Document:

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                                                                    EXHIBIT 10.3

                                ORGANIC INC. 1999
                         LONG-TERM STOCK INCENTIVE PLAN

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                                ORGANIC INC. 1999
                         LONG-TERM STOCK INCENTIVE PLAN

                                    SECTION 1
                                     GENERAL

        1.1. Purpose. The Organic Inc. 1999 Long-Term Stock Incentive Plan (the
"Plan") has been established by Organic Inc. (the "Company") to (i) attract and
retain persons eligible to participate in the Plan; (ii) motivate Participants,
by means of appropriate incentives, to achieve long-range goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify Participants' interests with those
of the Company's other shareholders through compensation that is based on the
Company's common stock; and thereby promote the long-term financial interest of
the Company and the Subsidiaries, including the growth in value of the Company's
equity and enhancement of long-term shareholder return.

        1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Individuals (including transferees of Eligible Individuals to the
extent the transfer is permitted by the Plan and the applicable Award
Agreement), those persons who will be granted one or more Awards under the Plan,
and thereby become "Participants" in the Plan.

        1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 8 of the Plan).

                                    SECTION 2
                                OPTIONS AND SARS

        2.1.  Definitions.

(a)     The grant of an "Option" entitles the Participant to purchase shares of
        Stock at an Exercise Price established by the Committee. Any Option
        granted under this Section 2 may be either an incentive stock option (an
        "ISO") or a non-qualified option (an "NQO"), as determined in the
        discretion of the Committee. An "ISO" is an Option that is intended to
        satisfy the requirements applicable to an "incentive stock option"
        described in section 422(b) of the Code. An "NQO" is an Option that is
        not intended to be an "incentive stock option" as that term is described
        in section 422(b) of the Code.

(b)     A stock appreciation right (an "SAR") entitles the Participant to
        receive, in cash or Stock (as determined in accordance with subsection
        2.5), value equal to (or otherwise based on)

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        the excess of: (a) the Fair Market Value of a specified number of shares
        of Stock at the time of exercise; over (b) an Exercise Price established
        by the Committee.

        2.2. Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; provided that, for NQOs and SARs, the Exercise Price shall not
be less than 85% of the Fair Market Value of a share of Stock on the date of
grant, and for ISOs, the Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Stock on the date of grant; and further provided that
the Exercise Price of for an Option or SAR with respect to a share of Stock
shall not be less than the par value of a share of Stock.

        2.3. Exercise. An Option and an SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee.

        2.4. Payment of Option Exercise Price. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:

(a)     Subject to the following provisions of this subsection 2.4, the full
        Exercise Price for shares of Stock purchased upon the exercise of any
        Option shall be paid at the time of such exercise (except that, in the
        case of an exercise arrangement approved by the Committee and described
        in paragraph 2.4(c), payment may be made as soon as practicable after
        the exercise).

(b)     The Exercise Price shall be payable in cash or by tendering, by either
        actual delivery of shares or by attestation, shares of Stock acceptable
        to the Committee, and valued at Fair Market Value as of the day of
        exercise, or in any combination thereof, as determined by the Committee.

(c)     The Committee may permit a Participant to elect to pay the Exercise
        Price upon the exercise of an Option by irrevocably authorizing a third
        party to sell shares of Stock (or a sufficient portion of the shares)
        acquired upon exercise of the Option and remit to the Company a
        sufficient portion of the sale proceeds to pay the entire Exercise Price
        and any tax withholding resulting from such exercise.

        2.5. Settlement of Award. Settlement of Options and SARs is subject to
subsection 4.7.

                                    SECTION 3
                               OTHER STOCK AWARDS

        3.1.  Definitions.

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(a)     A "Stock Unit" Award is the grant of a right to receive shares of Stock
        in the future.

(b)     A "Performance Share" Award is a grant of a right to receive shares of
        Stock or Stock Units which is contingent on the achievement of
        performance or other objectives during a specified period.

(c)     A "Performance Unit" Award is a grant of a right to receive a designated
        dollar value amount of Stock which is contingent on the achievement of
        performance or other objectives during a specified period.

(d)     A "Restricted Stock" Award is a grant of shares of Stock, and a
        "Restricted Stock Unit" Award is the grant of a right to receive shares
        of Stock in the future, with such shares of Stock or right to future
        delivery of such shares of Stock subject to a risk of forfeiture or
        other restrictions that will lapse upon the achievement of one or more
        goals relating to completion of service by the Participant, or
        achievement of performance or other objectives, as determined by the
        Committee.

        3.2. Restrictions on Awards. Each Stock Unit Award, Restricted Stock
Award, Restricted Stock Unit Award, Performance Share Award , and Performance
Unit Award shall be subject to such conditions, restrictions and contingencies
as the Committee shall determine.

                                    SECTION 4
                          OPERATION AND ADMINISTRATION

        4.1. Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective as of December 15 (the "Effective Date");
provided, however, that to the extent that Awards are granted under the Plan
prior to its approval by shareholders, the Awards shall be contingent on
approval of the Plan by the shareholders of the Company. The Plan shall only
remain in effect until the 10-year anniversary of the date the Plan is adopted
by the Board or the date the Plan is approved by shareholders, whichever is
earlier.

        4.2. Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:

(a)     The shares of Stock with respect to which Awards may be made under the
        Plan shall be shares currently authorized but unissued or currently held
        or subsequently acquired by the Company as treasury shares, including
        shares purchased in the open market or in private transactions.

(b)     Subject to the following provisions of this subsection 4.2, the maximum
        number of shares of Stock that may be delivered to Participants and
        their beneficiaries under the Plan shall be 3,500,000 shares of Stock,
        plus an annual increase on the first day of each of the Company's fiscal
        years beginning in 2000 and ending in 2009, equal to the lesser of (i)

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        1,000,000 Shares, (ii) four percent (4%) of the Shares outstanding on
        the last day of the immediately preceding fiscal year, or (iii) such
        lesser number of shares as is determined by the Board.

(c)     To the extent provided by the Committee, any Award may be settled in
        cash rather than Stock. To the extent any shares of Stock covered by an
        Award are not delivered to a Participant or beneficiary because the
        Award is forfeited or canceled, or the shares of Stock are not delivered
        because the Award is settled in cash or used to satisfy the applicable
        tax withholding obligation, such shares shall not be deemed to have been
        delivered for purposes of determining the maximum number of shares of
        Stock available for delivery under the Plan.

(d)     If the exercise price of any stock option granted under the Plan is
        satisfied by tendering shares of Stock to the Company (by either actual
        delivery or by attestation), only the number of shares of Stock issued
        net of the shares of Stock tendered shall be deemed delivered for
        purposes of determining the maximum number of shares of Stock available
        for delivery under the Plan.

(e)     Subject to paragraph 4.2(f), the maximum number of shares of Stock that
        may be issued by Options intended to be ISOs shall be 3,500,000 shares.

(f)     In the event of a corporate transaction involving the Company
        (including, without limitation, any stock dividend, stock split,
        extraordinary cash dividend, recapitalization, reorganization, merger,
        consolidation, split-up, spin-off, combination or exchange of shares),
        the Committee may adjust Awards to preserve the benefits or potential
        benefits of the Awards. Action by the Committee may include: (i)
        adjustment of the number and kind of shares which may be delivered under
        the Plan; (ii) adjustment of the number and kind of shares subject to
        outstanding Awards; (iii) adjustment of the Exercise Price of
        outstanding Options and SARs; and (iv) any other adjustments that the
        Committee determines to be equitable.

        4.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:

(a)     Notwithstanding any other provision of the Plan, the Company shall have
        no liability to deliver any shares of Stock under the Plan or make any
        other distribution of benefits under the Plan unless such delivery or
        distribution would comply with all applicable laws (including, without
        limitation, the requirements of the Securities Act of 1933), and the
        applicable requirements of any securities exchange or similar entity.

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(b)     To the extent that the Plan provides for issuance of stock certificates
        to reflect the issuance of shares of Stock, the issuance may be effected
        on a non-certificated basis, to the extent not prohibited by applicable
        law or the applicable rules of any stock exchange.

        4.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan.

        4.5. Grant and Use of Awards. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to a Participant. Awards may be granted
as alternatives to or replacement of awards granted or outstanding under the
Plan, or any other plan or arrangement of the Company or a Subsidiary (including
a plan or arrangement of a business or entity, all or a portion of which is
acquired by the Company or a Subsidiary). Subject to the overall limitation on
the number of shares of Stock that may be delivered under the Plan, the
Committee may use available shares of Stock as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.

        4.6. Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock,
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.

        4.7. Settlement of Awards. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Satisfaction of any such obligations
under an Award, which is sometimes referred to as "settlement" of the Award, may
be subject to such conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest or dividend
equivalents, and may include converting such

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credits into deferred Stock equivalents. Each Subsidiary shall be liable for
payment of cash due under the Plan with respect to any Participant to the extent
that such benefits are attributable to the services rendered for that Subsidiary
by the Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee.

        4.8. Transferability. Awards under the Plan are not transferable except
as designated by the Participant by will or by the laws of descent and
distribution.

        4.9. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.

        4.10. Agreement With Company. An Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in such form of written document as is
determined by the Committee. A copy of such document shall be provided to the
Participant, and the Committee may, but need not require that the Participant
sign a copy of such document. Such document is referred to in the Plan as an
"Award Agreement" regardless of whether any Participant signature is required.

        4.11. Action by Company or Subsidiary. Any action required or permitted
to be taken by the Company or any Subsidiary shall be by resolution of its board
of directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.

        4.12. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.

        4.13.  Limitation of Implied Rights.

(a)     Neither a Participant nor any other person shall, by reason of
        participation in the Plan, acquire any right in or title to any assets,
        funds or property of the Company or any Subsidiary whatsoever,
        including, without limitation, any specific funds, assets, or other
        property which the Company or any Subsidiary, in its sole discretion,
        may set aside in anticipation of a liability under the Plan. A
        Participant shall have only a contractual right to the Stock or amounts,
        if any, payable under the Plan, unsecured by any assets of the Company
        or any Subsidiary, and nothing contained in the Plan shall constitute a

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        guarantee that the assets of the Company or any Subsidiary shall be
        sufficient to pay any benefits to any person.

(b)     The Plan does not constitute a contract of employment, and selection as
        a Participant will not give any participating employee or other
        individual the right to be retained in the employ of the Company or any
        Subsidiary or the right to continue to provide services to the Company
        or any Subsidiary, nor any right or claim to any benefit under the Plan,
        unless such right or claim has specifically accrued under the terms of
        the Plan. Except as otherwise provided in the Plan, no Award under the
        Plan shall confer upon the holder thereof any rights as a shareholder of
        the Company prior to the date on which the individual fulfills all
        conditions for receipt of such rights.

        4.14. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.

                                    SECTION 5
                                CHANGE IN CONTROL

        5.1. Change in Control. Subject to the provisions of paragraph 4.2(f)
(relating to the adjustment of shares), and except as otherwise provided in the
Plan or the Award Agreement reflecting the applicable Award, upon the occurrence
of a Change in Control:

(a)     If a Participant who is employed by the Company or an Affiliate at the
        time of a Change in Control holds one or more outstanding Options, such
        Participant shall be credited with two years of additional vesting
        service for purposes of the vesting of Options (regardless of whether in
        tandem with SARs), and the vesting of any Stock purchased by the
        Participant under an Option.

(b)     If a Participant who is employed by the Company or an Affiliate at the
        time of a Change in Control holds one or more outstanding SARs, such
        Participant shall be credited with two years of additional vesting
        service for purposes of the vesting of SARs (regardless of whether in
        tandem with Options), and the vesting of any cash or stock acquired by
        the Participant under such SAR.

