Document:

RG&E Exhibit 10-21 (2002 10-K)

Exhibit 10-21

Form of Severance Agreement, as Amended

RGS ENERGY GROUP, INC.

ROCHESTER GAS AND ELECTRIC CORPORATION

SEVERANCE AGREEMENT

 

          This Severance Agreement is made, effective as of ________________________, by and between RGS Energy Group, Inc. (RGS) and Rochester Gas and Electric Corporation (RG&E), both New York corporations having their principal place of business in Rochester, New York (collectively the "Company"), and _________________________, an individual currently residing in ________________, New York (the "Employee").  

          1.     Purposes.   The Company's Boards of Directors (the "Board") consider the creation and retention of a sound and vital management team to be essential to protecting and enhancing the best interests of the Company, its customers and its shareowners.  In this connection, the Company recognizes that if the possibility of a Change of Control arises, the uncertainty and discomfort it may raise could result in the departure or distraction of management personnel during the period leading up to and during a possible Change of Control to the detriment of the Company, its customers and its shareowners.  Furthermore, in addition to their regular duties management will be called upon during this period to assist in the assessment of third party proposals, to advise the Board as to whether such proposals would be in the best interests of the Company, its customers and its shareowners and to take such other action as the Board may determine appropriate.  Accordingly, to assure the Company that it will have the continued dedication of the Employee and the availability of his advice and counsel notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company, and to induce the Employee to remain in the employ of the Company, the Board has determined that it is in the Company 's best interests to provide the Employee with certain benefits in the event of the Employee's termination of employment under the terms and conditions below. 

          2.     Employee's Services During Attempted or Actual Change of Control.   In the event a third party takes any steps designed to effect a Change of Control, the Employee agrees not to effect a Voluntary Termination, and to render the services contemplated in paragraph 1, until the third party has abandoned or terminated efforts to effect a Change of Control or until three months after an actual Change of Control has occurred.

          3.     Payment of Severance Amount.  In the event of an Involuntary Termination of the Employee's employment by the Company or any subsidiary or successor of the Company occurring within three years after a Change of Control, then the Company shall pay the Employee a lump sum amount equal to the Severance Amount, payable within 15 business days after the Termination Date, plus such other benefits as may be provided in subsequent provisions of this Agreement.

          4.     Definitions.  All the terms defined in this paragraph 4 shall have the meanings given below throughout this Agreement.

               (a)"Annual Salary" shall, as determined on the Termination Date, be equal to the greater of:

                    i)the highest annual compensation (including base salary and bonus) paid or payable to the Employee with respect to any twelve (12) consecutive month period, as selected by the Employee, during the three years ending with the Termination Date, or

                    ii)the Employee's annual salary plus bonus on the Termination Date.

"Bonus" for the purpose of this definition of Annual Salary shall mean the Executive Incentive Plan (EIP) bonus for the Employee's final year or the average of the bonuses for the three years prior to the Termination Date, whichever is greater.

               (b)"Change in Duties" shall mean any one or more of the following:

                    i)a significant change in the nature or scope of the Employee's authorities or duties from those applicable to her/him immediately prior to the date on which a Change of Control occurs;

                    ii)a reduction in the Employee's Annual Salary from that provided to her/him immediately prior to the date on which a Change of Control occurs;

                    iii)     a diminution in the Employee's eligibility to participate in bonus, incentive award and other compensation plans which provide opportunities to receive compensation, from the greater of:

the opportunities provided by the Company (including its subsidiaries) for executives with comparable duties; or

the opportunities under any such plans under which she/he was participating immediately prior to the date on which a Change of Control occurs;

                    iv)     a diminution in employee benefits (including but not limited to medical, dental, life insurance and long-term disability plans) and perquisites applicable to the Employee, from the greater of:

the employee benefits and perquisites provided by the Company (including its subsidiaries), to executives with comparable duties; or

the employee benefits and perquisites to which the Employee was entitled immediately prior to the date on which a Change of Control occurs;

                    v)     a change in the location of the Employee's principal place of employment by the Company (including its subsidiaries) by more than fifty miles from the location where she/he was principally employed immediately prior to the date on which a Change of Control occurs; or

                    vi)     a reasonable determination by the Employee that, as a result of a Change of Control and a change in circumstances thereafter significantly affecting her/his position, she/he is unable to exercise the authorities, powers, functions or duties attached to her/ his position immediately prior to the date on which a Change of Control occurs.

