Document:

EXHIBIT 4.1
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                 AMENDMENT NO. 2 TO THE RENEWED RIGHTS AGREEMENT

         AMENDMENT NO. 2, dated as of November 24, 2004 (this "Amendment"), to
the RENEWED RIGHTS AGREEMENT, dated as of August 19, 1997, as amended to date
between IONICS, INCORPORATED, a Massachusetts corporation (the "Company"), and
EQUISERVE TRUST COMPANY, N.A. (as successor to BankBoston, N.A.), as Rights
Agent (the "Rights Agreement"). All terms not otherwise defined herein shall
have the meanings given such terms in the Rights Agreement. Unless otherwise
specified herein, all section references made herein are references to sections
in the Rights Agreement.

                              W I T N E S S E T H:

         WHEREAS, on December 22, 1987, the Board of Directors of the Company
(the "Board") adopted a stockholder rights plan (the "Existing Rights Plan") and
executed a Rights Agreement between the Company and the Rights Agent (the "1987
Agreement");

         WHEREAS, the Existing Rights Plan expired on December 31, 1997;

         WHEREAS, on August 19, 1997 the Board determined it desirable and in
the best interests of the Company and its stockholders for the Company to renew
the Existing Rights Plan upon its expiration and to implement such renewal by
executing the Rights Agreement;

         WHEREAS, on November 2, 2003, the Board authorized and approved
Amendment No. 1 to the Rights Agreement, which was entered into on November 17,
2003;

         WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company
may cause the Rights Agreement to be amended at any time prior to the
Distribution Date without the approval of any holders of certificates
representing shares of Common Stock of the Company;

         WHEREAS, as of the date of this Amendment, the Distribution Date has
not occurred;

         WHEREAS, on November 23, 2004, the Board authorized and approved the
acquisition (the "2004 Acquisition") of the Company by General Electric Company
as provided under that certain Agreement and Plan of Merger (the "Merger
Agreement") dated as of November 24, 2004 by and among the Company, General
Electric Company and Triton Acquisition Corp., a Massachusetts corporation and a
wholly-owned subsidiary of General Electric Company;

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         WHEREAS, on November 23, 2004, the Board authorized and approved those
certain Voting Agreements dated as of November 24, 2004 by and among General
Electric Company and the stockholders of the Company party thereto relating to
the 2004 Acquisition and the Merger Agreement (collectively, the "Voting
Agreement"); and

         WHEREAS, in anticipation of and in connection with the execution and
delivery of the Voting Agreement and the 2004 Acquisition, on November 23, 2004,
the Board authorized and approved an amendment of the Rights Agreement for the
express purpose of rendering the Rights Agreement inapplicable to the execution
and delivery of the Voting Agreement and the 2004 Acquisition, including without
limitation, the acquisition of the Company's Common Stock by General Electric
Company or its Subsidiaries, Affiliates or Associates and the other transactions
contemplated by the Merger Agreement;

         NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

         1. Notwithstanding anything to the contrary in the Rights Agreement,
the Rights Agreement shall not apply to, and neither General Electric Company
nor its Subsidiaries, Affiliates or Associates will become an Acquiring Person
upon, and no Distribution Date, Section 11(a)(ii) Event, Stock Acquisition Date
or Triggering Event will occur as a result of, (i) the approval, execution,
delivery, consummation or performance of the Merger Agreement or the Voting
Agreement, (ii) the announcement of the 2004 Acquisition, or (iii) the
consummation of the 2004 Acquisition.

         2. The definition of "Acquiring Person" set forth in Section 1(a) is
hereby amended and restated in its entirety as follows:

                  "Acquiring Person" shall mean any Person (as hereinafter
                  defined) who or which, together with all Affiliates and
                  Associates (each as hereinafter defined) of such Person, shall
                  be the Beneficial Owner (as hereinafter defined) of 15% or
                  more of the shares of Common Stock of the Company then
                  outstanding, but shall not include an Exempt Person, the 2003
                  Special Exempt Persons or the 2004 Special Exempt Persons
                  (each as hereinafter defined).

         3. A new definition is hereby added to Section 1 as Section 1(xx),
which such new definition shall read in its entirety as follows:

                  "2004 Merger Agreement" shall mean that certain Agreement and
                  Plan of Merger dated as of November 24, 2004 by and among the
                  Company, General Electric Company and Triton Acquisition
                  Corp., a Massachusetts corporation and a wholly-owned
                  subsidiary of General Electric Company

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                  (the "2004 Merger Sub"), as amended and supplemented from time
                  to time in accordance with its terms.