(c)     If a Participant who is employed by the Company or an Affiliate at the
        time of a Change in Control holds one or more of the following Awards:
        Stock Units, Restricted Stock, Restricted Stock Units, or Performance
        Shares, such Participant shall be credited with two years of additional
        vesting service for purposes of the vesting of all such awards.

(d)     If a Participant who is employed by the Company or an Affiliate at the
        time of a Change in Control holds any Option or SAR granted under the
        Plan and prior to the one-year

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        anniversary of the Change in Control such Participant is either (i)
        terminated by the Company for reasons other than Cause or (ii)
        terminates employment for Good Reason, such Participant shall become
        fully vested in any Awards granted under the Plan and shall have the
        greater of (i) 90 days from the date of such termination or (ii) the
        period otherwise specified for exercise after termination had the
        Participant been fully vested in the Awards on the date of termination
        to exercise such Awards; provided, however, that in no event shall the
        Option or SAR be exercisable at a date that is later than the date it
        would have been exercisable if the Participant had remained employed by
        the Company or a Subsidiary.

        5.2. Potential Change in Control. If the Participant's employment is
terminated by the Company without Cause during a Potential Change in Control,
and such date of termination occurs not more than 60 days prior to the
occurrence of a Change in Control, then the Participant shall be entitled to
receive the benefits that he would have received under paragraph 5.1(d),
determined as though his employment was terminated by the Company without Cause
immediately after the Change in Control. A "Potential Change in Control" shall
exist during any period in which the circumstances described in paragraphs (a),
(b), or (c) below exist (provided, however, that a Potential Change in Control
shall cease to exist not later than the occurrence of a Change in Control):

(a)     The Company enters into an agreement, the consummation of which would
        result in the occurrence of a Change in Control, provided that a
        Potential Change in Control described in this paragraph 5.2(a) shall
        cease to exist upon the expiration or other termination of all such
        agreements.

(b)     Any person (including the Company) publicly announces an intention to
        take or to consider taking actions the consummation of which would
        constitute a Change in Control; provided that a Potential Change in
        Control described in this paragraph 5.2(b) shall cease to exist upon the
        withdrawal of such intention, or upon a reasonable determination by the
        Board that there is no reasonable chance that such actions would be
        consummated.

(c)     The Board adopts a resolution to the effect that, for purposes of the
        Plan, a Potential Change in Control exists; provided that a Potential
        Change in Control described in this paragraph 5.2(c) shall cease to
        exist upon a reasonable determination by the Board that the reasons that
        gave rise to the resolution providing for the existence of a Potential
        Change in Control have expired or no longer exist.

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                                    SECTION 6
                                    COMMITTEE

        6.1. Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in a committee (the "Committee")
in accordance with this Section 6. The Committee shall be selected by the Board.
If the Committee does not exist, or for any other reason determined by the
Board, the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.

        6.2. Powers of Committee. The Committee's administration of the Plan
shall be subject to the following:

(a)     Subject to the provisions of the Plan, the Committee will have the
        authority and discretion to select from among the Eligible Individuals
        those persons who shall receive Awards, to determine the time or times
        of receipt, to determine the types of Awards and the number of shares
        covered by the Awards, to establish the terms, conditions, performance
        criteria, restrictions, and other provisions of such Awards, and
        (subject to the restrictions imposed by Section 7) to cancel or suspend
        Awards.

(b)     To the extent that the Committee determines that the restrictions
        imposed by the Plan preclude the achievement of the material purposes of
        the Awards in jurisdictions outside the United States, the Committee
        will have the authority and discretion to modify those restrictions as
        the Committee determines to be necessary or appropriate to conform to
        applicable requirements or practices of jurisdictions outside of the
        United States.

(c)     The Committee will have the authority and discretion to interpret the
        Plan, to establish, amend, and rescind any rules and regulations
        relating to the Plan, to determine the terms and provisions of any Award
        Agreement made pursuant to the Plan, and to make all other
        determinations that may be necessary or advisable for the administration
        of the Plan.

(d)     Any interpretation of the Plan by the Committee and any decision made by
        it under the Plan is final and binding on all persons.

(e)     In controlling and managing the operation and administration of the
        Plan, the Committee shall take action in a manner that conforms to the
        articles and by-laws of the Company, and applicable state corporate law.

        6.3. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.

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        6.4. Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment (or
other provision of services), termination of employment (or cessation of the
provision of services), leave of absence, reemployment and compensation shall be
conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.

                                    SECTION 7
                            AMENDMENT AND TERMINATION

        The Board may, at any time, amend or terminate the Plan, provided that
no amendment or termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; and further provided that adjustments
pursuant to paragraph 4.2(f) shall not be subject to the foregoing limitations
of this Section 7.

                                    SECTION 8
                                  DEFINED TERMS

        In addition to the other definitions contained herein, the following
definitions shall apply:

(a)     Award. The term "Award" shall mean any award or benefit granted under
        the Plan, including, without limitation, the grant of Options, SARs,
        Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit
        Awards, Performance Unit Awards] and Performance Share Awards.

(b)     Board. The term "Board" shall mean the Board of Directors of the
        Company.

(c)     Cause. The term "Cause" shall mean any of the following: (1) the willful
        and continued failure by the Participant to substantially perform his
        duties, other than by reason of his being Disabled (as defined below),
        (2) the willful engaging by the Participant in conduct which is
        demonstrably and materially injurious to the Company or its affiliates,
        (3) conduct by the Participant that involves theft or fraud or,
        dishonesty in connection with his duties, (4) Participant's violation of
        a non-compete or confidentiality agreement, or (5) conviction of felony
        involving moral turpitude.

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(d)     Change in Control. For purposes of the Plan, the term "Change in
        Control" means the occurrence, after an initial public offering of the
        stock of the Company of the events described in any of paragraphs (i),
        (ii), (iii), (iv) or (v) below:

        (i) The acquisition by any individual, entity or group (within the
        meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
        of 1934, as amended (the "Exchange Act") (a "Person") of beneficial
        ownership (within the meaning of Rule 13d-3 promulgated under the
        Exchange Act) of twenty-five percent (25%) or more of either (i) the
        then outstanding shares of common stock of the Company (the "Outstanding
        Company Common Stock"), or (ii) the combined voting power of the then
        outstanding voting securities of the Company entitled to vote generally
        in the election of directors (the "Outstanding Company Voting
        Securities"); provided, however, that for purposes of this subsection
        (i), the following acquisitions shall not constitute a Change in
        Control: (A) any acquisition directly from the Company (excluding any
        acquisition resulting from the exercise of an exercise, conversion or
        exchange privilege unless the security being so exercised, converted or
        exchanged was acquired directly from the Company), (B) any acquisition
        by the Company, (C) any acquisition by an employee benefit plan (or
        related trust) sponsored or maintained by the Company or any corporation
        controlled by the Company (a "Company Plan"), (D) any acquisition by an
        underwriter temporarily holding securities pursuant to an offering of
        such securities; or (E) any acquisition by any corporation pursuant to a
        transaction which complies with subsections (b)(iii)(A), (b)(iii)(B),
        and (b)(iii)(C) of this definition; provided further, that for purposes
        of clause (B), if any Person (other than the Company or any Company
        Plan) shall become the beneficial owner of twenty-five percent (25%) or
        more of the Outstanding Company Common Stock or twenty-five percent
        (25%) or more of the Outstanding Company Voting Securities by reason of
        an acquisition by the Company, and such Person shall, after such
        acquisition by the Company, become the beneficial owner of any
        additional shares of the Outstanding Company Common Stock or any
        additional Outstanding Company Voting Securities (other than pursuant to
        any dividend reinvestment plan or arrangement maintained by the Company)
        and such beneficial ownership is publicly announced, such additional
        beneficial ownership shall constitute a Change in Control.

        (ii) Individuals who, as of the date hereof, constitute the Board of
        Directors of the Company (for purposes of this subsection (b), the
        "Incumbent Board") cease for any reason to constitute at least a
        majority of the Incumbent Board; provided, however, that any individual
        becoming a director subsequent to the date hereof whose election, or
        nomination for election by the Company shareholders, was approved by a
        vote of a least a majority of the directors then comprising the
        Incumbent Board shall be considered as though such individual were a
        member of the Incumbent Board, but excluding, for this purpose, any such
        individual whose initial assumption of office occurs as a result of an
        actual or threatened election contest (as such terms are used in Rule
        14a-11 promulgated

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        under the Exchange Act) or other actual or threatened solicitation of
        proxies or consents by or on behalf of a Person other than the Board of
        Directors of the Company.

        (iii) Consummation, including receipt of any necessary regulatory
        approval, of (i) a reorganization, merger or consolidation involving the
        Company or (ii) the sale or other disposition of more than 50% of the
        operating assets of the Company (determined on a consolidated basis),
        other than in connection with a sale-leaseback or other arrangement
        resulting in the continued utilization of such assets (or the operating
        products of such assets) by the Company (any transaction described in
        part (i) or (ii) being referred to as a "Corporate Transaction");
        excluding, however, a Corporate Transaction pursuant to which all of
        paragraphs (A), (B), and (C) below are applicable:

        (A)     All or substantially of the individuals and entities who are the
                beneficial owners, respectively, of the Outstanding Company
                Common Stock and Outstanding Company Voting Securities
                immediately prior to such Corporate Transaction beneficially
                own, directly or indirectly, more than 60% of, respectively, the
                then outstanding shares of common stock and the combined voting
                power of the then outstanding voting securities entitled to vote
                generally in the election of directors, as the case may be, of
                the corporation resulting from such Corporate Transaction
                (including, without limitation, a corporation which, as a result
                of such transaction, owns the Company or all or substantially
                all of the assets of the Company either directly or through one
                or more subsidiaries) in substantially the same proportions as
                their ownership, immediately prior to such Corporate
                Transaction, of the Outstanding Company Common Stock and
                Outstanding Company Voting Securities, as the case may be.

        (B)     No Person (other than the Company, any Company Plan or related
                trust, the corporation resulting from such Corporate
                Transaction, and any Person which beneficially owned,
                immediately prior to such Corporate Transaction, directly or
                indirectly, twenty-five percent (25%) or more than the
                Outstanding Company Common Stock or the Outstanding Company
                Voting Securities, as the case may be) will beneficially own,
                directly or indirectly, twenty-five percent (25%) or more of,
                respectively, the then outstanding common stock of the
                corporation resulting from such Corporate Transaction or the
                combined voting power of the then outstanding voting securities
                of such corporation.

        (C)     Individuals who were members of the Incumbent Board will
                constitute at least a majority of the members of the board of
                directors of the corporation resulting from such Corporate
                Transaction.

        (iv) A tender offer (for which a filing has been made with the
        Securities and Exchange Commission (the "SEC") which purports to comply
        with the requirements of Section

                                      -12-
<PAGE>   14

        14(d) of the Exchange Act and the corresponding SEC rules) is made for
        the stock of the Company, which has not been negotiated and approved by
        the Board, provided that in case of a tender offer described in this
        subsection (iv), the Change in Control will be deemed to have occurred
        upon the first to occur of (A) any time during the offer period when the
        Person (as defined in subsection (b)(i), above) making the offer
        beneficially owns or has accepted for payment stock of the Company with
        25% or more of the combined voting power of the then Outstanding Company
        Voting Securities or (B) 3 business days before the offer is to
        terminate, unless the offer is withdrawn first, if the Person making the
        offer could own, by the terms of the offer plus any shares beneficially
        owned by that Person, stock with 50% or more of the combined voting
        power of the then Outstanding Company Voting Securities when the offer
        terminates.