               (c)     a "Change of Control" shall be deemed to have occurred if:

                    i)     any "person," including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"), is or becomes the beneficial owner, directly or indirectly, of securities of RGS representing 20 percent or more of the combined voting power of RGS's then outstanding Voting Securities;

                    ii)     as a result of, or in connection with, any tender offer or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of RGS before the transaction shall cease to constitute a majority of the Board of Directors of RGS  or any successor to RGS;

                    iii)     RGS is merged or consolidated with another corporation and as a result of the merger or consolidation less than 50 percent of the outstanding Voting Securities of the surviving or resulting corporation (or ultimate parent of such surviving or resulting corporation) shall then be owned in the aggregate by the stockholders of RGS immediately prior to such merger or consolidation, other than (x) affiliates within the meaning of the Exchange Act or (y) any party to the merger or consolidation;

                    iv)     a tender offer or exchange offer is made and consummated for the ownership of securities of RGS representing 20 percent or more of the combined voting power of RGS's then outstanding Voting Securities; or

                    v)     RGS transfers substantially all of its assets to another corporation, which is not a wholly owned subsidiary of RGS.

               (d)     "Involuntary Termination" shall mean any termination which:

                    i)     does not result from a resignation by the Employee (other than a resignation pursuant to clause ii of this subparagraph (d)), or

                    ii)     results from a resignation following any Change in Duties; provided, however, the term "Involuntary Termination" shall not include:

                         x.     a Termination for Cause, or

                         y.     any termination as a result of death, disability, or normal retirement pursuant to a retirement plan to which the Employee was subject prior to any Change of Control.

               (e)     "Severance Amount" is equal to [two (2) times the Employee's Annual Salary, i.e. for a period of 24 months][one (1) time the Employee's Annual Salary, i.e. for a period of 12 months].

               (f)     "Termination for Cause" shall mean only a termination as a result of fraud, misappropriation of, or intentional material damage to, the property or business of the Company (including its subsidiaries), or commission of a felony by the Employee.

               (g)     "Voluntary Termination" shall mean any termination, which is not:

                    i)     an Involuntary Termination;

                    ii)     a Termination for Cause; or

                    iii)     the result of death, disability, or normal retirement pursuant to a retirement plan to which the Employee was subject prior to any Change of Control.

               (h)     "Voting Securities" shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

               (i)     "Termination Date" shall mean the date on which the Employee's employment terminates.

          5.     Additional Payment for Excise Tax on Golden Parachute Payment.    It is anticipated that the payments to be made and benefits to be provided to the Employee under this Agreement and other agreements (collectively, the "Change of Control Amounts") may become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), on account of "excess parachute payments" as defined in Section 280G of the Code.  In the event such excise tax is payable, the Company shall pay to the Employee, in addition to the amounts payable pursuant to paragraph 3 of this Agreement and any other Change of Control Amounts, an additional amount which, together with any federal, state or local excise or income taxes payable by the Employee on such additional amount, will provide the Employee with a sum on a net after-tax basis equal to the amounts he would have received if the excise tax were not applicable to the Change of Control Amounts.  The determination of the amount to be paid hereunder shall be made at the expense of the Company by the independent certified public accounting firm acting as auditors for the Company on the date of a Change of Control (or another accounting firm designated by that firm).

          6.     Other Benefits.  

               (a)  Health and Death Benefits.  From the date benefits become payable under paragraph 3 through the end of the number of months used in determining the Employee's Severance Amount in paragraph 4(e), the Company shall continue to provide the Employee with life, accident, death and health insurance plans and benefits to the same extent such benefits are provided during this period to active employees holding positions equivalent to the position of the Employee immediately prior to his termination.  The Company's share of the cost of providing such benefits shall be the same as its share of the benefit costs for providing such benefits to other employees holding positions equivalent to the position the Employee held immediately prior to his termination.

               (b)  Outplacement and Relocation. The Company shall also reimburse the Employee the aggregate expenses the Employee incurs for outplacement assistance or relocation expenses in order to pursue other business opportunities within two (2) years of the Termination Date which are not reimbursed by another employer.

               (c)  Pension.  To the extent that any Company supplemental executive retirement plan benefit formula(s) takes into account service, age and annual compensation, the Employee shall be given credit under the formula(s) for (i) the same number of months used in determining the Employee's Severance Amount in paragraph 4(e), and (ii) annual compensation increases equal to the highest base salary increases received by the Employee in the three years prior to the Termination Date and bonus payouts at target.