         4. A new definition is hereby added to Section 1 as Section 1(yy),
which such new definition shall read in its entirety as follows:

                  "2004 Special Exempt Persons" shall mean, collectively, (i)
                  General Electric Company, (ii) 2004 Merger Sub, (iii) any
                  Subsidiaries, Affiliates or Associates of General Electric
                  Company or 2004 Merger Sub, (iv) any Persons party to the
                  Voting Agreement and (v) any Persons to whom shares of Common
                  Stock of the Company are attributed due to their relationship
                  with any Person described in the immediately preceding clauses
                  (i), (ii), (iii) and (iv) (but only to the extent of such
                  attribution); provided, however, that each such Person shall
                  cease to be 2004 Special Exempt Persons upon the earliest to
                  occur, subsequent to the execution and delivery of the 2004
                  Merger Agreement, of the following events: (A) all Persons
                  described in the immediately preceding clauses (i), (ii),
                  (iii) and (iv), together with their Subsidiaries, Affiliates
                  and Associates, cease to Beneficially Own in the aggregate 15%
                  or more of the shares of Common Stock of the Company then
                  outstanding, or (B) the 2004 Merger Agreement is terminated
                  prior to the consummation of the transactions contemplated
                  thereby.

         5. A new definition is hereby added to Section 1 as Section 1(zz),
which such new definition shall read in its entirety as follows:

                  "Voting Agreement" shall mean those certain Voting Agreements
                  dated as of November 24, 2004 by and among the Company,
                  General Electric Company and the stockholders of the Company
                  party thereto relating to the 2004 Acquisition and the Merger
                  Agreement

         6. The definition of "Final Expiration Date" set forth in Section 1(t)
is hereby amended and restated in its entirety as follows:

                  "Final Expiration Date" shall mean the earlier to occur of (i)
                  the Close of Business on August 19, 2007 and (ii) unless the
                  2004 Merger Agreement is terminated prior to the consummation
                  of the merger contemplated thereby, the Close of Business on
                  the business day immediately preceding the consummation of the
                  2004 Acquisition.

         7. Section 3(a) is hereby amended and restated in its entirety as
follows:

                  (a) Until the earliest of (i) the Close of Business on the
                  tenth Business Day (or such specified or unspecified later
                  date as may be determined by

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                  the Board before the occurrence of a Distribution Date) after
                  the Stock Acquisition Date (or, if the tenth Business Day (or
                  such later date) after the Stock Acquisition Date occurs
                  before the Record Date, the Close of Business on the Record
                  Date), (ii) the Close of Business on the tenth Business Day
                  (or such specified or unspecified later date as may be
                  determined by the Board before the occurrence of a
                  Distribution Date) after the date that a tender or exchange
                  offer by any Person (other than an Exempt Person or, solely
                  with respect to the acquisition of shares of Common Stock of
                  the Company pursuant to the 2003 Ecolochem Purchase Agreement,
                  the 2003 Special Exempt Persons, or solely with respect to the
                  acquisition of shares of Common Stock of the Company pursuant
                  to the 2004 Merger Agreement, the 2004 Special Exempt Persons)
                  is first published or sent or given within the meaning of Rule
                  14d-2(a) of the General Rules and Regulations under the
                  Exchange Act if upon consummation thereof such Person would be
                  the Beneficial Owner of 15% or more of the Common Stock of the
                  Company then outstanding (the earlier of (i) and (ii) being
                  herein referred to as the "Distribution Date"), (x) the Rights
                  will be evidenced (subject to the provisions of paragraphs (b)
                  and (c) of this Section 3) by the certificates for the Common
                  Stock of the Company registered in the names of the holders
                  thereof (which certificates shall be deemed also to be
                  certificates for Rights) and not by separate certificates and
                  (y) the Rights will be transferable only in connection with
                  the transfer of the underlying shares of Common Stock of the
                  Company (including a transfer to the Company). As soon as
                  practicable after the Distribution Date, the Rights Agent will
                  send by first-class, insured, postage prepaid mail, to each
                  record holder of the Common Stock of the Company as of the
                  Close of Business on the Distribution Date, at the address of
                  such holder shown on the records of the Company, one or more
                  rights certificates, substantially in the form attached hereto
                  as Exhibit A (the "Rights Certificates"), evidencing one Right
                  for each share of Common Stock of the Company so held, subject
                  to adjustment as provided herein. In the event that an
                  adjustment in the number of Rights per share of Common Stock
                  of the Company has been made pursuant to Section 11(i) hereof,
                  at the time of distribution of the Rights Certificates, the
                  Company shall not be required to issue Rights Certificates
                  evidencing fractional Rights, but may, in lieu thereof, make
                  the necessary and appropriate rounding adjustments (in
                  accordance with Section 14(a) hereof) so that Rights
                  Certificates representing only whole numbers of Rights are
                  distributed and cash is paid in lieu of any fractional Rights.
                  As of and after the Distribution Date, the Rights will be
                  evidenced solely by such Rights Certificates.