        (v) Approval by the shareholders of the Company of a plan of complete
        liquidation or dissolution of the Company.

(e)     Code. The term "Code" means the Internal Revenue Code of 1986, as
        amended. A reference to any provision of the Code shall include
        reference to any successor provision of the Code.

(f)     Disability. The term "Disability" shall mean the inability of the
        Participant, after reasonable accommodation, to continue to perform his
        duties on a full-time basis as a result of mental or physical illness,
        sickness or injury and the Company determines that such disability is of
        a long-term nature.

(g)     Eligible Individual. The term "Eligible Individual" shall mean any
        employee of the Company or a Subsidiary, and any consultant, director,
        or other person providing services to the Company or a Subsidiary. An
        Award may be granted to an individual, in connection with hiring,
        retention or otherwise, prior to the date the employee first performs
        services for the Company or the Subsidiaries, provided that such Awards
        shall not become vested prior to the date the employee first performs
        such services.

(h)     Fair Market Value. For purposes of determining the "Fair Market Value"
        of a share of Stock as of any date, the following rules shall apply,
        consistent with Section 260.140.50 of Title 10 of the California Code of
        Regulations, subject to the following:

        (i) If the Common Stock is listed on any established stock exchange or a
        national market system, including without limitation the Nasdaq National
        Market or the Nasdaq SmallCap, the "Fair Market Value" of a share of
        Stock shall be the closing sales price for such stock (or the closing
        bid, if no sales were reported) as quoted on such system or exchange (or
        the exchange with the greatest volume of trading in Stock) on the last
        market trading day prior to the day of determination, as reported in the
        Wall Street Journal or such other source as the Board deems reliable.

                                      -13-
<PAGE>   15

        (ii) In the absence of an established market for the Stock, the "Fair
        Market Value" shall be determined in good faith by the Board.

(i)     Good Reason. The term "Good Reason" shall mean any of the following
        which occur without the Participant's consent and which are not
        corrected by the Company within 10 days of written notice to the Company
        by the Participant: (1) a diminution of the Participant's duties or the
        assignment to him of duties that are inconsistent in any substantial
        respect with the position, authority or responsibilities associated with
        his position, (2) a reduction in the Participant's salary rate or bonus
        potential; or (3) a relocation of the Participant, that occurs after a
        Change of Control and without the Participant's consent, of over 100
        miles from the Participant's primary employment location as of the date
        of the Change of Control, except for required travel on Company business
        to an extent substantially consistent with the Participant's business
        travel obligations prior to the date of the Change of Control.

(j)     Subsidiaries. The term "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.

(k)     Stock. The term "Stock" shall mean shares of common stock of the
        Company.

                                      -14-
<PAGE>   16

                                ORGANIC INC. 1999
                         LONG-TERM STOCK INCENTIVE PLAN

                                   Appendix A

        Notwithstanding any other provision of the Plan to the contrary, the
following provisions shall be applicable to the Plan:

        1. Exercise Price. With respect to any Option or SAR granted to any
person who possesses more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or Parent (as defined in Code
section 424(e)) of the Company such Option or SAR shall have an exercise price
not less than 110% of the Fair Market Value of a share of Stock on the date of
grant.

        2. Expiration. All Options granted under the Plan shall expire not later
than the 10-year anniversary of the date of grant.

        3. Transferability. Awards granted pursuant to the Plan are not
transferable except by the laws of descent and distribution.

        4. Adjustment. In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reclassification, reorganization,
merger, consolidation, split-up, spin-off, combination or exchange of shares),
the Committee shall adjust Awards to preserve the benefits or potential benefits
of the Awards. Action by the Committee may include: (i) adjustment of the number
and kind of shares which may be delivered under the Plan; (ii) adjustment of the
number and kind of shares subject to outstanding Awards; (iii) adjustment of the
Exercise Price of outstanding Options and SARs; and (iv) any other adjustments
that the Committee determines to be equitable.

        5. Exercisability. Any Option granted under the Plan shall become
exercisable at a rate of at least 20% per year over 5 years from the date the
Option is granted, provided the Participant is employed by the Company at such
time. In addition, if the Participant resigns from employment, or is terminated
by the Company for any reason other than cause (as defined by applicable law),
any Options which have become exercisable prior to the time of such termination,
shall remain exercisable for:

(a)     6 months from the date of such termination if such termination was
        caused by death or Disability; or

(b)     30 days from the date of such termination if such termination was caused
        by reasons other than death or Disability.

                                      -15-
<PAGE>   17
                                  ISO AGREEMENT

        THIS AGREEMENT, entered into as of the Grant Date (as defined in
paragraph 1), by and between the Participant and Organic Inc. (the "Company");

                                WITNESSETH THAT:

        WHEREAS, the Company maintains the Organic Inc. 1999 Long-Term Stock
Incentive Plan (the "Plan"), which is incorporated into and forms a part of this
Agreement, and the Participant has been selected by the committee administering
the Plan (the "Committee") to receive an Incentive Stock Option Award under the
Plan;

        NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:

        1. Terms of Award. The following terms used in this Agreement shall have
the meanings set forth in this paragraph 1:

               (a) The "Participant" is _________________.

               (b) The "Grant Date" is _________________.

               (c) The number of "Covered Shares" shall be _____________ shares
of Stock.

               (d) The "Exercise Price" is $_____________ per share.

Other terms used in this Agreement are defined pursuant to paragraph 13 or
elsewhere in this Agreement.

        2. Award and Exercise Price. This Agreement specifies the terms of the
option (the "Option") granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
paragraph 1. The Option is intended to constitute an "incentive stock option" as
that term is used in Code section 422. To the extent that the aggregate fair
market value (determined at the time of grant) of Shares with respect to which
incentive stock options are exercisable for the first time by the Participant
during any calendar year under all plans of the Company and its Subsidiaries
exceeds $100,000, the options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
nonstatutory stock options. It should be understood that there is no assurance
that the Option will, in fact, be treated as an incentive stock option.

        3. Date of Exercise. Subject to the limitations of this Agreement, and
unless the Participant chooses to exercise the Option prior to vesting pursuant
to paragraph 4, the Option shall become exercisable with respect to 1/4 of the
Covered Shares on the one-year anniversary of the Grant Date (but only if the
Date of Termination has not occurred before the one-year

<PAGE>   18

anniversary). After such one-year anniversary, the Option shall become
exercisable with respect to an additional 1/48 of the Covered Shares on each
subsequent one-month anniversary of the Grant Date (but only if the Date of
Termination has not occurred before the respective one-month anniversary), until
such time as this Option is fully exercisable. Covered Shares as to which the
Option is exercisable in accordance with this paragraph 3 (regardless of whether
the Option has been exercised with respect to those shares) are sometimes
referred to as "vested shares," and Covered Shares as to which the Option is not
exercisable in accordance with this paragraph 3, until such time as the Option
would have become exercisable with respect to those shares (regardless of
whether the Option has been exercised with respect to those shares in accordance
with paragraph 4) are sometimes referred to as "unnvested shares." If the
Participant is employed by the Company or an Affiliate at the time of a Change
in Control holds one or more outstanding Options, such Participant shall be
credited with two years of additional vesting service for purposes of the
vesting of Options, and the vesting of any Stock purchased by the Participant
under an Option.

Notwithstanding the foregoing provisions of this paragraph 3, the Option shall
become fully vested and exercisable upon the Date of Termination, if the Date of
Termination occurs by reason of the Participant's death or Disability. The
Option may be exercised on or after the Date of Termination only as to that
portion of the Covered Shares for which it was exercisable (or became
exercisable) immediately prior to the Date of Termination.

[Notwithstanding any other provision, if a Change in Control occurs, and the
Participant terminates employment with the Company for any reason during the 30
day period which begins on the one-year anniversary of the Change in Control,
any Awards granted to the Participant shall become fully vested and exercisable
on such date of termination, and the Participant shall have the greater of (i)
90 days from the date of such termination or (ii) the period otherwise specified
for exercise after termination had the Participant been fully vested in the
Awards on the date of termination to exercise such Awards.]

        4. Exercise Prior to Vesting. Subject to the provisions of the Option,
the Participant may elect, at any time prior to his Termination Date, to
exercise the Option as to any part or all of the Covered Shares subject to this
Option at any time prior to the Expiration Date, including, without limitation,
a time prior to the date on which the Option would otherwise be exercisable in
accordance with paragraph 3; provided, however, that:

               (a) A partial exercise of the Option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares.

               (b) Any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase
Agreement.

<PAGE>   19

               (c) The Participant shall be required to enter into an Early
Exercise Stock Purchase Agreement in the form provided by the Company with a
vesting schedule that will result in the same vesting as if no early exercise
had occurred.

               (d) The Option shall not be exercisable under this paragraph 4 to
the extent such exercise would cause the aggregate Fair Market Value of any
shares subject to incentive stock options granted by the Company or any
Subsidiary (valued as of their grant date) which would become exercisable for
the first time during any calendar year to exceed $100,000.

The election provided in this paragraph 4 to purchase shares upon the exercise
of the Option prior to the Vesting Date shall cease upon the Participant's
Termination Date.

        5. Expiration. The Option shall not be exercisable after the Company's
close of business on the last business day that occurs prior to the Expiration
Date. The "Expiration Date" shall be earliest to occur of:

               (a) the ten-year anniversary of the Grant Date;

               (b) if the Date of Termination occurs by reason of death,
Disability or Retirement, the one- year anniversary of such Date of Termination;
or

               (c) if the Date of Termination occurs for reasons other than
death, Disability, or Retirement, the 90-day anniversary of such Date of
Termination.

        6. Method of Option Exercise. Subject to the terms of this Agreement and
the Plan, the Option may be exercised in whole or in part by filing a written
notice with the Secretary of the Company at its corporate headquarters prior to
the Company's close of business on the last business day that occurs prior to
the Expiration Date. Such notice shall specify the number of shares of Stock
which the Participant elects to purchase, and shall be accompanied by payment of
the Exercise Price, or a portion of the Exercise Price as specified below if the
Participant elects to use the deferred payment alternative described below in
paragraph 8, for such shares of Stock indicated by the Participant's election.
The Option shall not be exercisable if and to the extent the Company determines
that such exercise would violate applicable state or Federal securities laws or
the rules and regulations of any securities exchange on which the Stock is
traded. If the Company makes such a determination, it shall use all reasonable
efforts to obtain compliance with such laws, rules and regulations. In making
any determination hereunder, the Company may rely on the opinion of counsel for
the Company.

        7. Payment of Exercise Price. Payment of the Exercise Price may be made
by any of the following methods or any combination thereof,

               (a) By cash or by check payable to the Company;

               (b) Except as otherwise provided by the Committee before the
Option is exercised and provided that the Company's common stock is publicly
traded and quoted regularly in the Wall Street Journal, by delivery of shares of
Stock owned by the Participant and

<PAGE>   20

acceptable to the Committee having an aggregate Fair Market Value (valued as of
the date of exercise) that is equal to the amount of cash that would otherwise
be required; or

               (c) By authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.

