Document:

Exhibit 4.1

 

ENPATH MEDICAL, INC.

1999 NON-EMPLOYEE DIRECTOR AND MEDICAL ADVISORY BOARD

STOCK OPTION PLAN

(as amended through April 28, 2005)

 

1.             PURPOSE OF PLAN

 

This Plan shall be known as
the “Enpath Medical, Inc. 1999 Non-Employee Director and Medical Advisory
Board Stock Option Plan” and is hereinafter referred to as the “Plan.” The
purposes of the Plan are to attract and retain the best available personnel for
service as members of the Board of Directors and Medical Advisory Board of
Enpath Medical, Inc. (the “Company”) and to provide additional incentive
to the non-employee directors and advisors to continue to serve on the Board of
Directors and Medical Advisory Board, respectively, by affording them an
opportunity to acquire a proprietary interest in the Company. It is intended
that these purposes be effected through the granting of stock options or
restricted stock awards, as provided herein.

 

2.             DEFINITIONS

 

The following terms have the
meanings set forth below, unless the context otherwise requires:

 

(a)           “ADVISOR” means a member of the Advisory
Board.

 

(b)           “ADVISORY BOARD” means the Medical Advisory
Board of the Company.

 

(c)           “BOARD” means the Board of Directors of the
Company.

 

(d)           “CODE” means the Internal Revenue Code of
1986, as amended.

 

(e)           “COMMITTEE” means the group of individuals
administering the Plan, as provided in Section 4 of the Plan.

 

(f)            “COMMON STOCK” means the common stock of the
Company, par value $.01 per share (as such par value may be adjusted from time
to time).

 

(g)           “DISABILITY” means the permanent and total
disability of the Participant within the meaning of Section 22 (e) (3) of
the Code.

 

(h)           “EXCHANGE ACT” means the Securities Exchange
Act of 1934, as amended.

 

(i)            “FAIR MARKET VALUE” means, with respect to
the Common Stock, the following:

 

(i)            If the Common Stock is listed or admitted to
unlisted trading privileges on any national securities exchange or is not so
listed or admitted but transactions in the Common Stock are reported on the
NASDAQ National Market System, the last sale price of the Common Stock on such
exchange or reported by the NASDAQ National Market System as of such date (or,
if no shares were traded on such day, as of the next preceding day on which
there was such a trade).

 

(ii)           If the Common Stock is not so listed or
admitted to unlisted trading privileges or reported on the NASDAQ National
Market System, and bid and asked prices therefore in the over-the-counter
market are reported by the NASDAQ System or

 

 

the National Quotation
Bureau, Inc. (or any comparable reporting service), the average of the
closing bid and asked prices as of such date, as so reported by the NASDAQ
System, or, if-not so reported thereon, as reported by the National Quotation
Bureau, Inc. (or such comparable reporting service).

 

(iii)          If the Common Stock is not so listed or
admitted to unlisted trading privileges, or reported on the NASDAQ National
Market System, and such bid and asked prices are not so reported, such price as
the Committee determines in good faith in the exercise of its reasonable
discretion.

 

(j)            “NON-EMPLOYEE DIRECTOR” means a member of the
Board that meets the requirements of Section 5(a) of the Plan.

 

(k)           “NON-STATUTORY STOCK OPTION” means a right to
purchase Common Stock granted to and pursuant to the Plan that does not qualify
as an Incentive Stock Option, meaning of Section 422 of the Code.

 

(l)            “OPTION” means a Non-Statutory Stock Option
granted pursuant to this Plan.

 

(m)          “PARTICIPANT” means an individual who is
eligible to receive and who receives one or more Options pursuant to the Plan.

 

(n)           “PERSON” means any individual, corporation,
partnership, group, association or other “person” (as such term is used in Section 14
(d) of the Exchange Act), other than the Company, a wholly owned
subsidiary of the Company or any employee benefit plan sponsored by the Company
or a wholly owned subsidiary of the Company.

 

(o)           “PREVIOUSLY ACQUIRED SHARES” mean shares of
Common Stock that are already owned by the Participant and shares of Common
Stock that are to be acquired by the Participant pursuant to the exercise of an
Option.