         8. Section 11(a)(ii) is hereby amended and restated in its entirety as
follows:

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            (ii)  In the event (a "Section 11(a)(ii) Event") that any Person
                  (other than an Exempt Person), alone or together with its
                  Affiliates and Associates, shall, at any time after the Rights
                  Dividend Declaration Date, become the Beneficial Owner of 15%
                  or more of the shares of Common Stock of the Company then
                  outstanding, unless the event causing the 15% threshold to be
                  crossed (A) is a transaction set forth in Section 13(a)
                  hereof, or (B) is an acquisition of shares of Common Stock of
                  the Company pursuant to a tender offer or an exchange offer
                  for all outstanding shares of Common Stock of the Company at a
                  price and on terms determined by at least a majority of the
                  Outside Directors, after receiving advice from one or more
                  investment banking firms, to be (x) at a price that is fair to
                  stockholders (taking into account all factors which such
                  members of the Board deem relevant, including without
                  limitation prices which could reasonably be achieved if the
                  Company or its assets were sold on an orderly basis designed
                  to realize maximum value) and (y) otherwise in the best
                  interests of the Company and its stockholders, or (C) is the
                  execution, delivery, consummation and performance of the 2003
                  Ecolochem Purchase Agreement, or (D) is the sale, disposition,
                  conveyance or other transfer of shares of Common Stock of the
                  Company from one or more Persons, each of whom was a 2003
                  Special Exempt Person immediately prior to such transaction,
                  to a Person who, immediately following such transaction, is a
                  2003 Special Exempt Person, or (E) is the execution, delivery,
                  consummation and performance of the Voting Agreement or the
                  2004 Merger Agreement, then promptly after the date of
                  occurrence of a Section 11(a)(ii) Event, proper provision
                  shall be made so that each holder of a Right (except as
                  provided below and in Section 7(e) hereof) shall thereafter
                  have the right to receive, upon exercise thereof at the then
                  current Purchase Price in accordance with the terms of this
                  Agreement, such number of shares of Common Stock of the
                  Company as shall equal the result obtained by (1) multiplying
                  the then current Purchase Price by the then number of shares
                  of Common Stock of the Company for which a Right was
                  exercisable immediately prior to the first occurrence of a
                  Section 11(a)(ii) Event (whether or not such Right was then
                  exercisable) and (2) dividing that product (which following
                  such first occurrence, shall thereafter be referred to as the
                  "Purchase Price" for each Right and for all purposes of this
                  Agreement) by 50% of the Current Market Price per share of
                  Common Stock of the Company on the date of such first
                  occurrence (such number of shares being referred to as the
                  "Adjustment Shares").

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<PAGE>

         9. Section 13(d) is hereby amended and restated in its entirety as
follows:

            (d)   Notwithstanding anything in this Agreement to the contrary,
                  (A) Section 13 hereof shall not be applicable to a transaction
                  described in subparagraph (x) or subparagraph (y) of Section
                  13(a) hereof if (i) such transaction is consummated with a
                  Person or Persons (or a wholly owned Subsidiary of any such
                  Person or Persons) who acquired shares of Common Stock of the
                  Company pursuant to a tender offer or exchange offer for all
                  outstanding shares of Common Stock of the Company which
                  complies with the exception provided for in Section 11(A) (ii)
                  hereof, (ii) the price per share of Common Stock of the
                  Company offered in such transaction is not less than the price
                  per share of Common Stock of the Company paid to all holders
                  of shares of Common Stock of the Company whose shares were
                  purchased pursuant to such tender offer or exchange offer and
                  (iii) the form of consideration being offered to the remaining
                  holders of shares of Common Stock of the Company pursuant to
                  such transaction is the same as the form of consideration paid
                  pursuant to such tender offer or exchange offer, and (B) any
                  transaction that results from the execution, delivery,
                  consummation or performance of the Voting Agreement or the
                  2004 Merger Agreement shall not be a Section 13 Event. Upon
                  consummation of any such transaction contemplated by this
                  Section 13(d), all Rights hereunder shall expire.

         11. Sections 18(a) and 20(c) are hereby amended by inserting the word
"gross" in front of negligence.

         10. Except as amended hereby, the Rights Agreement shall continue in
full force and effect.

         11. The laws of the Commonwealth of Massachusetts shall govern the
interpretation, validity and performance of the terms of this Amendment,
regardless of the law that might be applied under principles of conflicts of
laws.

         12. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original but all of which, when taken together, shall
constitute one and the same instrument.

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<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to the Renewed Rights Agreement to be duly executed and their respective
corporate seals to be hereunto affixed and attested, all as of the day and year
first above written.

                                         IONICS, INCORPORATED

                                         By: /s/Stephen Korn
                                             ------------------------------
                                             Name: Stephen Korn
                                             Title: Vice President and
                                             General Counsel

Attest:

                                         EQUISERVE TRUST COMPANY, N.A.