        8. Deferral Payment Alternative. Provided that the Exercise Price for
the installment, or portion thereof, being purchased exceeds $500, the
Participant may pay the Exercise Price pursuant to the deferred payment
alternative as follows:

               (a) Not less than twenty-five percent (25%) of the aggregate
Exercise Price shall be due at the time of exercise, not less than twenty-five
percent (25%) of said Exercise Price, plus accrued interest, shall be due each
year after the date of exercise, and final payment of the remainder of the
Exercise Price, plus accrued interest, shall be due three (3) years from date of
exercise or, at the Company's election, upon the Participant's Termination Date;

               (b) Interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement; and

               (c) In order to elect the deferred payment alternative, the
Participant must, as a part of his written notice of exercise, give notice of
the election of this payment alternative and, in order to secure the payment of
the deferred Exercise Price to the Company hereunder, if the Company so
requests, the Participant must tender to the Company a promissory note and a
security agreement covering the purchased shares, both in form and substance
satisfactory to the Company, or such other or additional documentation as the
Company may request.

        9. Limit on Stock Sales. Any shares that a Participant acquires as a
result of the exercise of the Option shall be subject to the following
restrictions regarding sale or transfer:

               (a) The Participant must notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the shares of the
Stock issued upon exercise of this Option that occurs within two (2) years after
the date of the Grant Date or within one (1) year after such shares of Stock are
transferred upon exercise of the Option; and

               (b) The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that the Participant
not sell or otherwise transfer or dispose of any shares of Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. The Participant further agrees that the
Company may impose stop-transfer

<PAGE>   21

instructions with respect to securities subject to the foregoing restrictions
until the end of such period.

        10. Right of First Refusal by the Company. The Participant shall not
sell, assign, pledge or in any manner transfer any of the shares of Stock or any
right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the following requirements:

               (a) If the Participant desires to sell or otherwise transfer any
of its shares of stock acquired upon exercise of the Option in an "arms-length"
transaction, then the Participant shall first give written notice thereof to the
Company. The notice shall name the proposed transferee and state the number of
shares to be transferred, the proposed consideration, and all other terms and
conditions of the proposed transfer. (b) For thirty (30) days following receipt
of such notice, the Company shall have the option to purchase all (but not less
than all) of the shares specified in the notice at the price and upon the terms
set forth in such notice; provided, however, that, with the consent of the
Participant, the Company shall have the option to purchase a lesser portion of
the shares of Stock specified in said notice at the price and upon the terms set
forth therein. In the event of a gift, property settlement or other transfer
which would not be considered to have been made on an "arms length" basis and in
which the proposed transferee is not paying the full price for the shares, the
price shall be deemed to be the Fair Market Value of the stock at such time as
determined in good faith by the Board. In the event the Company elects to
purchase all of the shares or, with consent of the Participant, a lesser portion
of the shares, it shall give written notice to the transferring Participant of
its election and settlement for said shares shall be made as provided below in
paragraph (d).

               (c) The Company may assign its rights hereunder.

               (d) In the event the Company and/or its assignee(s) elect to
acquire any of the shares of the transferring Participant as specified in said
transferring Participant's notice, the Secretary of the Company shall so notify
the transferring Participant and settlement thereof shall be made in cash within
thirty (30) days after the Secretary of the Company receives said transferring
Participant's notice; provided that if the terms of payment set forth in said
transferring Participant's notice were other than cash against delivery, the
Company and/or its assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring Participant's notice.

               (e) In the event the Company and/or its assignee(s) do not elect
to acquire all of the shares specified in the transferring Participant's notice,
said transferring Participant may, within the sixty (60)-day period following
the expiration of the option rights granted to the Company and/or its
assignee(s) herein, transfer the shares specified in said transferring
Participant's notice which were not acquired by the Company and/or its
assignee(s) as specified in said transferring Participant's notice.

<PAGE>   22

               (f) Notwithstanding anything to the contrary contained herein,
the following transaction shall be exempt from the provisions of this paragraph
10: an Participant's bona fide pledge or mortgage of any shares with a
commercial lending institution, provided that any subsequent transfer of said
shares by said institution shall be conducted in the manner set forth in this
paragraph 10. In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this paragraph
10, and there shall be no further transfer of such stock except in accord with
this paragraph 10.

               (g) The provisions of this paragraph 10 may be waived with
respect to any transfer either by the Company, upon duly authorized action of
its Board, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the Company (excluding the votes
represented by those shares to be transferred by the transferring Participant).

               (h) Any sale or transfer, or purported sale or transfer, of
securities of the Company shall be null and void unless the terms, conditions
and provisions of this paragraph 10 are strictly observed and followed.

               (i) The foregoing right of first refusal shall terminate upon the
date securities of the Company are first offered to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933.

               (j) The certificates representing shares of stock of the Company
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:

               "The shares represented by this Certificate are subject to a
               right of first refusal option in favor of the Company and/or its
               Assignee(s)."

        11. Withholding. All deliveries and distributions under this Agreement
are subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Participant already owns, or
to which the Participant is otherwise entitled under the Plan.

        12. Transferability. The Option is not transferable other than as
designated by the Participant by will or by the laws of descent and
distribution, and during the Participant's life, may be exercised only by the
Participant.

        13. Definitions. For purposes of this Agreement, the terms used in this
Agreement shall be subject to the following:

               (a) Change in Control. The term "Change in Control" shall be
defined as that term is defined in the Plan.

               (b) Date of Termination. The "Date of Termination" shall be the
first day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a

<PAGE>   23

termination of employment shall not be deemed to occur by reason of a transfer
of the Participant between the Company and a Subsidiary or between two
Subsidiaries; and further provided that the Participant's employment shall not
be considered terminated while the Participant is on a leave of absence from the
Company or a Subsidiary approved by the Participant's employer. If, as a result
of a sale or other transaction, the Participant's employer ceases to be a
Subsidiary (and the Participant's employer is or becomes an entity that is
separate from the Company), and the Participant is not, at the end of the 30-day
period following the transaction, employed by the Company or an entity that is
then a Subsidiary, then the occurrence of such transaction shall be treated as
the Participant's Date of Termination caused by the Participant being discharged
by the employer.

               (c) Disability. Except as otherwise provided by the Committee,
the Participant shall be considered to have a "Disability" during the period in
which the Participant is unable, by reason of a medically determinable physical
or mental impairment, to engage in any substantial gainful activity, which
condition, in the opinion of a physician selected by the Committee, is expected
to have a duration of not less than 120 days.

               (d) Retirement. "Retirement" of the Participant shall mean, with
the approval of the Committee, the occurrence of the Participant's Date of
Termination on or after the date the Participant attains age 55.

               (e) Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan is similarly
used in this Agreement.

        14. Whole Shares. This Option may only be exercised for whole shares. In
lieu of issuing a fraction of a share upon any exercise of the Option, resulting
from an adjustment of the Option pursuant to paragraph 4.2(f) of the Plan or
otherwise, the Company will be entitled to pay to the Participant an amount
equal to the Fair Market Value of such fractional share.

        15. Heirs and Successors. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business. If any
rights exercisable by the Participant or benefits deliverable to the Participant
under this Agreement have not been exercised or delivered, respectively, at the
time of the Participant's death, such rights shall be exercisable by the
Designated Beneficiary, and such benefits shall be delivered to the Designated
Beneficiary, in accordance with the provisions of this Agreement and the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the Participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant. If a
deceased Participant designates a beneficiary and the Designated Beneficiary
survives the Participant but dies before the Designated Beneficiary's exercise
of all rights under this Agreement or before the complete distribution of
benefits to the

<PAGE>   24

Designated Beneficiary under this Agreement, then any rights that would have
been exercisable by the Designated Beneficiary shall be exercised by the legal
representative of the estate of the Designated Beneficiary, and any benefits
distributable to the Designated Beneficiary shall be distributed to the legal
representative of the estate of the Designated Beneficiary.

        16. Administration. The authority to manage and control the operation
and administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan. Any interpretation of the Agreement by the Committee and
any decision made by it with respect to the Agreement is final and binding on
all persons.

        17. Plan Governs. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which may be obtained by the Participant from the office of the
Secretary of the Company; and this Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

        18. Not An Employment Contract. The Option will not confer on the
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate or modify
the terms of such Participant's employment or other service at any time.

        19. Notices. Any written notices provided for in this Agreement or the
Plan shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail. Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt. Notices shall be
directed, if to the Participant, at the Participant's address indicated by the
Company's records, or if to the Company, at the Company's principal executive
office.

        20. No Rights As Shareholder. The Participant shall not have any rights
of a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

        21. Amendment. This Agreement may be amended by written agreement of the
Participant and the Company, without the consent of any other person.

<PAGE>   25

        IN WITNESS WHEREOF, the Participant has executed this Agreement, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.

                                            Participant

                                            ------------------------------------

                                            Organic Inc.

                                            By:
                                               ---------------------------------
                                            Its:
                                                --------------------------------

<PAGE>   26

                                  NQO AGREEMENT

        THIS AGREEMENT, entered into as of the Grant Date (as defined in
paragraph 1), by and between the Participant and Organic Inc. (the "Company");

                                WITNESSETH THAT:

        WHEREAS, the Company maintains the Organic Inc. 1999 Long-Term Stock
Incentive Plan (the "Plan"), which is incorporated into and forms a part of this
Agreement, and the Participant has been selected by the committee administering
the Plan (the "Committee") to receive a Non-Qualified Stock Option Award under
the Plan;

        NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:

        1. Terms of Award. The following terms used in this Agreement shall have
the meanings set forth in this paragraph 1:

               (a) The "Participant" is ________________.

               (b) The "Grant Date" is ________________.

               (c) The number of "Covered Shares" shall be _____________ shares
of Stock.

               (d) The "Exercise Price" is $_____________ per share.

Other terms used in this Agreement are defined pursuant to paragraph 13 or
elsewhere in this Agreement.

        2. Award and Exercise Price. This Agreement specifies the terms of the
option (the "Option") granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
paragraph 1. The Option is not intended to constitute an "incentive stock
option" as that term is used in Code section 422.

        3. Date of Exercise. Subject to the limitations of this Agreement, and
unless the Participant chooses to exercise the Option prior to vesting pursuant
to paragraph 4, the Option shall become exercisable with respect to 1/4 of the
Covered Shares on the one-year anniversary of the Grant Date (but only if the
Date of Termination has not occurred before the one-year anniversary). After
such one-year anniversary, the Option shall become exercisable with respect to
an additional 1/48 of the Covered Shares on each subsequent one-month
anniversary of the Grant Date (but only if the Date of Termination has not
occurred before the respective one-month anniversary), until such time as this
Option is fully exercisable. Covered Shares as to which the Option is
exercisable in accordance with this paragraph 3 (regardless of whether the
Option has been exercised with respect to those shares) are sometimes referred
to as "vested shares," and

<PAGE>   27

Covered Shares as to which the Option is not exercisable in accordance with this
paragraph 3, until such time as the Option would have become exercisable with
respect to those shares (regardless of whether the Option has been exercised
with respect to those shares in accordance with paragraph 4) are sometimes
referred to as "unnvested shares." If the Participant is employed by the Company
or an Affiliate at the time of a Change in Control holds one or more outstanding
Options, such Participant shall be credited with two years of additional vesting
service for purposes of the vesting of Options, and the vesting of any Stock
purchased by the Participant under an Option.

Notwithstanding the foregoing provisions of this paragraph 3, the Option shall
become fully vested and exercisable upon the Date of Termination, if the Date of
Termination occurs by reason of the Participant's death or Disability. The
Option may be exercised on or after the Date of Termination only as to that
portion of the Covered Shares for which it was exercisable (or became
exercisable) immediately prior to the Date of Termination.

