during his or her lifetime by only such Participant.

          (b)  Nonqualified  Stock  Options.  Except as otherwise  provided in a
     Participant's Award Agreement,  no NQSO granted under this Article 6 may be
     sold,   transferred,   pledged,   assigned,   or  otherwise   alienated  or
     hypothecated,   other  than  by  will  or  by  the  laws  of  descent   and
     distribution.  Further,  except as  otherwise  provided in a  Participant's
     Award  Agreement,  all NQSOs granted to a Participant  under this Article 6
     shall be exercisable  during his or her lifetime by only such  Participant,
     or the Participant's legal representative.

Article 7. Restricted Stock
     7.1 Grant of Restricted  Stock.  Subject to the terms and provisions of the
Plan,  the  Board,  at any time  and from  time to time,  may  grant  Shares  of
Restricted Stock to Participants in such amounts as the Board shall determine.

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Amended  8-24-99                             6
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     7.2  Restricted  Stock  Agreement.  Each  Restricted  Stock  grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Board shall determine.

     7.3  Transferability.  Except as provided in this  Article 7, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Board and specified in the Restricted Stock Award
Agreement, or upon earlier satisfaction of any other conditions, as specified by
the Board in its sole  discretion  and set forth in the  Restricted  Stock Award
Agreement.  All  rights  with  respect  to the  Restricted  Stock  granted  to a
Participant under the Plan shall be available during his or her lifetime to only
such Participant.

     7.4 Other Restrictions. Subject to Article 9 herein, the Board shall impose
such other  conditions  and/or  restrictions  on any Shares of Restricted  Stock
granted  pursuant  to the  Plan  as it may  deem  advisable  including,  without
limitation,  a requirement that Participants pay a stipulated purchase price for
each Share of  Restricted  Stock,  restrictions  based upon the  achievement  of
specific  performance  goals  (Company-wide,   divisional,   etc.),   time-based
restrictions  on vesting  following  the  attainment of the  performance  goals,
and/or restrictions under applicable federal or state securities laws.

     The Company may retain the certificates  representing  Shares of Restricted
Stock in the  Company's  possession  until  such time as all  conditions  and/or
restrictions applicable to such Shares have been satisfied.

     Except as otherwise  provided in this Article 7, Shares of Restricted Stock
covered by each  Restricted  Stock grant made under the Plan shall become freely
transferable by the Participant  after the last day of the applicable  Period of
Restriction.

     7.5 Voting Rights. To the extent applicable, Participants holding Shares of
Restricted  Stock  granted  hereunder  may be granted the right to exercise full
voting rights with respect to those Shares during the Period of Restriction.

     7.6 Dividends and Other  Distributions.  During the Period of  Restriction,
Participants  holding  Shares  of  Restricted  Stock  granted  hereunder  may be
entitled to receive  regular cash  dividends paid with respect to the underlying
Shares  while  they are so held.  The Board may  apply any  restrictions  to the
dividends that the Board deems  appropriate.  Without limiting the generality of
the preceding sentence, if the grant or vesting of Restricted Shares is designed
to comply with the requirements of the  Performance-Based  Exception,  the Board
may apply any  restrictions  it deems  appropriate  to the payment of  dividends
declared with respect to such Restricted Shares,  such that the dividends and/or
the Restricted Shares maintain eligibility for the Performance-Based Exception.

     The Board may also approve  payments by the Company to Participants in cash
or its equivalent, amounts of which the Board deems appropriate to be sufficient
remuneration  for all or a portion of the resulting  income tax  consequences to
the  Participant  of the  Restricted  Shares.  The  conditions  under which such
payments,  if any, shall be made shall be set forth in the  Participant's  Award
Agreement.