 

(p)           “RESTRICTED STOCK” means an award of Shares
that are subject to restrictions under Section 12 below.

 

(q)           “RETIREMENT” means the retirement of a
Participant pursuant to and in accordance with the regular or, if approved by
the Board for purposes of the Plan, any early retirement plan or practice of
the Company or Subsidiary then covering the Participant.

 

(r)            “SECURITIES ACT” means the Securities Act of
1933, as amended.

 

(s)           “SHARE” or “SHARES” means one or more shares
of Common Stock.

 

(t)            “SUBSIDIARY” means any subsidiary corporation
of the Company within the meaning of Section 424(f) and (g) of
the Code.

 

2

 

3.             STOCK SUBJECT TO PLAN

 

The stock subject to option
grants or restricted stock awards under the Plan shall be shares of the Company’s
authorized Common Stock. Subject to the adjustment as provided in Section 15
hereof, the maximum number of Shares for which options may be exercised or
restricted stock awards made under this Plan shall be 400,000(1) Shares. Any
Shares subject to an option or restricted stock award under the Plan which, for
any reason, is forfeited, expires, lapses or is otherwise terminated
unexercised as to such Shares shall be available for options and restricted
stock awards thereafter granted during the term of the Plan and may be again
subjected to an option or restricted stock grant under the Plan.

 

4.             ADMINISTRATION OF PLAN

 

The Plan shall be effective
as of July 29, 1999, according to the terms and conditions herein, and, if
required by Section 17 of the Exchange Act or the rules and
regulations thereunder, subject to subsequent approval by the shareholders of
the Company. The Plan shall be administered by the Board. The Board may
authorize the compensation or other committee thereof, consisting of at least
two (2) members appointed by the Board to exercise the powers conferred on
the Board under the Plan, other than the power under Section 15 hereof to
amend or terminate the Plan.

 

The interpretation and
construction by the Board or Committee of any provisions of the Plan or of any
option or award of restricted stock granted hereunder shall be final. No member
of the Board or Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option or award of restricted
stock granted hereunder.

 

5.             ELIGIBILITY AND GRANT

 

(a)           NON-EMPLOYEE DIRECTORS.

 

Each
member of the Board who satisfies all of the following criteria shall
automatically be a Participant in the Plan:

 

(i)            Such member is not, and has not during the
immediately preceding 12-month period been, an employee of the Company or any
Subsidiary; and

 

(ii)           Such member does not hold any options to
purchase Common Stock of the Company, except for stock options previously
granted pursuant to the Plan, the 1996 or the 1992 Non-Employee Director Stock
Option Plan.

 

(b)           ADVISORY BOARD MEMBERS.

 

Each
member of the Advisory Board who satisfies all of the following criteria shall
be eligible to be a Participant in the Plan:

 

(i)            Such member is not, and has not during the
immediately preceding 12-month period, been an employee of the Company or any
Subsidiary; and

 

(ii)           Such member does not hold any options to
purchase Common Stock of the Company, except for stock options previously
granted pursuant to the Plan.

 

(1)           The Plan originally
authorized 200,000 Shares for issuance. 
An amendment to the Plan to increase the number of Shares authorized
under the Plan by 200,000 shares was approved by the Board on February 16, 2005
and by the Company’s shareholders on April 28, 2005.

 

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6.             NON-EMPLOYEE DIRECTOR OPTIONS

 

(a)           GRANT OF NON-EMPLOYEE DIRECTOR OPTIONS.

 

(i)            Initial Non-Employee Director Option Grants. Each Non-Employee Director first elected or
appointed to the Board at any time after July 29, 1999, shall receive, by
virtue of serving as a Non-Employee Director of the Company, an initial grant
of a Non-Statutory Stock Option to purchase 15,000 Shares which shall be deemed
to be granted to a Non-Employee Director immediately after the Non-Employee
Director’s initial election or appointment to the Board. Each Non-Employee
Director who was a Non-Employee Director of the Company on July 29, 1999,
shall receive, by virtue of serving as a Non-Employee Director, an initial
grant of a Non-Statutory Stock Option to purchase 15,000 shares which shall be
deemed to be granted to such Non-Employee Director on the effective date of
this Plan. Each option granted under this Section 6(a)(i) is referred
to herein as an Initial Non-Employee Director Option. Directors who, as of the
date of initial election or appointment to the Board, are or were employees of
the Company or any Subsidiary and later become Non-Employee Directors shall
receive Initial Non-Employee Director Options one year after they are no longer
employees of the Company.