By: /s/ Jeff Seiders                     By: /s/ Tyler Heynes
    --------------------------               ------------------------------
    Name: Jeff Seiders                       Name: Tyler Heynes
    Title: Account Manager                   Title: Managing Director

                                       -7-EXHIBIT 10.1
                                                                    ------------

                              IONICS, INCORPORATED

                 AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN

                     (AS AMENDED THROUGH NOVEMBER 24, 2004)

    1. PURPOSE. The purpose of this Plan is to enable officers and other key
employees of, and consultants to, Ionics, Incorporated (the "Company") and any
present or future parent or subsidiary of the Company (collectively, "Related
Corporations") to (i) own shares of Stock in the Company, (ii) participate in
the stockholder value which has been created, (iii) have a mutuality of interest
with other stockholders and (iv) enable the Company to attract, retain and
motivate key employees and consultants of particular merit. As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.

    2. DEFINITIONS. For the purposes of the Plan, the following terms shall have
the meanings set forth below:

        (a) AWARD means the grant or sale pursuant to the Plan of any Restricted
    Stock Awards, Stock Options or Long-Term Performance Awards.

        (b) BOARD means the Board of Directors of the Company.

        (c) CODE means the Internal Revenue Code of 1986, as amended from time
    to time, or any statute successor thereto, and any regulations issued from
    time to time thereunder.

        (d) COMPANY means Ionics, Incorporated, a corporation organized under
    the laws of the Commonwealth of Massachusetts (or any successor
    corporation).

        (e) DISABILITY means "permanent and total disability" as defined under
    Section 22(e)(3) of the Code or any successor statute.

        (f) EFFECTIVE DATE means the date that the Plan is approved by both the
    Board of Directors of the Company and the stockholders of the Company, and
    if not approved on the same day, the date of the last approval.

        (g) FAIR MARKET VALUE means, as of any given date, the last reported
    sales price of the Stock as reported in THE WALL STREET JOURNAL for such
    date, or if no such sale is reported on the last preceding trade date to the
    sales date, or if the Stock is not publicly traded on or as of such date,
    the fair market value of the Stock as determined by the Committee in good
    faith based on the available facts and circumstances at the time.

        (h) INCENTIVE STOCK OPTION means any Stock Option intended to be and
    designated as an "Incentive Stock Option" within the meaning of Section 422
    of the Code.

        (i) LONG-TERM PERFORMANCE AWARD means an award made pursuant to Section
    7 below that is payable in cash and/or Stock in accordance with the terms of
    the grant, based on Company, business unit and/or individual performance
    over a period of at least one year.

        (j) NON-QUALIFIED STOCK OPTION means any Stock Option that is not an
    Incentive Stock Option.

        (k) PARTICIPANT means an employee or consultant to whom an Award is
    granted pursuant to the Plan.

        (l) PLAN means the Ionics, Incorporated 1997 Stock Incentive Plan, as
    set forth herein and as it may be amended from time to time.

<PAGE>

        (m) RESTRICTED STOCK AWARD means an award made pursuant to Section 8
    below that is payable in Stock in accordance with and subject to the terms
    of the grant.

        (n) RETIREMENT means a termination of employment, for reasons other than
    death, which satisfies the requirements for normal, early, late or
    disability retirement in accordance with the Ionics, Incorporated Retirement
    Plan or any successor plan.

        (o) STOCK means the common stock, $1.00 par value per share, of the
    Company.

        (p) STOCK OPTION OR OPTION means any option to purchase shares of Stock
    granted pursuant to Section 6 below.

    In addition the term CHANGE IN CONTROL shall have meaning set forth in
    Section 9.2.

    3. ADMINISTRATION

        (a) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
    the Board or, subject to paragraph 3(d) (relating to compliance with Section
    162(m) of the Code), by a committee appointed by the Board (the
    "Committee"), which shall initially be the Compensation Committee of the
    Board. Hereinafter, all references in this Plan to the "Committee" shall
    mean the Board if no Committee has been appointed. Subject to ratification
    of the grant or authorization of each Award by the Board (if so required by
    applicable state law), and subject to the terms of the Plan, the Committee
    shall have the authority to (i) determine to whom (from among the class of
    employees eligible under Section 5 to receive Incentive Stock Options)
    Incentive Stock Options shall be granted, and to whom (from among the class
    of individuals and entities eligible under Section 5 to receive
    Non-Qualified Stock Options, Restricted Stock Awards and Long-Term
    Performance Awards) Non-Qualified Stock Options, Restricted Stock Awards and
    Long-Term Performance Awards may be granted, (ii) determine the time or
    times at which Awards shall be granted; (iii) determine the purchase price
    of shares subject to each Option or Restricted Stock Award, which prices
    shall not be less than the minimum price specified in Section 6.2(a) or
    Section 8, as the case may be; (iv) determine whether each Option granted
    shall be an Incentive Stock Option or a Non-Qualified Stock Option; (v)
    determine (subject to Sections 6.2(b) and 6.2(c)) the time or times when
    each Option shall become exercisable and the duration of the exercise
    period; (vi) extend the period during which outstanding Options may be
    exercised; (vii) determine whether restrictions such as repurchase options
    are to be imposed on shares subject to Awards and the nature of such
    restrictions, if any; (viii) determine the Restriction Period (as set forth
    in Section 8.1(a)); and (viii) interpret the Plan and prescribe and rescind
    rules and regulations relating to it. If the Committee determines to issue a
    Non-Qualified Stock Option, it shall take whatever actions it deems
    necessary, under Section 422 of the Code and the regulations promulgated
    thereunder, to ensure that such Non-Qualified Stock Option is not treated as
    an Incentive Stock Option. The interpretation and construction by the
    Committee of any provisions of the Plan or of any Award granted under it
    shall be final unless otherwise determined by the Board. The Committee may
    from time to time adopt such rules and regulations for carrying out the Plan
    as it may deem advisable. No member of the Board or the Committee shall be
    liable for any action or determination made in good faith with respect to
    the Plan or any Award granted under it.