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Amended  8-24-99                             7
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     7.7 Termination of  Employment/Directorship.  Each  Restricted  Stock Award
Agreement  shall set forth the  extent to which the  Participant  shall have the
right  to  receive  unvested  Restricted  Shares  following  termination  of the
Participant's employment or directorship with the Company. Such provisions shall
be  determined  in the sole  discretion  of the Board,  shall be included in the
Award Agreement  entered into with each  Participant,  need not be uniform among
all Shares of  Restricted  Stock  issued  pursuant to the Plan,  and may reflect
distinctions  based on the  reasons for  termination;  provided,  however  that,
except in the cases of  terminations  connected  with a Change  in  Control  and
terminations  by  reason  of death or  Disability,  the  vesting  of  Shares  of
Restricted Stock which qualify for the  Performance-Based  Exception shall occur
at the time they otherwise would have, but for the termination.

Article 8. Performance Measures
     Unless and until the Board proposes for shareholder  vote and  shareholders
approve a change in the general  performance  measures set forth in this Article
8, the  attainment of which may  determine  the degree of payout and/or  vesting
with respect to Awards  which are designed to qualify for the  Performance-Based
Exception,  the  performance  measure(s)  to be used for purposes of such grants
shall be chosen from among:

     (a)  Earnings per share;

     (b)  Net income (before or after taxes);

     (c)  Return  measures  (including,  but not limited  to,  return on assets,
          equity, or sales);

     (d)  Cash flow return on investments which equals net cash flows divided by
          owners equity;

     (e)  Earnings before or after taxes;

     (f)  Gross revenues;

     (g)  Share price  (including,  but no limited to, growth measures and total
          shareholder return); and

     (h)  Economic profit  (generally  defined as, but not limited to, after-tax
          operating profit less the cost of capital).

     The Board  shall  have the  discretion  to adjust  the  amount of the Award
depending upon the degree of attainment of the preestablished performance goals;
provided,  however,  that no discretion  may be exercised with respect to Awards
which are designed to qualify for the  Performance-Based  Exception  (other than
discretion  by the Board to decrease the amount of the Award  otherwise  payable
upon attainment of the preestablished performance goals).

     In the event that applicable tax laws change to permit Board  discretion to
alter the governing  performance measures without obtaining shareholder approval
of such  changes,  the Board  shall have sole  discretion  to make such  changes
without obtaining shareholder approval. In addition, in the event that the Board
determines  that it is advisable to grant Awards which shall not qualify for the

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Amended  8-24-99                             8
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Performance-Based  Exception,  the Board may make such grants without satisfying
the requirements of Code Section 162(m).

Article 9. Beneficiary Designation
     Each  Participant  under  the  Plan  may,  from  time  to  time,  name  any
beneficiary or beneficiaries  (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she  receives  any or all of such  benefit.  Each such  designation  shall
revoke  all  prior  designations  by the  same  Participant,  shall be in a form
prescribed  by the  Company,  and  will be  effective  only  when  filed  by the
Participant in writing with the Company during the  Participant's  lifetime.  In
the  absence  of  any  such  designation,   benefits  remaining  unpaid  at  the
Participant's death shall be paid to the Participant's estate.

Article 10. Deferrals
     The Board may permit or require a Participant  to defer such  Participant's
receipt  of the  delivery  of  Shares  that  would  otherwise  be  due  to  such
Participant  by  virtue of the  exercise  of an Option or the lapse or waiver of
restrictions  with respect to Restricted Stock. If any such deferral election is
required or permitted, the Board shall, in its sole discretion,  establish rules
and procedures for such payment deferrals.

Article 11. Rights of Employees/Directors
     11.1  Employment.  Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate  any  Participant's  employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.

     11.2  Participation.  No Employee  or  Director  shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.

Article 12. Change in Control
     12.1  Treatment of Outstanding  Awards.  Upon the occurrence of a Change in
Control,  unless otherwise specifically  prohibited under applicable laws, or by
the rules and  regulations  of any governing  governmental  agencies or national
securities exchanges:

          (a)  Any and all Options granted  hereunder  shall become  immediately
               exercisable, and shall remain exercisable throughout their entire
               term;

          (b)  Any restriction  periods and  restrictions  imposed on Restricted
               Stock which are not performance-based shall lapse;

     12.2  Termination,   Amendment,   and  Modifications  of  Change-in-Control
Provisions. Notwithstanding any other provision of this Plan (but subject to the
limitations  of Section  12.3  hereof)  or any Award  Agreement  provision,  the
provisions of this Article 12 may not be terminated,  amended, or modified on or
after the date of a Change in Control to affect adversely any Award  theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's  outstanding Awards; provided,  however, the Board
may  terminate,  amend,  or modify this  Article 12 at any time and from time to
time prior to the date of a Change in Control.