 

(ii)           On-going Non-Employee Director Option Grants
for Directors first elected after July 29, 1999. On the third anniversary after the grant of
the Initial Non-Employee Director Option, Non-Employee Director shall be
granted a Non-Statutory Stock Option to purchase 18,000 shares and on the sixth
anniversary, and each three year anniversary thereafter, after the grant of the
Initial Non-Employee Director Option, Non-Employee Director shall be granted a
Non-Statutory Stock Option to purchase 21,000 shares, provided Non-Employee
Director continues as a member of the Board of Directors.

 

(iii)          On-going Non-Employee Director Option Grants
for Directors elected before July 29, 1999 (Pre-Plan Non-Employee
Directors. Upon reelection
to the Board at the annual stockholders meeting in 2002, Non-Employee Director
shall be granted a Non-Statutory Stock Option to purchase 18,000 shares and on
re-election to the Board at the annual meeting in 2005 and each three year
annual meeting date thereafter, Non-Employee Director shall be granted a
Non-Statutory Stock Option to purchase 21,000 shares, provided Non-Employee
Director continues to be elected to the Board of Directors.

 

(b)           EXERCISABILITY OF OPTIONS.

 

Non-Employee
Director Options shall vest and become exercisable cumulatively as follows:

 

(i)            For Directors joining the Board after July 29,
1999, one/third upon grant and one/third on each successive one-year
anniversary from date of grant.

 

(ii)           For Pre-Plan Non-Employee Directors,
one/third on date of grant and one/third on each successive annual re-election
to the Board of Directors.

 

Notwithstanding the
foregoing, vesting of a Non-Employee Director Option shall accelerate and the
Non-Employee Director Option shall become immediately exercisable in full in
accordance with Section 16 hereof.

 

4

 

Each Non-Employee Director
Option, to the extent exercisable, shall be exercisable in whole or in part.

 

(c)           TERM.

 

Subject
to Section 13 hereof, Non-Employee Director Options shall expire at the
earlier of (i) the 8-year anniversary date of the grant of the
Non-Employee Director Option, or (ii) except as otherwise provided in Section 16
hereof, one year after the date the Non-Employee Director ceases to be a
director of the Company to the extent that such Option was vested on the date
of termination. In no event shall any Non-Employee Director Option be
exercisable at any time after its expiration date. When a Non-Employee Director
Option is no longer exercisable, it shall be deemed to have lapsed or
terminated.

 

(d)           EXERCISE PRICE.

 

The
purchase price of each Share subject to a Non-Employee Director Option shall be
the Fair Market Value per Share on the date of grant. A Non-Employee Director
may exercise a Non-Employee Director Option using as payment any form of
consideration provided for in Section 8 hereof.

 

7.             ADVISORY COMMITTEE MEMBER OPTIONS

 

(a)           GRANT OF ADVISOR OPTIONS. An Advisor may be
granted from time to time one or more Non-Statutory Stock Options under the
Plan and such Advisor Options shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined by the
Committee in its sole discretion.

 

(b)           EXERCISABILITY. An Advisor Option shall
become exercisable at such times and in such installments (which may be
cumulative) as shall be determined by the Committee in its sole discretion at
the time the Advisor Option is granted.

 

(c)           TERM. Subject to Section 13 hereof, the
duration of Advisor Options shall be fixed by the Committee in its sole
discretion at its date of grant.

 

(d)           EXERCISE PRICE. The per share purchase price
to be paid by the Advisor at the time an Advisor Option is exercised shall be
determined by the Committee in its sole discretion at the time the Advisor
Option is granted; provided, however, that such price shall not be less than
the Fair Market Value of one share of Common Stock on the date the Advisor
Option is granted.