               (d)  Benefits of General Applicability.  The Employee shall remain eligible to receive other Company benefits that apply by their terms to persons who terminate employment with RGS.

               (e)     Incentive Compensation.  Any awards previously made shall vest on the Termination Date and be computed and paid notwithstanding any contrary plan provisions provided that, if the plan providing for any such award stipulates an earlier date for vesting, such provision shall control.  

          7.     Legal Fees.  The Company shall pay all legal fees and expenses the Employee may incur as a result of any litigation brought to enforce or interpret any provision of this Agreement, regardless of outcome.

          8.     Obligations of Employee.   Employee agrees that upon termination of employment he will turn over to the Company all materials and documents, whether written or electronic, that pertain to the operation, products, services, processes, plans, business or customers of the Company.  Employee also agrees not to disclose to any person any confidential information of the Company.  If the Employee fails to return materials required to be returned or discloses confidential information of the Company to any person, all payments and benefits still remaining to be paid or offered to the Employee under this Agreement shall be forfeited.

          9.     Notices.  Notices and all other communications under this Agreement shall be in writing and shall be deemed given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company, to:

     RGS Energy Group, Inc.

     89 East Avenue

     Rochester, New York  14649-0001

     ATTENTION:  Vice President, Human Resource Services

If to the Employee, to:

     __________________________

     __________________________

     __________________________

or to such other address as either party may furnish to the other in writing, except that a notice of a change of address shall be effective only upon receipt.

          10.     Applicable Law.  This contract is entered into under, and shall be governed for all purposes by, the laws of the State of New York.

          11.     Severability.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.

          12.     Withholding of Taxes.  The Company shall withhold from any benefits payable under this Agreement all Federal, state, city or other taxes as may be required pursuant to any law, governmental regulation or ruling.

          13.     Not an Employment Agreement.  Nothing in this Agreement shall give the Employee any rights (or impose any obligations to continued employment by the Company or any subsidiary or successor of the Company), nor shall it give the Company any rights (or impose any obligations) for the continued performance of duties by the Employee for the Company or any subsidiary or successor of the Company.

          14.     No Assignment.  The Employee's right to receive payments or benefits under this Agreement shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this paragraph, the Company shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

          15.     Successors.  This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns (including, without limitation, any company into or with which the Company may merge or consolidate).  The Company agrees that it will not effect the sale or other disposition of all or substantially all of its assets unless either (i) the person or entity acquiring the assets or a substantial portion of the assets shall expressly assume by an instrument in writing all duties and obligations of the Company under this Agreement, or (ii) the Company shall provide, through the establishment of a separate reserve for the payment in full of all amounts which are, or may reasonably be expected to become, payable to the Employee under this Agreement.

          16.     Other Benefits and Compensation.  The compensation and benefits provided hereunder shall not limit or reduce compensation or benefits otherwise payable to Employee pursuant to arrangements between Employee and the Company, unless specific reference to any such reduction or limit is made herein.  It is not intended that this Agreement constitute a waiver of rights under federal, state or local law, including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act and the Employee Retirement Income Security Act of 1974.

          17.     Payment Obligations Absolute.  The Company's obligation to pay the Employee the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right that the Company may have against him or anyone else.  All amounts payable by the Company hereunder shall be paid without notice or demand.  Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Employee or from whosoever may be entitled thereto, for any reason whatsoever.

          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of __________________________.

 
RGS ENERGY GROUP, INC.

By: __________________________________

Its: __________________________________

ROCHESTER GAS AND ELECTRIC 

CORPORATION

By: __________________________________

Its: __________________________________

__________________________

       Employee

RGS ENERGY GROUP, INC.

ROCHESTER GAS AND ELECTRIC CORPORATION

June 19, 2002

Name

ROCHESTER GAS AND ELECTRIC CORPORATION

89 East Avenue

Rochester, NY 14649

Dear ___________:

     Reference is made to the Severance Agreement made effective as of April 26, 2000, as amended by the letter agreement dated February 21, 2001 (the "Current Severance Agreement"), by and among you, RGS Energy Group, Inc. (the "Company") and Rochester Gas and Electric Corporation (the "Subsidiary").  This letter is intended to clarify certain aspects and provisions of the Current Severance Agreement, and, when executed by you, shall constitute an amendment to such agreement.