Approved by Shareholders on 5-4-99
Amended  8-24-99                             9
<PAGE>

     12.3 Pooling of Interests  Accounting.  Notwithstanding any other provision
of the Plan to the contrary,  in the event that the  consummation of a Change in
Control is contingent on using pooling of interests accounting methodology,  the
Board may take any action  necessary to preserve the use of pooling of interests
accounting,  including,  but not limited to,  unilateral  amendment  of existing
Award Agreements.

Article 13. Amendment, Modification, and Termination
     13.1 Amendment,  Modification, and Termination. Subject to the terms of the
Plan, the Board may at any time and from time to time, alter, amend,  suspend or
terminate the Plan in whole or in part.

     13.2  Adjustment  of Awards  Upon the  Occurrence  of  Certain  Unusual  or
Nonrecurring  Events. The Board may make adjustments in the terms and conditions
of,  and  the  criteria  included  in,  Awards  in  recognition  of  unusual  or
nonrecurring  events  (including,  without  limitation,  the events described in
Section 4.2 hereof)  affecting  the Company or the  financial  statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Board  determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential  benefits  intended
to be made available under the Plan;  provided that, unless the Board determines
otherwise at the time such adjustment is considered, no such adjustment shall be
authorized  to the extent that such  authority  would be  inconsistent  with the
Plan's meeting the  requirements  of Section 162(m) of the Code, as from time to
time amended.

     13.3 Awards Previously Granted.  Notwithstanding any other provision of the
Plan to the  contrary  (but  subject to Section 12.3  hereof),  no  termination,
amendment,  or modification  of the Plan shall adversely  affect in any material
way any Award previously  granted under the Plan, without the written consent of
the Participant holding such Award.

     13.4 Compliance  with Code Section  162(m).  At all times when Code Section
162(m) is  applicable,  all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m);  provided,  however,  that in the event the
Board  determines  that such compliance is not desired with respect to any Award
or Awards  available for grant under the Plan, then compliance with Code Section
162(m) will not be required.  In addition, in the event that changes are made to
Code Section 162(m) to permit greater  flexibility  with respect to any Award or
Awards available under the Plan, the Board may, subject to this Article 13, make
any adjustments it deems appropriate.

Article 14. Withholding
     14.1 Tax  Withholding.  The  Company  shall have the power and the right to
deduct or withhold,  or require a Participant to remit to the Company, an amount
sufficient  to satisfy  federal,  state,  and local taxes,  domestic or foreign,
required by law or  regulation  to be withheld with respect to any taxable event
arising as a result of this Plan.

     14.2 Share  Withholding.  With  respect to  withholding  required  upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any  other  taxable  event  arising  as a result of  Awards  granted  hereunder,
Participants  may elect,  subject to the  approval of the Board,  to satisfy the
withholding  requirement,  in whole or in part,  by having the Company  withhold
Shares having a Fair Market Value on the date the tax is to be determined  equal
to the minimum  statutory  total tax which could be imposed on the  transaction.
All  such  elections  shall  be  irrevocable,  made in  writing,

Approved by Shareholders on 5-4-99
Amended  8-24-99                             10
<PAGE>

signed  by  the  Participant,  and  shall  be  subject  to any  restrictions  or
limitations that the Board, in its sole discretion, deems appropriate.