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

        (c) GRANT OF AWARDS TO BOARD MEMBERS. Awards may be granted to members
    of the Board who are otherwise eligible to receive Awards under the Plan.
    All grants of Awards to members of the Board

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<PAGE>

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

        (d) PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may
    take such action as may be necessary to ensure that Stock Options and
    Restricted Stock Awards granted under the Plan qualify as "qualified
    performance-based compensation" within the meaning of Section 162(m) of the
    Code and applicable regulations promulgated thereunder ("Performance-Based
    Compensation"). Such action may include, in the Board's discretion, some or
    all of the following: (i) if the Board determines that Stock Options and
    certain Restricted Stock Awards granted under the Plan generally shall
    constitute Performance-Based Compensation, the Plan shall be administered,
    to the extent required for such Stock Options and certain Restricted Stock
    Awards to constitute Performance-Based Compensation, by a Committee
    consisting solely of two or more "outside directors" (as defined in
    applicable regulations promulgated under Section 162(m) of the Code); and
    (ii) Stock Options and certain Restricted Stock Awards granted under the
    Plan may be subject to such other terms and conditions as are necessary for
    compensation recognized in connection with the exercise or disposition of
    such Stock Option or the disposition of Stock acquired pursuant to such
    Stock Option to constitute Performance-Based Compensation.

    4. SHARES OF STOCK SUBJECT TO THE PLAN.

        (a) STOCK. The Stock subject to Awards shall be authorized but unissued
    shares of Stock or shares of Stock reacquired by the Company in any manner.
    Subject to adjustment as provided in subsection (c) of this Section 4, the
    aggregate number of shares of Stock that may be issued pursuant to the Plan
    shall be (i) 2,750,000 (which number includes the aggregate number of shares
    with respect to which no options have been granted under the 1979 Stock
    Option Plan on the Effective Date), plus (ii) such number of shares as to
    which options granted under the 1979 Stock Option Plan terminate or expire
    without being fully exercised, plus (iii) effective as of January 1, 1998
    and each of the three successive years thereafter, a number of shares of
    Stock equal to two percent (2%) of the total number of shares of Stock
    issued and outstanding as of the close of business on December 31 of the
    preceding year. Subject to adjustment as provided in subsection (c) of this
    Section 4, no more than an aggregate of 750,000 shares of Stock may be
    issued pursuant to the exercise of Incentive Stock Options granted under the
    Plan (including shares issued pursuant to the exercise of Incentive Stock
    Options granted under the Plan that are the subject of disqualifying
    dispositions within the meaning of Sections 421, 422 and 424 of the Code and
    the regulations thereunder); no more than an aggregate of 150,000 shares of
    Stock may be issued in connection with Long-Term Performance Awards granted
    under this Plan; and no more than an aggregate of 1,000,000 shares of Stock
    may be issued in connection with Restricted Stock Awards. If any Award
    granted under the Plan expires, ceases to be exercisable or is terminated,
    surrendered (other than pursuant to Sections 6.2(k) or 12.5) or forfeited,
    in whole or in part, the unpurchased shares subject to such Award shall
    again be available for grants of Awards under the Plan.

        No employee of the Company or any Related Corporation may be granted
    Options (or any other Award) to acquire, in the aggregate, more than 200,000
    shares of Stock during any 12-month period under the Plan. If any Award
    granted under the Plan expires, or is terminated, surrendered or forfeited,
    in whole or in part, the unpurchased shares subject to such Award shall be
    included in the determination of the aggregate number of shares of Stock
    deemed to have been granted to such employee under the Plan.

        (b) COMPUTATION OF AVAILABLE SHARES. For the purpose of computing the
    total number of shares of Stock available for Plan purposes at any time
    during which the Plan is in effect, there shall be debited against the total
    number of shares determined to be available pursuant to paragraphs (a) and
    (c) of this Section 4 the maximum number of shares of Stock subject to
    issuance upon exercise of Options or upon

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<PAGE>

    settlement of other Awards theretofore made under the Plan. In addition,
    however, shares related to the unexercised, undistributed or restricted
    portion of any expired, terminated, surrendered (other than pursuant to
    Sections 6.2(k) or 12.5) or forfeited Award for which no material benefit
    was received by a Participant (e.g. dividends, but not including voting
    rights), or to the portion of any Award settled in cash, shall be recredited
    to the number remaining upon such expiration, termination, surrender or
    forfeiture and thereafter again be available for distribution in connection
    with future Awards under the Plan.