 

8.             PAYMENT OF EXERCISE PRICE

 

The purchase price of each
Share subject to Options granted under the Plan shall be payable at the time
written notice of exercise is given to the Company. Payment for Shares issued
upon exercise of an option may consist of cash, check, exchange of Previously
Acquired Shares (by tendering to the Company shares previously owned by the
Participant which have a Fair Market Value on the date of exercise equal to the
option price), or a combination thereof.

 

5

 

9.             OPTION AGREEMENT

 

Each Option granted under
this Plan shall be evidenced by a stock option agreement between the Company
and the Participant to whom the option is granted.

 

10.          EXERCISE OF OPTION

 

(a)           The exercise of any Option may be contingent
upon receipt from the Participant (or other person rightfully exercising the
option) of a representation that, at the time of such exercise, it is his of
her present intention to acquire the Shares received thereunder for investment
and not with a view to distribution thereof. Certificates for Shares so issued
may be restricted as to transfer upon advice of legal counsel that such
restriction is appropriate to comply with applicable securities laws.

 

(b)           The exercise of any Option shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares pursuant to such exercise will not violate any
state or federal securities or other laws. The Company may, in its sole
discretion, defer the effectiveness of any Option exercised hereunder in order
to permit registration or an exemption from registration for such issuance of
Shares for the purpose of compliance with applicable federal and state
securities laws.

 

(c)           A Participant electing to exercise an Option
shall give written notice to the Company of such election and of the number of
Shares subject to such exercise. The full purchase price of such Shares shall
be tendered with such notice of exercise. Until such person has been issued a
certificate or certificates for the Shares subject to such exercise, he or she
shall possess no rights as a shareholder with respect to such Shares.

 

11.          RIGHT TO TERMINATE SERVICE

 

Nothing in the Plan or in
any agreement hereunder shall confer on any Participant any right to continue
as a Director or Advisor of the Company or affect, in any way, the right of the
Company to terminate his or her service as a Director or Advisor at any time.

 

12.          RESTRICTED STOCK

 

(a)           Administration. 
Shares of Restricted Stock may be issued either alone or in addition to
other awards granted under the Plan.  The
Committee has the right to determine to whom, and the time or times at which,
Restricted Stock awards will be made, the number of shares to be awarded, the
time or times within which such awards may be subject to forfeiture, and all
other conditions of the awards.  The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.

 

(b)           Awards and Certificates.  The
prospective recipient of an award of shares of Restricted Stock shall not have
any rights with respect to such award, unless and until such recipient has
executed an agreement evidencing the award and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.

 

(i)            Each participant shall be issued a stock
certificate in respect of shares of Restricted Stock awarded under the
Plan.  Such certificate shall be registered
in the name of the participant, and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such award,
substantially in the following form:

 

6

 

“The transferability of this
certificate and the shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Enpath Medical, Inc. 1999
Non-Employee Director and Medical Advisory Board Stock Option Plan and an
Agreement entered into between the registered owner and Enpath Medical, Inc.  Copies of such Plan and Agreement are on file
in the offices of Enpath Medical, Inc., 15301 Hwy 55 West, Plymouth, MN
55447.”

 

(ii)           The Committee must require that the stock
certificates evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Shares covered by such award.

 

(c)           Restrictions and Conditions.  The
shares of Restricted Stock awarded pursuant to the Plan shall be subject to the
following restrictions and conditions:

 

(i)            Subject to the provisions of this Plan and
the award agreement, during a period set by the Committee commencing with the
date of such award (the “Restriction Period”), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan.  Within these
limits, the Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.

 

(ii)           Except as provided in paragraph (c)(i) of
this Section 12, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares and the right to receive any cash dividends.  The Committee, in its sole discretion, may
permit or require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of Restricted Stock
(to the extent shares are available under Section 3 and subject to
paragraph (c)(vi) of this Section 12).