Article 15. Indemnification
     Each person who is or shall have been a member of the Committee,  or of the
Board,  shall be indemnified  and held harmless by the Company  against and from
any loss,  cost,  liability,  or expense that may be imposed upon or  reasonably
incurred by him or her in connection  with or resulting from any claim,  action,
suit,  or proceeding to which he or she may be a party or in which he or she may
be involved  by reason of any action  taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in  settlement  thereof,
with  the  Company's  approval,  or  paid by him or her in  satisfaction  of any
judgement in any such action,  suit, or proceeding  against him or her, provided
he or she shall give the Company an opportunity,  at its own expense,  to handle
and defend the same before he or she  undertakes  to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other  rights of  indemnification  to which such  persons may be entitled
under the Company's  Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

Article 16. Successors
     All  obligations  of the  Company  under  the Plan with  respect  to Awards
granted hereunder shall be binding on any successor to the Company,  whether the
existence of such  successor  is the result of a direct or indirect  purchase of
all or  substantially  all of the business and/or assets of the Company,  or the
result of a merger, consolidation or otherwise.

Article 17. Legal Construction
     17.1 Gender and Number.  Except where  otherwise  indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

     17.2  Severability.  In the event any  provision  of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

      17.3  Requirements  of Law.  The  granting  of Awards and the  issuance of
Shares  under the Plan shall be  subject  to all  applicable  laws,  rules,  and
regulations,  and to such  approvals  by any  governmental  agencies or national
securities exchanges as may be required.

      17.4  Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Iowa.

Approved by Shareholders on 5-4-99
Amended  8-24-99                             11EXHIBIT 10.8
STATE OF NORTH CAROLINA

COUNTY OF CRAVEN

                               CONTRACT AND LEASE

         THIS CONTRACT AND LEASE, made and entered into this the 1st day of
January, 1999, by and between THOMAS PROPERTIES (hereinafter referred to as
"Lessor"); and ATLANTIC INTEGRATED HEALTH INCORPORATED. (hereinafter referred to
as "Lessee");

                                   WITNESSETH

         WHEREAS, Lessor and Lessee desire to establish the terms and conditions
of a Lease and execute this Contract and lease to so establish such terms.

         NOW, THEREFORE, for and in consideration of the Premises, the mutual
promises, and the covenants and considerations contained herein, the parties
hereby do agree as follows:

         1. PREMISES. Lessor hereby does let and demise to Lessee the following
Premises: Suite D-17 & D-18 Thomas Square, 1315 S. Glenburnie Road, New Bern NC
28561.

         2. TERM. The term of this Lease shall begin on the 1st day of January,
2000, and shall end (unless sooner terminated as hereinafter provided) at
midnight on the 31st day of December, 2001.

         3. RENT. During the term of this lease, Lessee shall pay to Lessor as
rent the sum of $1,300.00 (One-thousand three hundred and 00/100 dollars) each
month. Such rent is to be paid on or before the 1st day of each month to Lessor
at such place as Lessor may direct. Rent moneys received after the 7th day of
the month will be assessed a late fee of ten percent (10%).

         4. USE OF PREMISES. During the term of this Lease and any extension or
extensions thereof, the Premises shall be used and occupied solely for the
purpose of Office Space and Lessee shall not permit the same to be used for any
other purpose without the prior written consent of Lessor.

         5. PARKING. Lessee shall have a nonexclusive right to use the several
common areas provided by Lessor and appurtenant to the Premises, including
walks, ramps, driveways and parking areas. The public parking areas provided by
Lessor in and about the premises are acknowledged as being intended primarily
for use by customers on Lessee's Premises and other Premises in the same
building. Lessor shall have the authority to assign parking for Lessee and
Lessee's employees as deemed necessary by Lessor. It is provided, however, that
Lessor from time to time may construct improvements within the parking areas
currently existing for the Premises. Accordingly, the right of use grantee in
this paragraph is limited to those parking areas as from time to time located on
the Premises belonging to Lessor.

<PAGE>

         6. RESTRICTIVE COVENANTS AND HOMEOWNERS ASSOCIATION. The Premises being
leased are conveyed subject to restrictive covenants of record, if any, and
Lessor and Lessee hereby agree to abide by any and all restrictions, conditions,
easements and covenants contained in the aforesaid restrictive covenants. The
Premises also being leased are conveyed subject to the Homeowners Association
Rules and Regulations. (Copy attached which becomes part of this Lease.)