[Notwithstanding any other provision, if a Change in Control occurs, and the
Participant terminates employment with the Company for any reason during the 30
day period which begins on the one-year anniversary of the Change in Control,
any Awards granted to the Participant shall become fully vested and exercisable
on such date of termination, and the Participant shall have the greater of (i)
90 days from the date of such termination or (ii) the period otherwise specified
for exercise after termination had the Participant been fully vested in the
Awards on the date of termination to exercise such Awards.]

        4. Exercise Prior to Vesting. Subject to the provisions of the Option,
the Participant may elect, at any time prior to his Termination Date, to
exercise the Option as to any part or all of the Covered Shares subject to this
Option at any time prior to the Expiration Date, including, without limitation,
a time prior to the date on which the Option would otherwise be exercisable in
accordance with paragraph 3; provided, however, that:

               (a) A partial exercise of the Option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares.

               (b) Any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase
Agreement.

               (c) The Participant shall be required to enter into an Early
Exercise Stock Purchase Agreement in the form provided by the Company with a
vesting schedule that will result in the same vesting as if no early exercise
had occurred.

The election provided in this paragraph 4 to purchase shares upon the exercise
of the Option prior to the Vesting Date shall cease upon the Participant's
Termination Date.

<PAGE>   28

        5. Expiration. The Option shall not be exercisable after the Company's
close of business on the last business day that occurs prior to the Expiration
Date. The "Expiration Date" shall be earliest to occur of:

               (a) the ten-year anniversary of the Grant Date;

               (b) if the Date of Termination occurs by reason of death,
Disability or Retirement, the one- year anniversary of such Date of Termination;
or

               (c) if the Date of Termination occurs for reasons other than
death, Disability, or Retirement, the 90-day anniversary of such Date of
Termination.

        6. Method of Option Exercise. Subject to the terms of this Agreement and
the Plan, the Option may be exercised in whole or in part by filing a written
notice with the Secretary of the Company at its corporate headquarters prior to
the Company's close of business on the last business day that occurs prior to
the Expiration Date. Such notice shall specify the number of shares of Stock
which the Participant elects to purchase, and shall be accompanied by payment of
the Exercise Price, or a portion of the Exercise Price as specified below if the
Participant elects to use the deferred payment alternative described below in
paragraph 8, for such shares of Stock indicated by the Participant's election.
The Option shall not be exercisable if and to the extent the Company determines
that such exercise would violate applicable state or Federal securities laws or
the rules and regulations of any securities exchange on which the Stock is
traded. If the Company makes such a determination, it shall use all reasonable
efforts to obtain compliance with such laws, rules and regulations. In making
any determination hereunder, the Company may rely on the opinion of counsel for
the Company.

        7. Payment of Exercise Price. Payment of the Exercise Price may be made
by any of the following methods or any combination thereof,

               (a) By cash or by check payable to the Company;

               (b) Except as otherwise provided by the Committee before the
Option is exercised and provided that the Company's common stock is publicly
traded and quoted regularly in the Wall Street Journal, by delivery of shares of
Stock owned by the Participant and acceptable to the Committee having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to
the amount of cash that would otherwise be required; or

               (c) By authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.

        8. Deferral Payment Alternative. Provided that the Exercise Price for
the installment, or portion thereof, being purchased exceeds $500, the
Participant may pay the Exercise Price pursuant to the deferred payment
alternative as follows:

<PAGE>   29

               (a) Not less than twenty-five percent (25%) of the aggregate
Exercise Price shall be due at the time of exercise, not less than twenty-five
percent (25%) of said Exercise Price, plus accrued interest, shall be due each
year after the date of exercise, and final payment of the remainder of the
Exercise Price, plus accrued interest, shall be due three (3) years from date of
exercise or, at the Company's election, upon the Participant's Termination Date;

               (b) Interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement; and

               (c) In order to elect the deferred payment alternative, the
Participant must, as a part of his written notice of exercise, give notice of
the election of this payment alternative and, in order to secure the payment of
the deferred Exercise Price to the Company hereunder, if the Company so
requests, the Participant must tender to the Company a promissory note and a
security agreement covering the purchased shares, both in form and substance
satisfactory to the Company, or such other or additional documentation as the
Company may request.

        9. Limit on Stock Sales. With respect to any shares that a Participant
acquires as a result of the exercise of the Option, the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that the Participant not sell or otherwise transfer
or dispose of any shares of Stock or other securities of the Company during such
period (not to exceed one hundred eighty (180) days) following the effective
date of the registration statement of the Company filed under the Securities Act
as may be requested by the Company or the representative of the underwriters.
The Participant further agrees that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.

        10. Right of First Refusal by the Company. The Participant shall not
sell, assign, pledge or in any manner transfer any of the shares of Stock or any
right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the following requirements:

               (a) If the Participant desires to sell or otherwise transfer any
of its shares of stock acquired upon exercise of the Option in an "arms-length"
transaction, then the Participant shall first give written notice thereof to the
Company. The notice shall name the proposed transferee and state the number of
shares to be transferred, the proposed consideration, and all other terms and
conditions of the proposed transfer.

               (b) For thirty (30) days following receipt of such notice, the
Company shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the Participant, the
Company shall have the option to purchase a lesser portion of the shares of
Stock specified in said notice at the price and upon the terms set forth
therein. In the event of a gift, property settlement or other transfer which
would not be considered to have been made on an

<PAGE>   30

"arms length" basis and in which the proposed transferee is not paying the full
price for the shares, the price shall be deemed to be the Fair Market Value of
the stock at such time as determined in good faith by the Board. In the event
the Company elects to purchase all of the shares or, with consent of the
Participant, a lesser portion of the shares, it shall give written notice to the
transferring Participant of its election and settlement for said shares shall be
made as provided below in paragraph (d).

               (c) The Company may assign its rights hereunder.

               (d) In the event the Company and/or its assignee(s) elect to
acquire any of the shares of the transferring Participant as specified in said
transferring Participant's notice, the Secretary of the Company shall so notify
the transferring Participant and settlement thereof shall be made in cash within
thirty (30) days after the Secretary of the Company receives said transferring
Participant's notice; provided that if the terms of payment set forth in said
transferring Participant's notice were other than cash against delivery, the
Company and/or its assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring Participant's notice.

               (e) In the event the Company and/or its assignee(s) do not elect
to acquire all of the shares specified in the transferring Participant's notice,
said transferring Participant may, within the sixty (60)-day period following
the expiration of the option rights granted to the Company and/or its
assignee(s) herein, transfer the shares specified in said transferring
Participant's notice which were not acquired by the Company and/or its
assignee(s) as specified in said transferring Participant's notice.

               (f) Notwithstanding anything to the contrary contained herein,
the following transaction shall be exempt from the provisions of this paragraph
10: an Participant's bona fide pledge or mortgage of any shares with a
commercial lending institution, provided that any subsequent transfer of said
shares by said institution shall be conducted in the manner set forth in this
paragraph 10. In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this paragraph
10, and there shall be no further transfer of such stock except in accord with
this paragraph 10.

               (g) The provisions of this paragraph 10 may be waived with
respect to any transfer either by the Company, upon duly authorized action of
its Board, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the Company (excluding the votes
represented by those shares to be transferred by the transferring Participant).

               (h) Any sale or transfer, or purported sale or transfer, of
securities of the Company shall be null and void unless the terms, conditions
and provisions of this paragraph 10 are strictly observed and followed.

               (i) The foregoing right of first refusal shall terminate upon the
date securities of the Company are first offered to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933.

<PAGE>   31

               (j) The certificates representing shares of stock of the Company
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:

               "The shares represented by this Certificate are subject to a
        right of first refusal option in favor of the Company and/or its
        Assignee(s)."

        11. Withholding. All deliveries and distributions under this Agreement
are subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Participant already owns, or
to which the Participant is otherwise entitled under the Plan.

        12. Transferability. The Option is not transferable other than as
designated by the Participant by will or by the laws of descent and
distribution, and during the Participant's life, may be exercised only by the
Participant.

        13. Definitions. For purposes of this Agreement, the terms used in this
Agreement shall be subject to the following:

               (a) Change in Control. The term "Change in Control" shall be
defined as that term is defined in the Plan.

               (b) Date of Termination. The "Date of Termination" shall be the
first day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a termination of employment shall not
be deemed to occur by reason of a transfer of the Participant between the
Company and a Subsidiary or between two Subsidiaries; and further provided that
the Participant's employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant's employer. If, as a result of a sale or other transaction,
the Participant's employer ceases to be a Subsidiary (and the Participant's
employer is or becomes an entity that is separate from the Company), and the
Participant is not, at the end of the 30-day period following the transaction,
employed by the Company or an entity that is then a Subsidiary, then the
occurrence of such transaction shall be treated as the Participant's Date of
Termination caused by the Participant being discharged by the employer.

               (c) Disability. Except as otherwise provided by the Committee,
the Participant shall be considered to have a "Disability" during the period in
which the Participant is unable, by reason of a medically determinable physical
or mental impairment, to engage in any substantial gainful activity, which
condition, in the opinion of a physician selected by the Committee, is expected
to have a duration of not less than 120 days.

               (d) Retirement. "Retirement" of the Participant shall mean, with
the approval of the Committee, the occurrence of the Participant's Date of
Termination on or after the date the Participant attains age 55.

<PAGE>   32

               (e) Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan is similarly
used in this Agreement.

        14. Whole Shares. This Option may only be exercised for whole shares. In
lieu of issuing a fraction of a share upon any exercise of the Option, resulting
from an adjustment of the Option pursuant to paragraph 4.2(f) of the Plan or
otherwise, the Company will be entitled to pay to the Participant an amount
equal to the Fair Market Value of such fractional share.

        15. Heirs and Successors. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business. If any
rights exercisable by the Participant or benefits deliverable to the Participant
under this Agreement have not been exercised or delivered, respectively, at the
time of the Participant's death, such rights shall be exercisable by the
Designated Beneficiary, and such benefits shall be delivered to the Designated
Beneficiary, in accordance with the provisions of this Agreement and the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the Participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant. If a
deceased Participant designates a beneficiary and the Designated Beneficiary
survives the Participant but dies before the Designated Beneficiary's exercise
of all rights under this Agreement or before the complete distribution of
benefits to the Designated Beneficiary under this Agreement, then any rights
that would have been exercisable by the Designated Beneficiary shall be
exercised by the legal representative of the estate of the Designated
Beneficiary, and any benefits distributable to the Designated Beneficiary shall
be distributed to the legal representative of the estate of the Designated
Beneficiary.

        16. Administration. The authority to manage and control the operation
and administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan. Any interpretation of the Agreement by the Committee and
any decision made by it with respect to the Agreement is final and binding on
all persons.

        17. Plan Governs. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which may be obtained by the Participant from the office of the
Secretary of the Company; and this Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

        18. Not An Employment Contract. The Option will not confer on the
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would

<PAGE>   33

otherwise have to terminate or modify the terms of such Participant's employment
or other service at any time.

        19. Notices. Any written notices provided for in this Agreement or the
Plan shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail. Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt. Notices shall be
directed, if to the Participant, at the Participant's address indicated by the
Company's records, or if to the Company, at the Company's principal executive
office.

        20. No Rights As Shareholder. The Participant shall not have any rights
of a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

        21. Amendment. This Agreement may be amended by written agreement of the
Participant and the Company, without the consent of any other person.

        IN WITNESS WHEREOF, the Participant has executed this Agreement, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.

                                            Participant

                                            ------------------------------------

                                            Organic Inc.