     Paragraph 3 of the Current Severance Agreement is amended by adding to the end thereof the following:

The actual amount paid shall be reduced by the lump sum value of the portion of this benefit that is payable pursuant to Amendment No. 2 of the Company's Supplemental Retirement Benefit Program.  The amount of the lump sum reduction is listed in Appendix C to the Supplemental Retirement Benefit Program.

     Please execute both copies of this letter in the space provided below and return one fully executed copy to Michael T. Tomaino by June 28, 2002.

RGS ENERGY GROUP, INC.

By: __________________________________

       Thomas S. Richards, Chairman, President,

       and Chief Executive Officer

ROCHESTER GAS AND ELECTRIC CORPORATION

By: _________________________________

       David C. Heiligman, Vice President

       and Corporate Secretary

	
ACKNOWLEDGED AND AGREED:

_______________________________

       [Signature of Employee]     
	

___________________

       [Date]

 

RGS ENERGY GROUP, INC.

ROCHESTER GAS AND ELECTRIC CORPORATION

February 21, 2001

 

Name

Rochester Gas and Electric Corporation

89 East Avenue

Rochester, NY  14649

Dear _______________:

     Reference is made to the Severance Agreement made effective as of April 26, 2000 (the "Current Severance Agreement"), by and among you, RGS Energy Group, Inc. (the "Company") and Rochester Gas and Electric Corporation (the "Subsidiary").  Capitalized terms not otherwise defined in this letter have the same meanings as in the Severance Agreement.  This letter is intended to clarify certain aspects and provisions of the Current Severance Agreement, and, when executed by you, shall constitute an amendment to such agreement.

     1.     Definition of "Annual Salary" Clarified.  Paragraph 4(a) of the Current Severance Agreement is hereby amended by deleting the current text thereof and replacing it with the following:
"Annual Salary" shall, as determined on the Termination Date, be equal to the sum of:
(i)   the greater of (A) the highest base salary paid or payable to the Employee with respect to any twelve (12) consecutive month period, as selected by the Employee, during the three years ending with the Termination Date and (B) the Employee's base salary as in effect on the Termination Date (without regard to any reduction giving rise to a Change in Duties hereunder); and

(ii)   the greater of (A) the Executive Incentive Plan ("EIP") bonus for the Employee's final year of employment and (B) the average of the EIP bonuses for the three years prior to the Termination Date.

     2.     Additional Benefits Upon an Involuntary Termination.  The following language shall be inserted at the beginning of paragraph 6 of the Current Severance Agreement prior to subparagraph (a) thereof:
     In addition to the severance payment provided in paragraph 3 hereof, the Employee shall be entitled to the following benefits in the event of an Involuntary Termination of the Employee's employment by the Company or any subsidiary or successor of the Company occurring within three years after a Change of Control:

     3.     No Rights to Other Severance.  Paragraph 6(d) of the Current Severance Agreement is hereby amended by inserting the following at the end thereof:
; provided, however, that the Employee shall not be entitled to any severance payments or benefits under any severance plan except as provided herein

     4.     Incentive Compensation.  Paragraph 6(e) of the Current Severance Agreement is hereby amended by (a) inserting the term "equity-based" before the word "award" and "awards" where they appear in such paragraph, (b) inserting the parenthetical "(whether granted before, on or following a Change of Control and whether granted by RGS or a successor, parent or other affiliate of RGS)" after the words "previously made" in such paragraph, and (c) inserting the following additional sentence at the end thereof.
The Employee shall be paid a pro rata bonus for the year of termination under the EIP or any other annual incentive bonus plan then applicable to the Employee, which pro rata bonus shall be determined following the close of the relevant fiscal year based on actual performance for such year and shall be paid at the same time as bonuses are generally paid to other executives of the Company; provided, that such pro rata bonus shall be reduced but not below zero, by the amount of any bonus under any such plan previously paid to the Employee with respect to the same year.

     Please execute both copies of this letter in the space provided below and return one fully executed copy to Michael T. Tomaino by February 23, 2001.

RGS ENERGY GROUP, INC.

By:  _____________________________

       Name:  Michael T. Tomaino

       Title:    Senior Vice President and

                   General Counsel

ROCHESTER GAS AND ELECTRIC 

CORPORATION

By:  _____________________________

       Name:  David C. Heiligman

       Title:   Vice President and 

                   Corporate Secretary

ACKNOWLEDGED AND AGREED:

______________________________<Page>

                                                                    EXHIBIT 10.1

                       INVESTORS FINANCIAL SERVICES CORP.