         7. DAMAGE TO OTHERS. Lessee shall not permit, allow or cause any act or
deed to be performed or any practice to be adopted or followed in and about the
Premises which shall cause injury or damage to any person or to said Premises,
building, sidewalks, walkways and parking lots which adjoin the Premises. Lessee
shall comply with all rules and regulations governing the use of common areas in
and about the Premises which may from time to time be adopted by Lessor.

         8. MAINTENANCE. Lessor, at its sole cost and expense, shall maintain
and keep in good repair the roof, exterior and supporting walls, electrical,
heat/air conditioning unit and plumbing fixtures (with the exclusion of general
maintenance such as changing of light bulbs and air filters), and common areas
such as parking and grassed areas of the Premises. Provided, however, that the
cost of any repairs required as a result of negligence or any willful act by
Lessees, its licensees, agents, servants, employees or invitees, shall be paid
solely by Lessee. Lessee shall be responsible for all glass repair.

         9. UTILITIES. Lessee shall be responsible for paying for all utility
services to the Premises and for providing for such utility services in the name
of Lessee.

         10. ASSOCIATION FEES. Lessor shall pay monthly Association Fees in the
amount of $100.00 (One hundred and 00/100 dollars). The fees cover common area
cost including insurance, common area lighting, common area maintenance
including ground care. The fees are subject to yearly increases based on
previous years expenses. Lessee shall be responsible for the payment of any such
increases in association fees.

         11. STRUCTURAL CHANGES: Lessee shall not make any structural changes or
alterations in or to any part of the building in which the Premises are located
or in the Premises except upon the prior written consent of Lessor. All
furnishing, fixtures and equipment installed by Lessee on the Premises may be
removed from the Premises at any time during the term of this Lease. This right
of removal of Lessee shall be contingent upon the Lessee repairing and replacing
any and all damage to the Premises resulting from the removal of such furniture,
fixtures and equipment.

         12. LESSEE'S PERSONAL PROPERTY. All of the personal property placed or
installed on the Premises by Lessee shall be at the risk of Lessee, and Lessor
shall not be liable for any damage to or for the destruction of said personal
property, or to the Lessee, however occurring, including, but not limited to,
the bursting or leaking of water or steam pipes or from any willful act or
negligence of any other Lessee on the Premises or occupant of the building in
which the Premises are located, or by any other person or cause whatsoever,
unless due to landlords failure to properly maintain and repair plumbing
fixtures pursuant to paragraph 8.

                                       2
<PAGE>

         13. TAXES. Lessee shall be responsible for the payment of all ad
valorem taxes assessed by any lawful taxing authority of the personal property
of Lessee located on the Premises.

         14. SIGNS. Lessee shall arrange for sign announcing Lessee's services
on the exterior of Premises through Custom Signs, New Bern, NC. (Sign subject to
Lessor's approval.)

         15. NO ASSIGNMENT OR SUBLETTING. Lessee shall not have the right to
assign this Lease or to sublet the Premises or any part thereof without the
prior written consent of Lessor.

         16. DAMAGE TO PREMISES. In the event the Premises are damaged by fire,
the elements, unavoidable accidents or other casualty, but are not thereby
rendered untenantable either in whole or in part, Lessor, at it's sole expense,
shall cause such damage to be repaired and the rent shall not be abated.

         If by reason of any such occurrence the Premises shall be rendered
wholly or partly untenantable, Lessor, at it's option, shall have the right to
either (a) terminate this Lease as of the date of such destruction by giving
written notice to Lessee within thirty (30) days of such date, or (b) repair and
restore the Premises to as good a condition or a better condition as that
existing immediately prior to said occurrence and this Lease shall not
terminate, except that the rent shall abate for that period of time when
Premises are untenantable for the purpose of this Lease. In the event Lessor
elects to repair the Premises pursuant to Subparagraph (b) above, such repairs
shall be completed within ninety (90) days of the date of such occurrence. In
the event such repairs are not so completed, Lessee may terminate this Lease.