 

(iii)          Subject to the provisions of the award
agreement and paragraph (c)(iv) of this Section 12, upon termination
of employment for any reason during the Restriction Period, all shares still
subject to restriction shall be forfeited by the participant.

 

(iv)          In the event of special hardship
circumstances of a participant whose directorship is terminated (other than for
cause), including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the Committee may,
in its sole discretion, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all remaining
restrictions with respect to such participant’s shares of Restricted Stock.

 

(v)           Notwithstanding the foregoing, in the event
of the sale by the Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, exchange,
consolidation or liquidation of the Company, the Board shall, in its sole
discretion, in connection with the Board’s adoption of the plan for sale,
merger, exchange, consolidation or liquidation, provide for one or more of the
following with respect to Restricted Stock Awards that are, on such date, still
subject to a Restriction Period:  (i) the
removal of the restrictions on any or all outstanding Restricted Stock Awards; (ii) the
complete termination of this Plan and forfeiture of outstanding Restricted
Stock Awards prior to a date

 

7

 

specified
by the Board; and (iii) the continuance of the Plan with respect to the
Restricted Stock Award which were outstanding as of the date of adoption by the
Board of such plan for sale, merger, exchange, consolidation or liquidation and
provide to participants holding Restricted Stock Awards the right to an
equivalent number of restricted shares of stock of the corporation succeeding
the Company by reason of such sale, merger, exchange, consolidation or
liquidation.  The grant of a Restricted
Stock Award pursuant to the Plan shall not limit in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

 

(vi)          As a condition of any Restricted Stock award,
the Company may require the participant to represent and warrant to the Company
at the time of the award that the Shares are being acquired only for investment
and without any present intention to sell or distribute the Shares if, in the
opinion of counsel for the Company, that such representation is required under
the Securities Act of 1933, or any other applicable law, regulation or rule of
any governmental agency.

 

13.          SUSPENSION OR TERMINATION OF OPTIONS

 

If the President of the
Company or his or her designee reasonably believes that a Participant has
committed an act of misconduct, the President may suspend the Participant’s
right to exercise any Option pending a determination by the Board (excluding
the Director accused of such misconduct). If the Board (excluding the Director
accused of such misconduct) determines that the Participant has committed an
act of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of Company rules or
policies resulting in loss, damage or injury to the Company, or if a
Participant makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company, or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Participant nor his or her
estate shall be entitled to exercise any Option whatsoever. In making such a
determination, the Board (excluding the Director accused of such misconduct)
shall give the Participant an opportunity to appear and present evidence on the
Participant’s behalf at a hearing before the Board.

 

14.          NON-TRANSFERABILITY

 

No Option granted under the
Plan shall be transferable by a Participant, other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title I of the
Employee Retirement Income Security Act or the rules thereunder. During
the lifetime of a Participant, the Option shall be exercisable only by such
Participant.

 

15.          DILUTION OR OTHER ADJUSTMENTS

 

If there shall be any change
in the Shares of the Company through merger, consolidation, reorganization,
recapitalization, stock dividend (of whatever amount), stock split or other
change in the corporate structure, appropriate adjustments in the Plan and
outstanding options shall be made by the Board. In the event of any such
changes, adjustments shall include, where appropriate, changes in the aggregate
number of Shares subject to the Plan and in the number of Shares and the price
per Share subject to outstanding options, in order to prevent dilution or
enlargement of option rights.

 

8

 

16.          CHANGE OF CONTROL OF THE COMPANY

 

In the event of a Change in
Control (as hereinafter defined), an Option granted to a Participant shall
become fully exercisable if, within one year of such Change in Control, such
Participant shall cease for any reason to be a member of the Board or Advisory
Board, as the case may be. Any exercise of an Option permitted by these Change
of Control provisions may be made at any time during the remaining term of the
Option. A Change in Control shall be deemed to have occurred if (i) there
shall be consummated (x) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
Shares would be converted into cash, securities, or other property, other than
a merger in which shareholders of the Company immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or (ii) the
shareholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company; or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934
(the “1934 Act”)) shall become the beneficial owner (within the meaning of Rule 1
3d-3 under the 1934 Act) of 30% or more of the Company’s outstanding Common
Stock; or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by the Company’s shareholders, of each new Director
was approved by a vote of at least two-thirds of the Directors then still in
office who were Directors at the beginning of the period.