        (c) OTHER ADJUSTMENT. In the event of any merger, reorganization,
    consolidation, recapitalization, Stock dividend, or other change in
    corporate structure affecting the Stock, such substitution or adjustment
    shall be made in the aggregate number of shares reserved for issuance under
    the Plan, and in the number and option price of shares subject to
    outstanding Options and other Stock-based Awards granted under the Plan, as
    may be determined to be appropriate by the Committee in its sole discretion
    provided that the number of shares subject to any Award shall always be a
    whole number.

    5. ELIGIBILITY. Incentive Stock Options may be granted only to employees of
the Company and any Related Corporation. Officers and other key employees of or
consultants to the Company, who are responsible for or contribute to, as
determined by the Committee in its sole discretion, the management, growth
and/or profitability of the business of the Company and/or any Related
Corporation are eligible for Awards under the Plan.

    6. STOCK OPTIONS.

    6.1 PROVISION FOR GRANT. Stock Options may be granted alone, in addition to
or in tandem with other Awards under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee who is an employee
of the Company, or of any Related Corporation, Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options. To the extent that
any Stock Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option. In the case of any other
person eligible for an Award under the Plan, any Stock Option granted under the
Plan shall be a Non-Qualified Stock Option.

    Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised
(other than acceleration of the exercisability of Stock Options hereunder) so as
to disqualify the Plan under Section 422 of the Code, or, without the consent of
the optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422.

    6.2 TERMS AND CONDITIONS. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem appropriate:

        (a) OPTION PRICE. The option price per share of Stock purchasable under
    a Stock Option shall be determined by the Committee at the time of grant but
    shall be not less than 100% of the Fair Market Value of the Stock at the
    time of grant. However, any Incentive Stock Option granted to any optionee
    who, at the time the option is granted, owns more than 10% of the voting
    power of all classes of stock of the Company or of a parent or subsidiary
    corporation (in each case as defined in Section 424 of the Code) shall have
    an exercise price no less than 110% of Fair Market Value per share on date
    of the grant.

        (b) OPTION TERM. The term of each Stock Option shall be fixed by the
    Committee, but no Stock Option shall be exercisable more than ten years
    after the date on which the Option is granted. However, any Incentive Stock
    Option granted to any optionee who, at the time the Option is granted, owns
    more than 10% of the voting power of all classes of stock of the Company or
    of a parent or subsidiary corporation (in each case as defined in Section
    424 of the Code) may not have a term of more than five years. No Stock
    Option may be exercised by any person after expiration of the term of the
    Option.

                                        4
<PAGE>

        (c) EXERCISABILITY. Stock Options shall be exercisable at such time or
    times and subject to such terms and conditions as shall be determined by the
    Committee at or after grant, provided, however, that, except as provided in
    Sections 6.2(f), 6.2(g) and 9, unless otherwise determined by the Committee
    at or after grant, no Stock Option shall be exercisable during the six
    months following the date of the granting of the Option. If the Committee
    provides, in its discretion, that any Stock Option is exercisable only in
    installments, the Committee may waive such installment exercise provisions
    at any time at or after grant in whole or in part, based on such factors as
    the Committee shall determine, in its sole discretion.

        (d) METHOD OF EXERCISE. Subject to whatever installment exercise
    provisions apply pursuant to Section 6.2(c), Stock Options may be exercised
    in whole or in part at any time and from time to time during the option
    period, by giving written notice of exercise to the Company specifying the
    number of shares to be purchased. Such notice shall be accompanied by
    payment in full of the purchase price, either by certified or bank check, or
    such other instrument as the Committee may accept. As determined by the
    Committee, in its sole discretion, payment in full or in part may also be
    made in the form of unrestricted Stock already owned by the optionee (based,
    in each case, on the Fair Market Value of the Stock on the date the option
    is exercised, as determined by the Committee); provided, however, that, in
    the case of an Incentive Stock Option, the right to make a payment in the
    form of already owned shares may be authorized only at the time the Option
    is granted.

        If payment of the Option exercise price of a Stock Option is made in
    whole or in part in the form of unrestricted Stock already owned by the
    Participant, the Company may require that the Stock has been owned by the
    Participant for a specified minimum period of time, for the purpose of
    avoiding any charge to the Company's earnings, limiting the pyramiding of
    Stock Option exercises, or such other purposes as the Company deems
    appropriate.