         17. CONDEMNATION. If the whole or any part of the demised Premises
shall be appropriated and taken by virtue of any condemnation proceeding for any
public or quasi-public use of purpose so as to render the remaining portion
untenantable for the uses and purposes contemplated by the parties, then this
Lease immediately shall terminate on the date possession thereof shall be so
obtained. All or any part thereof, shall become the sole and absolute property
of Lessor, regardless of whether such damages are awarded as compensation for
the diminution in the value of the leasehold or the loss of the fee. The
provisions of this paragraph apply only to the actual Premises demised herein
and shall not be operative to terminate this Lease in the event that said
condemnation or eminent domain proceedings affects only common areas or other
portions of the building in which the Premises are located.

         18. INSPECTION. Lessor or its authorized agents or representatives
shall have the right to enter the Premises during all reasonable hours in order
to examine the Premises and shall be allowed to exhibit the Premises to any
prospective lessee at any time with prior notification within one hundred eighty
(180) days prior to the expiration of this Lease as the same may be extended for
time to time.

         19. SUBORDINATION. This Lease is subject to and subordinate to all
security liens, mortgages or deeds of trust which may now or hereinafter affect
the Premises or the building in which situated, or the real property upon which
said building is located, and to all renewals, modifications, consolidations,
replacements and extensions thereof. Lessee shall

                                       3
<PAGE>

execute promptly any certificate or any other instrument in confirmation of such
subordination that Lessor from time to time may request.

         20. INSURANCE. Lessee shall be responsible at its sole cost and expense
of insuring all items of personal property belonging to Lessee kept on the
Premises against any casualty whatsoever.

         Lessee, during the entire term of this Lease, shall keep in full force
and effect a policy of general liability insurance protecting Lessor and Lessee
against any claim or claims for damage arising by reason of injury, death or
damage occasioned in, upon or adjacent to the Premises, such insurance to
protect Lessor and Lessee jointly and severally to the combined single limit of
One Million and No/100 Dollars ($1,000,000.00) for injury to or death of any one
(1) or more persons by the same accident and or damage to property of other
persons. The policy shall name Lessor, any person, firm or corporation
designated by Lessor and Lessee as the insured, and shall contain a clause which
provides that the insurer shall not cancel or change the insurance without first
giving the Lessor ten (10) days prior written notice of such change or
cancellation. Such insurance shall be with an insurance company approved by
Lessor and a copy of the policy shall be delivered to Lessor together with
evidence satisfactory to Lessor of the payment from time to time of all required
premiums.

         21. INDEMNITY. Lessee shall indemnify and hold Lessor harmless from any
and all liability for any damage or injury to any occupant of the building in
which the Premises are contained or to any other person, or to any property,
occasioned by or resulting from the willful, negligent or improper conduct or
omission on the part of Lessee, its agents or employees, from or in or about the
Premises; provided, however, that Lessee shall not be required to indemnify and
hold harmless the Lessor from negligent or improper conduct, acts or omissions
of Lessor's agents, servants or employees.

         22. DEFAULT. In the event of any failure of Lessee:

             (a)    to pay any rent reserved hereunder within fifteen (15)
days after the same shall be due; or

             (b)    to perform any other of the terms, covenants or conditions
contained in this Lease to be observed or performed by Lessee, and such default
shall continue for more than thirty (30) days after written notice thereof shall
have been mailed to Lessee; or

             (c)    if Lessee shall become bankrupt or insolvent, or file any
debtor proceeding, or have taken against Lessee in any court pursuant to any
statute either of the United States or of any State a petition in bankruptcy or
insolvency or for reorganization or for appointment to a receiver or trustee of
all or any portion of Lessee's property, or if Lessee makes an assignment for
the benefit of creditors, petitions for or enters into an arrangement, or if
Lessee shall abandon the Premises or suffer the Lease to be taken under any
right of execution, then Lessor, without excluding other rights and remedies
that it may have, shall have the immediate right of re-entry and may remove all
persons and property from the Premises and such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account of
Lessee, all without resort to legal process and without being deemed guilty of
trespass, or