 

17.          AMENDMENT OR DISCONTINUANCE OF PLAN

 

The Board may amend or
discontinue the Plan at any time provided, however, that, if necessary to
maintain the Plan in compliance with Exchange Act Rule 16b-3, the Plan may
not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder. Further, if necessary to maintain the Plan
in compliance with Exchange Act Rule 16b-3, no amendment of the Plan
shall, without shareholder approval: (i) increase by more than 10% the
number of Shares issuable under the Plan (not including increases to reflect
stock splits and stock dividends); (ii) change the eligibility
requirements or the limits on Options; (iii) decrease the minimum option
price; (iv) extend the maximum option term; or (v) materially
increase the benefits which may accrue to Participants under the Plan. Except
as provided in Section 13 hereof, the Board shall not alter or impair any
Option previously granted under the Plan without the consent of the holder of
the Option.

 

18.          TERMINATION OF PLAN

 

Unless the Plan shall have
been discontinued as provided in Section 17 hereof, the Plan shall
terminate on July 29, 2011. No Option may be granted after such date, but
termination of the Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option granted prior to
termination of the Plan.

 

19.          SHAREHOLDER APPROVAL

 

Provided that approval of
the Company’s shareholders is required under Section 17 of the Exchange
Act and the rules and regulations thereunder, the Plan shall be null and
void, and each option granted hereunder shall be null and void, if the
shareholders of the Company shall not have approved the Plan prior to May 1,
2000.

 

_____________________

Originally adopted
by Board on July 29, 1999 and approved by shareholders on April 27,
2000.

Subsequently amended
by Board on February 16, 2005 and approved by shareholders on April 28,
2005.

 

9Exhibit 10.1

 

 

Keane, Inc.

 

 

Incentive Stock Option Agreement

Granted Under 1998 Stock Incentive
Plan

 

1.                                       Grant
of Option.

 

This
agreement evidences the grant by Keane, Inc., a Massachusetts corporation (the
“Company”), on          
  ,      (the “Grant Date”) to
                              
(the “Participant”), an employee of the Company or one of its wholly-owned
subsidiaries, as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the”Code”), of an
option to purchase, in whole or in part, on the terms provided herein and in
the Company’s 1998 Stock Incentive Plan (the “Plan”), a total of 
         shares of common stock,
$.10 par value per share, of the Company (“Common Stock”) (the “Shares”) at
$      per Share. 
Unless earlier terminated, this option shall expire on, and cannot be
exercised on or after, the tenth anniversary of the Grant Date (the “Expiration
Date”).

 

It is
intended that the option evidenced by this agreement shall be an incentive
stock option as defined in Section 422 of the Code.  For so long as the Code shall so provide,
options granted to any employee which are intended to constitute incentive
stock options shall not constitute incentive stock options to the extent that
such options, in the aggregate, become exercisable for the first time in any
one calendar year for shares of Common Stock with an aggregate fair market
value (determined as of the respective date or dates of grant) of more than
$100,000.  Any shares granted above the
$100,000 limit are considered non-qualified stock options.  Except as otherwise indicated by the context,
the term “Participant”, as used in this option, shall be deemed to include any
person who acquires the right to exercise this option validly under its terms.

 

2.                                       Vesting
Schedule.

 

Except
as otherwise provided in this Agreement, this option shall become fully
exercisable as to all of the Shares on the fifth anniversary of the Grant Date
(the “Fifth Anniversary Date”). 
Notwithstanding the foregoing, if prior to the Fifth Anniversary Date
the Company determines that the cash EPS targets set forth below have been met,
and if the Board of 

 

1

 

Directors so concurs,
then this option shall immediately become exercisable as to not more than the
number of shares set forth opposite such cash EPS target in the table below.