        No shares of Stock shall be issued until full payment therefor has been
    made. An optionee shall generally have the rights to dividends or other
    rights of a shareholder with respect to shares subject to the Option when
    the optionee has given written notice of exercise, has paid in full for such
    shares, and, if requested, has given the representation described in Section
    12.1.

        (e) TRANSFERABILITY. No Stock Option shall be transferable by the
    optionee otherwise than by will or by the laws of descent and distribution,
    and all Stock Options shall be exercisable, during the optionee's lifetime,
    only by the optionee, provided, however, the Committee may grant
    Non-Qualified Stock Options that are transferable, without payment of
    consideration, to immediate family members of the optionee or to trusts for
    such family members, or to partnerships in which such immediate family
    members are the only parties, subject to such limits as the Committee may
    establish, and the transferee shall remain subject to all of the terms and
    conditions applicable to such Non-Qualified Stock Options prior to such
    transfer.

        (f) TERMINATION BY REASON OF DEATH. If an optionee's employment by or
    association with the Company or any Related Corporation terminates by reason
    of death, any Stock Option held by such optionee may thereafter be
    exercised, to the extent then exercisable at the time of death, or on such
    accelerated basis as the Committee may determine at or after grant, by the
    legal representative of the estate or by the legatee of the optionee under
    the will of the optionee, for a period of 90 days (or such shorter period as
    the Committee may specify at grant) from the date of such death or until the
    expiration of the stated term of such Stock Option, whichever period is the
    shorter.

        (g) TERMINATION BY REASON OF DISABILITY OR RETIREMENT. If an optionee's
    employment by or association with the Company or any Related Corporation
    terminates by reason of Disability or Retirement, any Stock Option held by
    such optionee may thereafter be exercised by the optionee, to the extent it
    was exercisable at the time of termination, or on such accelerated basis as
    the Committee may determine at or after grant, for a period of 90 days (or
    such shorter period as the Committee may specify at grant) from the date of
    such termination of employment or until the expiration of the stated term of
    such Stock Option, whichever period is the shorter; provided, however, that,
    if the optionee dies within

                                        5
<PAGE>

    such 90-day period (or such shorter period as the Committee shall specify at
    grant), any unexercised Stock Option held by such optionee shall thereafter
    be exercisable to the extent to which it was exercisable at the time of
    death for a period of 90 days from the date of such death or until the
    expiration of the stated term of such Stock Option, whichever period is the
    shorter.

        (h) OTHER TERMINATION. Unless otherwise determined by the Committee at
    grant, if an optionee's employment by or association with the Company or any
    Related Corporation terminates for any reason other than death, Disability
    or Retirement, the Stock Option shall thereupon terminate, except that in
    the Committee's sole discretion, based upon such factors as the Committee
    may deem appropriate, the Committee may specify that such Stock Option may
    be exercised, to the extent exercisable at termination, or on such
    accelerated basis as the Committee may determine at or after grant, for a
    period of 90 days (or such shorter period as the Committee shall specify at
    grant) from the date of such termination or until the expiration of the
    stated term of such Stock Option, whichever period is shorter.

        (i) EXTENSION OF EXERCISABILITY PERIOD. The Committee or Board of
    Directors pursuant to the authority granted in Section 3(a) may in its
    discretion grant Stock Options which provide for longer periods of
    exercisability following the termination of an optionee's employment by or
    association with the Company or any Related Company than is provided in
    Subsections 6.2(f), 6.2(g), and 6.2(h), provided that any extended
    exercisability period shall not extend beyond the expiration of the stated
    term of the Stock Option. Notwithstanding Sections 6.2(f), 6.2(g) and
    6.2(h), the Committee or the Board of Directors may also in its discretion
    amend outstanding Stock Options to extend the period during which they
    remain exercisable, provided that any extended exercisability period shall
    not extend beyond the expiration of the stated term of the Stock Option.

        (j) INCENTIVE STOCK OPTION LIMITATIONS. To the extent required for
    "incentive stock option" status under Section 422 of the Code, the aggregate
    Fair Market Value (determined as of the time of grant) of the Stock with
    respect to which Incentive Stock Options granted are exercisable for the
    first time by the optionee during any calendar year under the Plan and/or
    any other stock option plan of the Company and any parent or subsidiary
    corporation (within the meaning of Section 424 of the Code) shall not exceed
    $100,000. The Company intends to designate any Options granted in excess of
    the $100,000 limitation as Non-Qualified Stock Options, and the Company
    shall issue certificates to the optionee with respect to the Options that
    are Non-Qualified Options and Options that are Incentive Stock Options.

        (k) CASHLESS EXERCISE; SATISFACTION OF TAX WITHHOLDINGS. To the extent
    permitted under applicable laws and regulations, at the request of a
    Participant, the Company agrees to cooperate in a "cashless exercise" of an
    Option. The cashless exercise shall be effected by the Participant
    delivering to a registered securities broker acceptable to the Company
    instructions to sell a sufficient number of shares of Stock for which such
    Option is then exercisable to cover the costs and expenses associated with
    such exercise and sale. Under any Option, the Committee may permit a
    Participant to pay any applicable withholding taxes by delivering a
    sufficient number of previously owned shares of Common Stock to the Company
    to satisfy such taxes.