                      AMENDED AND RESTATED 1995 STOCK PLAN

     1.   PURPOSE. The purpose of the Investors Financial Services Corp. 1995
Stock Plan (the "Plan") is to encourage key employees of Investors Financial
Services Corp. (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 by a committee
     appointed by the Board (the "Committee"); provided that the Plan shall be
     administered: (i) to the extent required by applicable regulations under
     Section 162(m) of the Code, by two or more "outside directors" (as defined
     in applicable regulations thereunder) and (ii) to the extent required by
     Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or any
     successor provision ("Rule 16b-3"), by a disinterested administrator or
     administrators within the meaning of Rule 16b-3. 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. 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.

<Page>

          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. Subject to the provisions
     of paragraph 2(A) above, if applicable, Stock Rights may be granted to
     members of the Board. All grants of Stock Rights to members of the Board
     shall in all other respects be made in accordance with the provisions of
     this Plan applicable to other eligible persons. Consistent with the
     provisions of Paragraph 2(A) above, 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.

     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 $.01 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 7,640,000, subject to adjustment as provided in paragraph 13. If any Stock
Right 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 of Common
Stock subject to such Stock Right shall again be available for grants of Stock
Rights under the Plan.

     No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,792,000 shares of Common Stock
under the Plan, subject to adjustment as provided in paragraph 13. 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. If,
in accordance with the Plan, an optionee uses shares of common stock of the
Company to pay the exercise price of an Option, only the number of shares issued
net of shares tendered in payment of such exercise price shall be deemed to be
issued for purposes of determining the maximum number of shares available under
the Plan.

     5.   GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after August 15, 1995 and prior to August 1, 2005. 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. Options granted under

<Page>

the Plan are intended to qualify as performance-based compensation to the extent
required under Treasury Regulation Section 1.162-27.

     6.   MINIMUM OPTION PRICE; ISO LIMITATIONS.

          A.   PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. 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 shall in
     no event be less than the minimum legal consideration required therefor
     under the laws of any jurisdiction in which the Company or its successors
     in interest may be organized.

          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.

          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.

          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.

     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.

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     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) thirty
(30) days 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. 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 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) one year 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 on that date, until the earlier of (i)
     the specified expiration date of the ISO or (ii) one year from the date of
     the termination of the optionee's employment. For the

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     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. Except as set forth below, (i) no Stock Right shall be
transferable by any grantee other than by will or by the laws of descent and
distribution and (ii) Stock Rights may be exercised during the grantee's
lifetime only by the grantee (or, if the grantee is disabled and so long as the
Stock Right remains exercisable, by the grantee's duly appointed guardian or
other legal representative). However, a grantee may transfer (i) a Non-Qualified
Option pursuant to a valid domestic relations order and (ii) a Stock Right other
than an ISO to, or for the benefit of, family members or to other persons for
estate planning purposes. Following any such transfer, any such Stock Right
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and references to a grantee, to the extent
relevant in the context, shall include references to authorized transferees. The
events and consequences of termination of employment set forth in a grantee's
agreement pursuant to which such Stock Right is granted shall continue to be
applied and triggered with reference to the original grantee, following which
the Stock Right shall be exercisable by the transferee only to the extent and
for the periods specified in such agreement.

     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.

          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, sale of all or
     substantially all of the Company's assets or otherwise (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 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, 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) over
     the exercise price thereof.

<Page>

          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.

          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 and
     the per participant limit 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 stockholder 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

<Page>

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.

     15.  TERM AND AMENDMENT OF PLAN. This Plan was originally adopted by the
Board on August 15, 1995, and approved by the sole stockholder of the Company in
August 1995. The Plan shall expire at the end of the day on August 1, 2005
(except as to Options outstanding on that date). 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 benefits accruing to participants
under the Plan may not be materially increased; (c) the requirements as to
eligibility for participation in the Plan may not be materially modified; (d)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may not
be modified; (e) 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); (f) the expiration date of the Plan may
not be extended; and (g) the Board may not take any action which would cause the
Plan to fail to comply with Rule 16b-3. 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 Option
previously granted to such grantee.

     16.  CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS. 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.

     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 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 transfer of a Stock Right, 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

<Page>

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
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
instruments evidencing Options shall be governed by the laws of the Commonwealth
of Massachusetts, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.

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