 

	
  Cash EPS Target

  	
   

  	
  Number of 

  Shares as to which

  Option is Exercisable

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

[Vesting Schedule omitted for
purposes of form of option]

 

The
right of exercise shall be cumulative so that to the extent the option is not
exercised at any time to the maximum extent permissible it shall continue to be
exercisable, in whole or in part, with respect to all Shares for which it is
vested until the earlier of the Expiration Date or the termination of this
option under Section 3 hereof or the Plan.

 

3.                                       Exercise
of Option.

 

(a)                                  Form
of Exercise.  Each election to
exercise this option shall be in writing specifying the number of Shares to be
exercised, the option exercise price per Share and delivery instructions for
the Shares, signed by the Participant, and received by the Company at its
principal office, accompanied by payment in full as follows:

 

(i)                                     in
cash or by check, payable to the order of the Company; or

 

(ii)                                  by
delivery of cash or a check equal to the exercise price of the options by a
creditworthy broker;

 

(iii)                               by delivery of shares of
Common Stock owned by the Participant valued at their fair market value as
determined by (or in a manner approved by) the Board in good faith, with
written proof that the Common Stock was owned by the Participant at least
twelve months prior to such delivery; or

 

(iv)                              by
any combination of the above permitted forms of payment.

The Participant may purchase
less than the number of shares covered hereby, provided that no partial
exercise of this option may be for any fractional share or for fewer than ten
whole shares.

 

(b)                                 No
Special Employment Rights; Agreement Not To Compete.  Nothing contained in the Plan shall be
construed or deemed by any person under any circumstances to bind the Company
to continue the employment of the Participant for the period within which this
option

 

2

 

may be
exercised.  The Company expressly
reserves the right at any time to dismiss or otherwise terminate its
relationship with a Participant free from any claim under the Plan.  In consideration of the benefits herein
conferred, the Participant hereby agrees and covenants with the Company that
for a period of one (1) year following any termination of his or her employment
with the Company he or she (i) will not hire, attempt to hire, solicit, or
attempt to solicit to hire, or assist another or participate in any manner in
the hiring or soliciting for hire, of any person employed by Keane within the
one (1) year prior to the termination of his or her employment; and (ii) will
not “compete” with Keane.  For purposes
of the Agreement, “competing” is defined as soliciting or doing business with,
directly or indirectly, any present or past (within the two years prior to the
termination of his or her employment) customer of Keane, or any prospective
customer of Keane, with whom he or she has had contact in connection with any
business activity, but is limited to the type of services provided by Keane to
any of its customers during the term of his or her employment.

 

(c)                                  Continuous
Relationship with the Company Required. 
Except as otherwise provided in this Section 3, this option may not
be exercised unless the Participant, at the time he or she exercises this
option, is, and has been at all times since the date of grant of this option,
an employee, officer or director of, or consultant or advisor to, the Company
or any parent or subsidiary of the Company as defined in Section 424(e) or
(f) of the Code (an “Eligible Participant”).

 

(d)                                 No
Rights As Stockholder.  No
Participant shall have any rights as a stockholder with respect to any shares
of Common Stock to be distributed with respect to this option (including,
without limitation, any rights to dividends or distributions) until becoming
the record holder of such shares. 
Notwithstanding the foregoing, in the event the Company effects a split
of the Common Stock by means of a stock dividend and the exercise price of and
the number of shares subject to this option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then if the Participant exercises this option between the close of
business on the record date for such stock dividend and the close of business
on the distribution date for such stock dividend, he or she shall be entitled
to receive, on the distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such option exercise, notwithstanding the
fact that such shares were not outstanding as of the close of business on the
record date for such stock dividend.

 

(e)                                  Termination
of Relationship with the Company.  If
the Participant ceases to be an Eligible Participant for any reason, then,
except as provided in paragraphs (f) and (g) below, the right to exercise
this option shall terminate forty-five (45) days after such cessation (but in
no event after the Expiration Date), provided  that this option
shall be exercisable only to the extent that the Participant was entitled to
exercise this option on the date of such cessation.  Notwithstanding the foregoing, if the
Participant, prior to the Expiration Date, violates the non-competition or
confidentiality provisions of any employment contract, confidentiality and
nondisclosure agreement or other agreement between the Participant and the
Company, the right to exercise this option shall terminate immediately upon
written notice to the Participant from the Company describing such violation.