                                            By:
                                               ---------------------------------
                                            Its:
                                                --------------------------------<PAGE>   1

                                                                   Exhibit 10.12
                                                                   -------------

                             AT HOLDINGS CORPORATION

                           -------------------------

                             STOCKHOLDERS AGREEMENT

                           -------------------------

                                   Dated as of
                                December 17, 1998

<PAGE>   2

                             STOCKHOLDERS' AGREEMENT

         STOCKHOLDERS' AGREEMENT made as of this 17th day of December, 1998, by
and among AT Holdings Corporation, a Delaware corporation (the "Company"), AT
Holdings, LLC, a Nevada limited liability company ("ATLLC"), YC International
Inc., a California corporation ("YCI"), Sunhorizon International, Inc., a
California corporation ("Sunhorizon", and together with ATLLC and YCI, the
"Yamada Investors"), Chase Venture Capital Associates, L.P., a California
limited partnership (together with its permitted transferees the "Equity
Investors"), and David L. Chrencik, Yoichi Fujiki, Paul R. Keen, Michael S.
Lipscomb and Frances S. St. Clair individually and as representatives of all of
the management and director stockholders of the Company who enter into
Acknowledgment and Agreements substantially in the form of ANNEX A to this
Agreement (the "Management Investors"). The Yamada Investors, the Management
Investors and the Equity Investor are sometimes referred to herein collectively
as the "Investors".

         WHEREAS, the Company has entered into a Stock Purchase Agreement dated
as of December 17, 1998, with ATLLC, whereby the Company has agreed to purchase
639,510 shares of the Company's Common Stock, $.001 par value per share (the
"Common Stock") for an aggregate purchase price of approximately $79,590,000
(the "Stock Repurchase");

         WHEREAS, the Company plans to finance the Stock Repurchase partially
from the proceeds of the issuance to the Equity Investor pursuant to the
Preferred Stock and Warrant Purchase Agreement dated as of December 17, 1998,
with the Company (the "Preferred Stock Agreement") of a total of 30,000 shares
of Cumulative Exchangeable Redeemable Preferred Stock, par value $1,000 per
share (the "Preferred Stock") and warrants to acquire 46,025 shares of Common
Stock, including additional warrants issued upon the occurrence of certain
Events of Non-Compliance (as defined in the Preferred Stock Agreement) (the
"Warrants"), for an aggregate purchase price of $30,000,000;

         WHEREAS, it is a condition to the obligations of the Equity Investor to
purchase the Preferred Stock and Warrants pursuant to the Preferred Stock
Agreement that the Investors shall enter into this Stockholders' Agreement;

         WHEREAS, the Company has entered into a Supplemental Stockholders
Agreement of even date herewith with Argo-Tech Corporation and Key Trust Company
of Ohio, N.A., in its capacity as Trustee under the Argo-Tech Corporation
Employee Stock Ownership Plan and Trust (the "Supplemental Stockholders
Agreement"); and

         WHEREAS, the Investors desire to enter into this Stockholders'
Agreement for the purpose of regulating certain aspects of the Investors'
relationships with regard to the Company;

         NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:

<PAGE>   3

SECTION 1. BOARD OF DIRECTORS; GOVERNANCE.
           -------------------------------

         1.1 NUMBER OF DIRECTORS; ELECTION OF NOMINEES. During the term of this
Agreement, each Investor shall take any and all action to elect, and shall use
their best efforts to cause the elected Board of Directors to recommend the
election to the Board of Directors of the Company (the "Board of Directors"),
the following seven (7) individuals:

                  (a)      two (2) individuals designated in writing by the
                           Yamada Investors, not more than one of whom may be an
                           employee of the Company or any of its subsidiaries
                           (the "Yamada Directors"); and

                  (b)      five (5) individuals designated in writing by the
                           Management Investor representatives, not more than
                           two of whom may be employees of the Company or any of
                           its subsidiaries (the "Management Directors").

         1.2 INITIAL DIRECTORS. The initial Board of Directors will consist of:

                        Name                           Category
                        ----                           --------

             1.  Mr. Remi de Chastenet             Yamada Director
             2.  Mr. Robert Nagata                 Yamada Director
             3.  Mr. Thomas Dougherty              Management Director
             4.  Mr. Yoichi Fujiki                 Management Director
             5.  Mr. Michael Lipscomb              Management Director
             6.  Mr. Karl Storrie                  Management Director
             7.  Vacancy                           Management Director

         1.3 VACANCIES. If any vacancy on the Board of Directors occurs during
the term of this Agreement (including the vacancy identified in Section 1.2),
the Investors shall use their best efforts to cause the Directors remaining in
office to recommend and elect to fill such vacancy with a replacement director
in accordance with the provisions of Section 1.1 hereof.

         1.4 INCREASES IN THE NUMBER OF DIRECTORS. Subject to the Company's
governing charter documents, the number of members of the Board of Directors may
be increased from seven (7) persons from time to time at the discretion of the
Board of Directors; PROVIDED, HOWEVER, that such increases shall require the
approval of Directors then in office who number one less than the total
Directors then in office. In the event that the size of the Board of Directors
is increased, the additional members shall be persons who are not employees of
the Company, selected by the Management Investor representatives in a manner
consistent with the provisions of Section 1 hereof.

         1.5 NON-VOTING OBSERVER. The Equity Investor shall have the right to
select one non-voting observer to the Board of Directors, who shall have the
right to attend all Board of Directors and committee meetings.

                                        2

<PAGE>   4

         1.6 VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS.

             (a) The approval of more than 66% of the members of the Board of
Directors shall be required before the Company enters into any Extraordinary
Transaction (as hereinafter defined).

             (b) "Extraordinary Transactions" shall mean the following:

                 (i) the merger or consolidation of the Company with or into
another entity, where (x) the Company is not the survivor or (y) the capital
stock of the Company is converted or exchanged into other securities or cash or
(z) the holders of the Common Stock, immediately prior to such merger or
consolidation do not own at least a majority of the voting power of the Company
immediately following such merger or consolidation;

                 (ii) a sale by the Company of all or substantially all of its
assets, other than to one or more wholly-owned subsidiaries of the Company;

                 (iii) any amendment to the Company's Certificate of
Incorporation or Bylaws; or

                 (iv) the adoption by the Company of a plan of liquidation.

SECTION 2. TRANSFER RESTRICTIONS
           ---------------------

         2.1 GENERAL RESTRICTION.

             (a) Each Investor agrees that neither such Investor nor any of such
Investor's permitted transferees as contemplated below will directly or
indirectly offer, transfer, donate, sell, assign, pledge, hypothecate or
otherwise dispose of (any such action a "Transfer") all or any portion of the
shares of Common Stock of the Company now owned or hereafter acquired by such
Investor or them, except (i) to permitted transferees as permitted by Section
2.1(b) or (ii) in bona fide sales to third parties for value following
compliance with Section 2 (it being understood that so long as the Equity
Investor owns less than 10% of the outstanding shares of Common Stock, bona fide
sales by the Equity Investor to third parties for value shall be permitted under
this Section 2).

             (b) "Permitted Transfers" by an Investor shall be limited to (i)
Transfers by any Investor to its Affiliates (as defined below), (ii) Transfers
upon an Investor's death to the Investor's heirs, executors or administrators or
to a trust under the Investor's will or to the Investor's guardian or
conservator, (iii) Transfers between Management Investors or Affiliates of
Management Investors, (iv) Transfers between Yamada Investors or Affiliates of
Yamada Investors, (v) Transfers to Management Investors, (vi) Transfers to the
Company, any Affiliate of the Company or any employee benefit plan maintained by
the Company or any of its Affiliates and (vii) any Transfer by a Management
Investor which has been approved by the Management Investor representatives.
Anything to the contrary in this Agreement notwithstanding, Transfers under this
Section 2.1(b) shall not be subject to Section 2.2 or 2.3 and transferees
permitted by

                                        3

<PAGE>   5

this Section 2.1(b) shall take any shares so Transferred subject to all
obligations under this Agreement as if such shares were still held by the
Investor whether or not they so expressly agree.

             (c) For purposes of this Agreement, "Affiliate" shall mean, (i)
with respect to an individual: a parent, descendent or spouse of such
individual; (ii) with respect to an individual: any trust for the primary
benefit of the individual or any person described in clause (i); (iii) with
respect to a trust: the beneficiaries of the trust or another trust established
for the primary benefit of such beneficiaries; and (iv) with respect to any
person (other than a natural person): any other person, directly or indirectly,
controlling or controlled by under direct or indirect common control with such
specified person. For purposes of this definition, "control" when used with
respect to any person means the power to direct the management and policies of
such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

         2.2 RIGHT OF FIRST REFUSAL. If at any time on or after the date hereof
an Investor, or group of Investors, owning a combined total of ten percent (10%)
or more of the outstanding shares of Common Stock (including for all purposes of
this Section 2.2, any permitted transferee of such Investor's shares pursuant to
Section 2.1(b)) receives a bona fide offer to purchase shares representing ten
percent (10%) or more of the outstanding shares of Common Stock (the "Offer")
from an unaffiliated third party (the "Offeror") that the Investor, or group of
Investors, wishes to accept, such Investor, or group of Investors, may Transfer
such shares pursuant to and in accordance with the following provisions of this
Section 2.2:

             (a) Such Investor, or group of Investors (the "Selling Investor")
shall cause the Offer to be reduced to writing and shall notify the Company and
the other Investors in writing of such Selling Investor's desire to accept the
Offer and otherwise comply with the provisions of this Section 2. The Selling
Investor's notice shall constitute an irrevocable offer to sell such Common
Stock to the Company and the other Investors at a purchase price equal to the
price contained in, and on the same terms and conditions of, the Offer. The
notice shall be accompanied by a true copy of the Offer (which shall identify
the Offeror).

             (b) The Company shall have the right to offer to purchase all, but
not less than all, of the shares covered by the Offer. To exercise such right,
the Company shall, within ten (10) days of receipt of such written notice (the
"Company Notice Period"), communicate in writing such election to the Selling
Investor (with copies to the other Investors). Such written election to purchase
shall constitute a valid, legally binding and enforceable agreement for the sale
and purchase of all of the shares covered by the Offer.

             (c) In the event that the Company does not exercise its rights
pursuant to Section 2.2(b), the Selling Investor shall notify the other
Investors in writing of such fact (the "Investor Notice"). At any time within
twenty (20) days after receipt by the other Investors of the Investor Notice
(the "Notice Period"), one or more of the other Investors, individually or in
aggregate may, subject to the terms hereof, choose to accept the Offer with
respect to all, but not less than all, of the shares covered thereby and not
purchased by the Company by giving written notice to the Selling Investor to
such effect; provided that if two or more of the other Investors choose, in the
aggregate, to accept such Offer with respect to an aggregate number of shares

                                        4

<PAGE>   6

which exceeds the number of shares subject to such Offer and available for
purchase, the number of shares for which the Offer may be accepted by each such
Investor shall, in each case, be reduced by the smallest number of shares as
shall be necessary to reduce the aggregate number of shares for which the Offer
may be accepted by the electing Investors as contemplated herein to the number
of shares for which the Offer was made and which are available for purchase by
them; provided further, that the number of shares for which any Investor may
accept such Offer as contemplated herein shall in no event be reduced to less
than the number of shares which bears the same proportion to the total number of
shares which are available for purchase as the number of shares of Common Stock
then held by such Investor bears to the total number of shares of Common Stock
then held by all Investors accepting such Offer.