                                       4
<PAGE>

becoming liable for any loss or damage which may be occasioned thereby. If
Lessor should elect to re-enter as herein provided, or should take possession
pursuant to legal proceedings; it may terminate this Lease or it may from time
to time without terminating this Lease make such alterations, and repairs as may
be necessary in order to relet the Premises, and relet said Premises for such
term and at such rentals as Lessor may deem advisable. In the event of any such
reletting, all rentals received by Lessor shall be applied first to the payment
of any indebtedness other than rent due hereunder from Lessee to Lessor; second,
to the payment of any costs and expenses of such reletting, including the
expense of alteration and repair; third, to the payment of rent due and unpaid
hereunder, and the residue, if any, shall be applied by Lessor in payment of
future rent due and unpaid hereunder. If such reletting shall yield rentals
insufficient for any month to pay the rent due by Lessee hereunder for that
month, Lessee shall be liable to Lessor for the deficiency and the same shall be
paid monthly. No such re-entry or taking possession of Premises by Lessor shall
be construed as an election to terminate this Lease unless a written notice of
such intention be given to Lessee by Lessor at the time of such re-entry.
Notwithstanding such re-entry and reletting without termination, Lessor may at
any time thereafter elect to terminate this Lease for such previous breach, in
which event it may recover from Lessee damages incurred by reason of such
breach, including the cost of recovering the Premises and the difference in
value between the rent reserved hereunder for the remainder of the term and the
reasonable rental value of the Premises for the remainder of the term.

         23. HOLDOVER. In the event Lessee remains in possession of the Premises
after the expiration of the term of this Lease without the execution of a new
Lease or an extension as hereinabove provided, Lessee shall occupy the Premises
under a month-to-month tenancy, subject to all of the conditions of this Lease
insofar as same are consistent with such tenancy.

         24. NO PARTNERS. The execution of this Lease or the performance of any
act pursuant to the provisions hereof shall not be deemed or construed to have
the effect of creating between the Lessor and the Lessee the relationship of
principal and agent, partnership, or joint venture.

         25. NOTICE. Any notice required hereunder shall be deemed sufficient
notice and service thereof completed upon receipt of refusal of same if same
shall be in writing addressed to the addressee at his last known post office
address, mailed certified or registered, postage prepaid, with return receipt
requested.

         26. OTHER TERMS. Lessee will return the unit to the original floor
plan, unless otherwise instructed in writing by the Lessor. Lease is contingent
upon Lessor's approval of restored floor plan.

         27. ENTIRE AGREEMENT. Lessor and Lessee agree that no representations
or inducements have been made other than those expressed herein and that this
Agreement contains the entire agreement between all of the parties hereto.

                                       5
<PAGE>

         28. ADDRESS. The address of Lessee to which all notices herein provided
shall be sent is:

                           Suite D-17 Thomas Square
                           1315 South Glenburnie Road
                           New Bern NC  28561

         29. ADDRESS. The address of Lessor to which, all notices herein
provided shall be sent is:

                           Thomas Properties
                           P O Box 14165
                           New Bern NC  28561

         30. REFERENCES/PARAGRAPH HEADINGS/NEGOTIATIONS. Throughout this
Contract and Lease, the masculine gender shall be deemed to include the neuter
and the feminine; the singular, the plural; the plural, the singular; the
corporate, the individual; and the individual, the corporate.

         31. RENEWAL. This agreement may be renewed at the expiration of the
initial term by the Lessee, when written notice is given to the Lessor 60 days
before the end of each term, for one two-year term renewal with a rent increase
of six per cent (6%) for the renewal term if all lease terms and conditions are
satisfied by the Lessee.

         32. DUPLICATES. There are duplicate originals hereof.

                                       6
<PAGE>

                                Thomas Properties
                                  P0 Box 14165
                               New Bern, NC 28561

                                February 25, 2000

Atlantic Integrated Health Inc.
1315 South Glenburnie Rd
Suite D-17
New Bern, NC  28561

Dear Sirs:

Thomas Properties accepts the layout of units D-17 & D-18 at Thomas Square as
they exist on this date.

Sincerely,

/s/  J. Brynn Thomas

J. Brynn Thomas
General Partner

                                       7

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