 

3

 

(f)                                    Exercise
Period Upon Death or Disability.  If
the Participant dies or becomes disabled (within the meaning of Section 22(e)(3)
of the Code) prior to the Final Exercise Date while he or she is an Eligible
Participant and the Company has not terminated such relationship for “cause” as
specified in paragraph (g) below, this option shall be exercisable, within the
period of one year following the date of death or disability of the Participant
by the Participant, provided  that this option shall be
exercisable only to the extent that this option was exercisable by the
Participant on the date of his or her death or disability, and further provided
that this option shall not be exercisable after the Expiration Date.

 

(g)                                 Discharge
for Cause.  If the Participant, prior
to the Expiration Date, is discharged by the Company for “cause” (as defined
below), the right to exercise this option shall terminate immediately upon the
effective date of such discharge. “Cause” shall mean misconduct by the
Participant or willful failure by the Participant to perform his or her
responsibilities to the Company in the best interests of the Company
(including, but not limited to, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by
the Company, which determination shall be conclusive.  The Participant shall be considered to have
been discharged for “Cause” if the Company determines, within 30 days after the
Participant’s resignation, that discharge for cause was warranted.

 

(h)                                 Changes
in Capitalization.  In the event of
any stock split, reverse stock split, stock dividend, recapitalization,
combination of shares, reclassification of shares, spin-off or other similar
change in capitalization or event, or any distribution to holders of Common
Stock other than a normal cash dividend, in each case other than an Acquisition
Event (as defined in the Plan), the number and class of securities and exercise
price per share subject to this option shall be appropriately adjusted by the
Company to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate.

 

4.                                       Withholding.  No Shares will be issued pursuant to the
exercise of this option unless and until the Participant pays to the Company,
or makes provision satisfactory to the Company for payment of, any federal,
state or local withholding taxes required by law to be withheld in respect of
this option.

 

5.                                       Nontransferability
of Option.  This option may not be
sold, assigned, transferred, pledged or otherwise encumbered by the
Participant, either voluntarily or by operation of law, except by will or the
laws of descent and distribution, and, during the lifetime of the Participant,
this option shall be exercisable only by the Participant.

 

6.                                       Disqualifying
Disposition.  If the Participant
disposes of Shares acquired upon exercise of this option within two years from
the date of grant of the option or one year after such Shares were acquired
pursuant to exercise of this option, the Participant shall notify the Company
in writing of such disposition within 30 days of such disposition.

 

4

 

7.                                       Provisions
of the Plan.   This option is subject
to the provisions of the Plan, a copy of which is furnished to the Participant
with this option.

 

8.                                       Notice.  All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party hereto at the address shown
beneath his or her or its respective signature to this Agreement, or at such
other address or addresses as either party shall designate to the other in
accordance with this Section 13.

 

9.                                       Pronouns.  Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural, and vice versa.

 

10.                                 Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties, and supercedes all prior
agreements and understanding, relating to the subject matter of this Agreement.

 

11.                                 Amendment.  This Agreement may be amended or modified
only by a written instrument executed by both the Company and the Employee.

 

12.                                 Governing
Law.  This Agreement shall be
governed by and enforced in accordance with the internal laws of the
Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of law thereof.

 

IN
WITNESS WHEREOF, the Company has caused this option to be executed under its
corporate seal by its duly authorized officer. 
This option shall take effect as a sealed instrument.

 

 

	
   

  	
  KEANE, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name/Title

  

 

5

 

PARTICIPANT’S
ACCEPTANCE

 

The undersigned
hereby accepts the foregoing option and agrees to the terms and conditions
thereof.  The undersigned hereby
acknowledges receipt of a copy of the Company’s 1998 Stock Incentive Plan.

 

 

	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name (please
  print):

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

 

I have
read the terms and conditions of the foregoing option and choose NOT TO
ACCEPT the option agreement.

 

	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name (please
  print):

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

6

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