             (d) If shares covered by any Offer are purchased pursuant to
Section 2.2(b) or 2.2(c), such purchase shall be (i) at the same price and on
the same terms and conditions as the Offer if the Offer is for cash and/or notes
or (ii) if the Offer includes any consideration other than cash and notes, then
at the equivalent all cash price for such other consideration. The closing of
the purchase of the shares subject to an Offer pursuant to this Section 2.2
shall take place within fifteen (15) days after the expiration of the Notice
Period, or upon satisfaction of any governmental approval requirements, if
later, by delivery by the respective purchasers of the purchase price for shares
being purchased as provided above to the Selling Investor against delivery of
the certificates representing the shares so purchased, appropriately endorsed
for Transfer by such Selling Investor.

         2.3 TAG-ALONG RIGHTS.

             (a) INVESTORS TAG-ALONG OPTION. In the event any Investor or group
of Investors (including for all purposes of this Section 2.3, any permitted
transferees of an Investor as contemplated by Section 2.1(b)) proposes to sell
ten percent (10%) or more of the outstanding shares of Common Stock or receives
an Offer for ten percent (10%) or more of the outstanding shares of Common Stock
and any of such shares are not purchased pursuant to Section 2.2, such Investor,
or group of Investors, may Transfer the shares subject thereto only following
compliance with this Section 2.3.

                 (i) In such event, immediately following the last day of the
applicable Notice Period, the Selling Investor shall give an additional notice
of the proposed sale to the other Investors, once again enclosing a copy of the
Offer, if applicable, which shall identify the Offeror and the number of shares
proposed to be sold (the "Co-Sale Notice").

                 (ii) Upon the election by an Investor, such Investor shall have
the right, exercisable upon written notice to the Selling Investor and any such
permitted transferee within twenty (20) days after delivery to it of the Co-Sale
Notice (the "Co-Sale Notice Period"), to participate in the sale on the terms
and conditions stated in the Co-Sale Notice, except that any Investor who holds
Warrants shall be permitted to sell to the relevant purchaser shares of Common
Stock acquired upon exercise thereof or, at its election, an option to acquire
such Common Stock when it receives the same upon such exercise at the election
of such Investor or as otherwise provided in the Company's Certificate of
Incorporation with the same effect as if Common Stock were being conveyed. Each
of the Investors shall have the right to sell all or any portion of its shares
of Common Stock on the terms and conditions in the Co-Sale Notice (subject to
the foregoing), with the number of shares of Common Stock to be apportioned on a

                                        5

<PAGE>   7

pro rata basis among the relevant Investors based on the number of shares of
Common Stock requested to be sold by each such Investor. To the extent one or
more Investors elect not to sell the full amount of shares which they are
entitled to sell pursuant to this Section 2.3(a), the other participating
Investors' rights to sell shares shall be increased proportionately to their
relative holdings of Common Stock, such that the Investors shall have the right
to sell the full number of shares allocable to them in any transaction subject
to this Section 2.3(a) even if some Investors elect not to participate.

                 (iii) Within five (5) days after the expiration of the Co-Sale
Notice Period, the relevant Investor shall notify each participating Investor of
the number of shares held by such Investor that will be included in the sale and
the date on which the sale will be consummated, which shall be no later than the
later of (i) 30 days after the delivery of the Co-Sale Notice and (ii) the
satisfaction of all governmental approval requirements, if any.

                 (iv) Each of the Investors may effect its participation in any
sale hereunder by delivery to the purchaser, or to the relevant Investor for
transfer to the purchaser, of one or more instruments, certificates and/or
option agreements, properly endorsed for transfer, representing the shares it
elects to sell therein, provided that no Investor shall be required to make any
representations or warranties or to provide any indemnities in connection
therewith other than with respect to title to the stock being conveyed. At the
time of consummation of the sale, the purchaser shall remit directly to each
Investor that portion of the sale proceeds to which each Investor is entitled by
reason of its participation therein. No shares may be purchased by a purchaser
from the relevant Investor or any of such Investor's permitted transferees
unless the purchaser simultaneously purchases from the Investors all of the
shares that they have elected to sell pursuant to this Section 2.3(a).

             (b) Any shares held by an Investor or any of its permitted
transferees that the Investor or transferee desires to sell following compliance
with Section 2.3(a) may be sold to the purchaser only during the 90-day period
after the expiration of the Co-Sale Notice Period and only on terms no more
favorable to the Investor or transferee than those contained in the relevant
notice. Promptly after such sale, such Investor shall notify the parties hereto
of the consummation thereof and shall furnish such evidence of the completion
and time of completion of such sale and of the terms thereof as may reasonably
be requested by the other parties hereto. So long as the purchaser is neither a
party nor an affiliate or relative of a party to this Agreement, such purchaser
shall take the shares so Transferred free and clear of any further restrictions
of this Section 2. If, at the end of such 90-day period, such Investor or any of
such transferees have not completed the sale of such shares as aforesaid, all
the restrictions on Transfer contained in this Section 2 shall again be in
effect with respect to such shares.

SECTION 3. REGISTRATION RIGHTS
           -------------------

         The Registration Rights Agreement to be entered into by and among the
parties to this Agreement is attached as ANNEX B hereto.

SECTION 4. MANAGEMENT INVESTOR REPRESENTATIVES
           -----------------------------------

         4.1 INITIAL REPRESENTATIVES OF THE MANAGEMENT INVESTORS. Initially,
there will be five (5) representatives of the Management Investors. The
Management Investors, by their

                                        6

<PAGE>   8

execution of the Acknowledgment and Agreement attached to this Agreement,
appoint the following persons to be their initial representatives:

                                  Name
                                  ----

                  1.       Mr. David L. Chrencik
                  2.       Mr. Yoichi Fujiki
                  3.       Mr. Paul R. Keen
                  4.       Mr. Michael S. Lipscomb
                  5.       Ms. Frances S. St. Clair

         4.2 SUCCESSION. In the event of any vacancies among the Management
Investor representatives, the vacancy shall be filled by the person selected by
the remaining representatives of the Management Investors holding a majority of
the Common Stock owned by such representatives. The representatives of the
Management Investors shall have the authority to add members to the
representatives or remove members from the representatives of the Management
Investors. In the absence of any representatives, new representatives may be
appointed by vote of the Management Investors.

         4.3 VOTING. Except as set forth in the first sentence of Section 4.2,
all decisions to be made by the representatives of the Management Investors
shall be by majority vote of the uninterested representatives of the Management
Investors. A written consent of a majority of the uninterested representatives
of the Management Investors shall be sufficient to bind all of the
representatives of the Management Investors.

SECTION 5. REPURCHASE OF COMMON SHARES FROM MANAGEMENT INVESTORS
           -----------------------------------------------------

         5.1 REPURCHASE OF COMMON SHARES. Upon the termination of a Management
Investor's employment (or directorship, as the case may be) with the Company,
such Management Investor (or the Investor's heirs, spouse or former spouse or
other legal representative, to the extent then otherwise empowered to act on
behalf of such Investor) may elect to sell, and the Company shall purchase from
such Management Investor (or the Investor's heirs, spouse or former spouse or
other legal representative) may sell all, but not less than all, of the shares
of Common Stock owned by such Management Investor within six (6) months of such
termination upon the written request of such Management Investor and upon the
terms set forth in Section 5.2. The Company may assign and delegate its right or
obligation to purchase Common Stock under this Section 5 to one or more of the
Management Investors, as directed by the Management Investor representatives.

         5.2 PRICE AND TERMS OF REPURCHASE.

         (a) The price at which the Company shall purchase Common Stock under
Section 5.1 from a Management Investor (or the Investor's heirs, spouse or
former spouse or other legal representative) (the "Redeeming Investor") is equal
to the greater of (i) the most recent Argo-Tech Employee Stock Ownership Plan
valuation, or (ii) the sale price of the Common Stock in

                                        7

<PAGE>   9

any transaction within the last year in which ten percent (10%) or more of the
Common Stock was sold (the "Purchase Price").

         (b) The Company shall deliver written notice to the Redeeming Investor
specifying the date of the closing for the purchase of the Redeeming Investor's
Common Stock and the terms of payment of the purchase price of such Common
Stock. Any purchase and sale under this Section 5 shall be consummated not more
than ninety (90) days (or such other date as is mutually agreeable to the
Company and the Redeeming Investors) after the occurrence of the event
triggering the repurchase obligation.

         (c) The Purchase Price for the Common Stock shall be paid in full in
cash at the closing.

         (d) The Redeeming Investor shall execute and deliver to the Company at
the closing the same instruments and documents as are required by the Company.

         5.3 GENERAL LIMITATIONS. Notwithstanding any other provision in this
Agreement, the obligation of the Company to purchase Common Stock hereunder and
to pay the Purchase Price is subject to any restrictions and limitations imposed
on the Company or any of its Affiliates by (i) applicable law, including,
without limitation, the existence of funds legally available under the General
Corporation Law of the State of Delaware to effect such purchase; (ii) any
agreement to which the Company or any Affiliate thereof may become a party at or
after the date hereof that gives rise to actual or contingent indebtedness,
whether as principal or as guarantor for an Affiliate; and (iii) any default on
funded debt or the preferred stock or exchange notes that exists and is
continuing or any event which, with the lapse of time or the giving of notice,
or both, would constitute an Event of Default as such term may be defined in any
agreement to which the Company or its Affiliates may be party related to funded
debt (collectively, all of the foregoing events described in clause (iii) of
this Section 5.3 are hereinafter referred to as a "Default").

         5.4 COMPANY'S NOTE. With respect to any shares of Common Stock the
purchase of which would result in the occurrence of a Default or the breach of
any limitation on the payment of the Purchase Price, the Company shall give the
Redeeming Investor (or his successor or representative, as the case may be),
prompt written notice of the occurrence or existence of such a Default or
breach, setting forth in reasonable detail the specifics thereof and indicating
the number of shares of Common Stock, if any, that the Company is permitted to
purchase in cash without such purchase resulting in such a Default or breach of
such provisions, and the Company shall purchase such number of shares in cash.
With respect to any remaining shares of Common Stock that the Company is unable
to purchase in cash, the Company shall, subject to any limitation as provided in
Section 5.3, pay for such Common Stock with a subordinated promissory note (the
"Company's Note" or, if there be more than one, the "Company's Notes"), which
Company's Note shall bear interest at the prime rate of interest in dollars
(U.S.) in effect at that time by Chase Manhattan Bank and which interest shall
not be payable in cash at the time (unless the Company determines in its sole
discretion to pay such interest in cash currently), but such interest shall
accrue during such period of suspension of payment by the Company to the extent
permitted by applicable law and by any such agreements giving rise to actual or
contingent indebtedness to which the Company or any of its Affiliates is a
party, and such interest shall be payable in full at maturity of such Company's
Note if then permitted to be so paid and if not then permitted to be so paid,
then at the earliest time such interest may be paid. The Company shall promptly
notify the Redeeming Investor in writing as soon as the Company

                                        8

<PAGE>   10

is no longer prevented from making a cash payment to satisfy the Company's Note
issued for any shares purchased from the Redeeming Investor. The Company shall
make such cash payment to the Redeeming Investor within five (5) days of
providing such notice and to the full extent possible without exceeding the
limits established by Section 5.3. Such resumed payment shall be applied first
to accrued and unpaid interest on the principal amount of such Company's Note.
In the event that full payment under such Company's Note cannot be made without
exceeding such limitations, payments will be made PRO RATA with all other
outstanding obligations to former Stockholders, if any, for payment of the
Purchase Price for Common Stock purchased hereunder.

SECTION 6. GENERAL
           -------

         6.1 TERMINATION OF PRIOR STOCKHOLDERS AGREEMENT; WAIVER OF RIGHTS. The
execution and delivery of this Agreement by any Investor will (i) terminate the
AT Holdings Corporation 1994 Stockholders Agreement dated May 17, 1994, as
amended, and any other existing stockholders agreements to which such Investor
is a party with respect to the ownership of equity securities of the Company and
(ii) be deemed a waiver of all rights of such Investor under such agreements.

         6.2 AMENDMENTS, WAIVERS AND CONSENTS. For the purposes of this
Agreement and all agreements executed pursuant hereto, no course of dealing
between or among any of the parties hereto and no delay on the part of any party
hereto in exercising any rights hereunder or thereunder shall operate as a
waiver of the rights hereof and thereof. No provision hereof may be waived
otherwise than by a written instrument that makes reference to this Agreement
and is signed by the party or parties so waiving such covenant or other
provision. No amendment to this Agreement may be made without the written
consent of (a) the Company, (b) Management Investors holding at least 50.1% of
the shares of Common Stock then owned by the Management Investors, (c) Equity
Investors holding at least 50.1% of the Common Stock or Warrants then held by
the Equity Investors, and (d) Yamada Investors holding at least 50.1% of the
Common Stock then held by the Yamada Investors; provided, however, that no
written consent will be required from any group of Investors then holding less
than 5% (2.5% in the case of the Equity Investors) of the Common Stock and
Warrants, taken together.

             Notwithstanding the foregoing, this Agreement shall be amended from
time to time to add or delete Management Investors. A new Management Investor
will be added through the execution of an Acknowledgment in the form of ANNEX A,
as such form is amended to represent the current Management Investor
representatives at such time.

         6.3. TERM. The term of this Agreement shall commence as of the date
hereof and shall terminate upon the first to occur of the following events:

                           (a)      An initial public offering by the Company
                                    resulting in at least $30,000,000 of gross
                                    proceeds to the Company, without the
                                    deduction of fees, discounts and expenses;
                                    or

                           (b)      the Investors, in the aggregate,
                                    beneficially own less than thirty percent
                                    (30%) (by voting power or by value) of the
                                    then outstanding Common Stock.

                                        9

<PAGE>   11

         6.4 LEGEND ON SECURITIES. The Company and the Investors acknowledge and
agree that the following legends shall be typed on each certificate evidencing
any of the securities issued hereunder held at any time by an Investor or
Investor:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM.

         THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER 17, 1998, INCLUDING THEREIN CERTAIN
RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY OF THE AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE INVESTOR UPON WRITTEN REQUEST AND WITHOUT CHARGE WITHIN FIVE
(5) DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR ADDRESSED TO THE COMPANY.

         6.5 GOVERNING LAW. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of
Delaware, without giving effect to conflict of laws principles thereof.

         6.6 SECTION HEADINGS AND GENDER. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
The use in this Agreement of the masculine pronoun in reference to a party
hereto shall be deemed to include the feminine or neuter, and vice versa, as the
context may require.

         6.7 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.

         6.8 NOTICES AND DEMANDS. Any notice or demand which is required or
provided to be given under this Agreement or the Certificate of Incorporation
shall be deemed to have been sufficiently given and received for all purposes
when delivered by hand, telecopy, telex or other method of facsimile, or five
days after being sent by certified or registered mail, postage and charges
prepaid, return receipt requested, or two days after being sent by overnight
delivery providing receipt of delivery, to the following addresses:

                                       10

<PAGE>   12

         if to the Company:

         AT Holdings Corporation
         23555 Euclid Avenue
         Cleveland, OH  44117-1795
         Attention: Corporate Secretary
         Facsimile: (216) 692-6331

         with a copy to:

         Jones, Day, Reavis & Pogue
         901 Lakeside Avenue
         Cleveland, Ohio  44114
         Attention: David P. Porter
         Facsimile: (216) 579-0212

         if to a Management Investor:

         to the address for such person
         indicated on the Company's
         payroll and benefits records

         with a copy to:

         the Company's Corporate
         Secretary at the address
         indicated above

         if to a Yamada Investor:

         AT Holdings, LLC
         1894 Highway 50
         Suite 4-153
         Carson City, Nevada  89701
         Attention: J. Koike

         with a copy to:

         Musick, Peeler & Garrett
         624 South Grand Avenue
         Suite 2100
         Los Angeles, California  90017
         Attention: Thomas T. Kawakami

                                       11

<PAGE>   13

         if to an Equity Investor:

         Chase Venture Capital Associates, L.P.
         c/o Chase Capital Partners
         380 Madison Avenue
         12th Floor
         New York, New York  10017
         Attention: Richard D. Waters, Jr.
         Facsimile: (212) 622-3950

         with a copy to:

         Cravath, Swaine & Moore
         825 Eighth Avenue
         New York, NY  10019
         Attention: Gregory M. Shaw
         Facsimile: (212) 474-3700

         6.9 REMEDIES; SEVERABILITY. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any person subject hereto
will result in irreparable injury to the other parties hereto, that the remedy
at law alone will be an inadequate remedy for such breach, and that, in addition
to any other remedies which they may have, such other parties may enforce their
respective rights by actions for specific performance (to the extent permitted
by law). The Company may refuse to recognize any unauthorized transferee as one
of its Investors for any purpose, including, without limitation, for purposes of
dividend and voting rights, until the relevant party or parties have complied
with all applicable provisions of this Agreement. Whenever possible, each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be deemed prohibited or invalid under such applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.

         6.10 INTEGRATION. The terms and provisions of this Agreement and its
Exhibits and the Supplemental Stockholders Agreement constitute the entire
agreement between the parties and there are no collateral agreements or
representations or warranties other than as expressly set forth or referred to
in this Agreement and the Supplemental Stockholders Agreement. This Agreement
(including its Exhibits) and the Supplemental Stockholders Agreement supersede
any other agreement, whether written or oral, that may have been made or entered
into by any party hereto or any of their respective Affiliates (or by any
director, officer or representative hereof) relating to the matters contemplated
hereby. The parties acknowledge that they will be bound by the terms and
conditions of the Supplemental Stockholders Agreement.

         6.11 FEES AND EXPENSES. The Company shall reimburse the Investors for
the reasonable out-of-pocket expenses incurred by the Investors in connection
with the transactions contemplated by this Agreement.

         6.12 BEST EFFORTS. Investors shall use their best efforts to carry-out
the intent of this Agreement, including voting shares of Common Stock (i) for
any proposal that furthers the

                                       12

<PAGE>   14

purpose of this Agreement and (ii) against any proposal that is contrary to the
purpose of this Agreement. Notwithstanding anything in this Agreement to the
contrary, this Agreement will not be binding and shall have no effect on any
shares of Common Stock beneficially owned by an Investor through the Argo-Tech
Employee Stock Ownership Plan.

         6.13 ASSIGNMENT. The Company may assign and delegate all of its rights
and obligations under this Agreement to any Affiliate of the Company.

         6.14 REGULATORY MATTERS.

              (a) COOPERATION OF OTHER STOCKHOLDERS. Each Investor agrees to
cooperate with the Company in all reasonable respects in complying with the
terms and provisions of the letter agreement between the Company and Chase
Venture Capital Associates, L.P., a copy of which is attached hereto as ANNEX C,
regarding small business matters (the "SBA Sideletter"), including without
limitation, voting to approve amending the Company's Certificate of
Incorporation, the Company's By-laws or this Agreement in a manner reasonably
acceptable to the Investors and Chase Venture Capital Associates, L.P. or any
Regulated Holder (as defined in the SBA Sideletter) entitled to make such
request pursuant to the SBA Sideletter in order to remedy a Regulatory Problem
(as defined in the SBA Sideletter). Anything contained in this Section 6.14 to
the contrary notwithstanding, no Investor shall be required under this Section
6.14 to take any action that would adversely affect in any material respect such
Investor's rights under this Agreement or as a stockholder of the Company.

                  (b) COVENANT NOT TO AMEND. The Company and each Investor agree
not to amend or waive the voting or other provisions of the Company's
Certificate of Incorporation, the Company's By-laws or this Agreement if such
amendment or waiver would cause any Regulated Holder to have a Regulatory
Problem (as defined in the SBA Sideletter). Chase Venture Capital Associates,
L.P. agrees to notify the Company as to whether or not it would have a
Regulatory Problem promptly after Chase Venture Capital Associates, L.P. has
notice of such amendment or waiver.

                                       13

<PAGE>   15

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

                                             AT HOLDINGS CORPORATION

                                             By:_______________________________
                                                Its:

                                             AT HOLDINGS, LLC

                                             By:_______________________________
                                                Its:

                                             YC INTERNATIONAL INC.

                                             By:_______________________________
                                                Its:

                                             SUNHORIZON INTERNATIONAL, INC.

                                             By:_______________________________
                                                Its:

                                       14

<PAGE>   16

                                     __________________________________________
                                     DAVID L. CHRENCIK, individually and as
                                     a representative of the Management
                                     Investors

                                     __________________________________________
                                     YOICHI FUJIKI, individually and as a
                                     representative of the Management Investors

                                     __________________________________________
                                     PAUL R. KEEN, individually and as a
                                     representative of the Management Investors

                                     __________________________________________
                                     MICHAEL S. LIPSCOMB, individually and
                                     as a representative of the Management
                                     Investors

                                     __________________________________________
                                     FRANCES S. ST. CLAIR, individually and
                                     as a representative of the Management
                                     Investors

                                     CHASE VENTURE CAPITAL
                                     ASSOCIATES, L.P.

                                     by:            Chase Capital Partners,
                                        its general partner,

                                     By:______________________________________
                                          Name:
                                          Title:

                                       15

<PAGE>   17

                                                                 Annex A to
                                                          Stockholders Agreement
                                                          ----------------------

                          ACKNOWLEDGMENT AND AGREEMENT

                  The undersigned is a stockholder of AT Holdings Corporation
(the "Corporation") who hereby:

         1.       acknowledges status as a "Management Investor" for purposes of
                  the Stockholders Agreement dated as of December   , 1998 among
                  the Corporation, AT Holdings, LLC, YC International Inc.,
                  Sunhorizon International, Inc. and the representatives of the
                  Management Investors named therein (the "Stockholders
                  Agreement");

         2.       appoints the following persons to serve as the initial
                  representatives of the Management Investors:

                           1.       Mr. David L. Chrencik
                           2.       Mr. Yoichi Fujiki
                           3.       Mr. Paul R. Keen
                           4.       Mr. Michael S. Lipscomb
                           5.       Ms. Frances S. St. Clair;

         3.       agrees to be bound by, and joins as a party to, the
                  Stockholders Agreement, in the form approved by the initial
                  representatives of the Management Investors, as it may be
                  amended from time to time in accordance with its terms;

         4.       agrees to vote for the election of Directors in accordance
                  with Section 1.1 of the Stockholders Agreement;

         5.       agrees to be bound by, and joins as a party to, the
                  Registration Rights Agreement referred to in Section 3 of the
                  Stockholders Agreement, in the form approved by the initial
                  representatives of the Management Investors, as it may be
                  amended from time to time in accordance with its terms; and

         6.       acknowledges the termination of the Stockholders Agreement,
                  dated May 17, 1994, as amended, among the Corporation and the
                  other parties thereto and waives all rights under such
                  agreement.

Executed as of the____day of December, 1998.

       ________________________              _______________________________
              Signature                                 Print Name

<PAGE>   18

                                   ANNEX B TO
                             STOCKHOLDERS AGREEMENT

<PAGE>   19

                                   ANNEX C TO
                             STOCKHOLDERS AGREEMENT

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