    7. LONG-TERM PERFORMANCE AWARDS

    7.1 PROVISION FOR GRANT. Long-Term Performance Awards may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the nature, length and starting date of the performance period (the
"Performance Period") for each Long-Term Performance Award, which subject to
Section 9 below shall be a period of at least one year, and shall determine the
performance objectives to be used in valuing Long-Term Performance Awards and
determining the extent to which such Long-Term Performance Awards have been
earned. Performance objectives may vary from Participant to Participant and
between groups of Participants and shall be based upon such Company, business
unit and/or individual performance factors and criteria as the Committee may
deem appropriate, including, but not limited to, earnings per share or return on
equity. Performance Periods may overlap and Participants may participate
simultaneously with respect to Long-Term Performance Awards that are subject to
different Performance Periods and/or different performance factors and criteria.

                                        6
<PAGE>

    7.2 PERIODICAL DETERMINATION OF PERFORMANCE. At the beginning of each
Performance Period, the Committee shall determine for each Long-Term Performance
Award subject to such Performance Period the range of dollar values or number of
shares of Stock to be awarded to the Participant at the end of the Performance
Period if and to the extent that the relevant measure(s) of performance for such
Long-Term Performance Award is (are) met. Such dollar values or number of shares
of Stock may be fixed or may vary in accordance with such performance and/or
other criteria as may be specified by the Committee, in its sole discretion.

    7.3 ADJUSTMENT OF AWARDS. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives to
a Long-Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long-Term
Performance Awards affected, to the extent deemed appropriate by the Committee,
in its sole discretion, to avoid unintended windfalls or hardship.

    7.4 TERMINATION OF EMPLOYMENT. Subject to Section 9 below and unless
otherwise provided in the applicable Award agreement(s), if a Participant
terminates employment or other association with the Company or any Related
Corporation during a Performance Period because of death, Disability or
Retirement, such Participant shall be entitled to a payment with respect to each
outstanding Long-Term Performance Award at the end of the applicable Performance
Period (i) based, to the extent relevant under the terms of the award, upon the
Participant's performance for the portion of such Performance Period ending on
the date of termination and the performance of the applicable business unit(s)
for the entire Performance Period, and (ii) prorated, where deemed appropriate
by the Committee, for the portion of the Performance Period during which the
Participant was employed by or associated with the Company and any Related
Corporation, all as determined by the Committee, in its sole discretion.
However, the Committee may provide for an earlier payment in settlement of such
award in such amount and under such terms and conditions as the Committee deems
appropriate.

    Subject to Section 9 below, if a Participant terminates employment by or
association with the Company and any Related Corporation during a Performance
Period for any other reason, then such Participant shall not be entitled to any
payment with respect to Long-Term Performance Awards subject to such Performance
Period, unless the Committee shall otherwise determine, in its sole discretion.

    7.5 FORM OF PAYMENT. The earned portion of a Long-Term Performance Award may
be paid currently or on a deferred basis with such interest or earnings
equivalent as may be determined by the Committee, in its sole discretion.
Payment shall be made in the form of cash or whole shares of Stock, either in a
lump sum payment or in annual installments commencing as soon as practicable
after the end of the relevant Performance Period, all as the Committee shall
determine at or after grant.

    8. RESTRICTED STOCK AWARDS

    8.1 TERMS AND CONDITIONS. The Committee may grant Restricted Stock Awards in
furtherance of the purpose of the Plan without, unless otherwise provided, other
payment and subject to the restrictions referred to in this Section 8. All
Restricted Stock Awards granted under the Plan shall be so granted for, and in
consideration of, past services rendered to the Company or a Related Corporation
or other lawful consideration and shall be subject to the following terms and
conditions and to such other terms and conditions, not inconsistent with the
Plan, as shall be prescribed by the Committee in its sole discretion and as
shall be contained in the Restricted Stock Agreement referred to in Section
8.1(d) hereof:

        (a) RESTRICTION PERIOD. At the time of a grant of shares of Restricted
    Stock, the Committee shall establish for all such shares received by a
    grantee (a "Restricted Stock Grantee") (or, if it is the intent that the
    total of such shares shall be divided into separate parts, for each part of
    such total) a period of time (the "Restriction Period") commencing with the
    date of the grant of such shares during which time the shares may not be
    sold, assigned, transferred, pledged, or otherwise encumbered, except as
    herein provided. Different Restriction Periods may be fixed for different
    parts of the shares that are being granted to a recipient, and the
    Restriction Period for one grant may differ from the Restriction Period

                                        7
<PAGE>

    for other grants; provided, however, that in no event will the total
    Restriction Period with respect to any Restricted Stock Award be less than
    three (3) years, and restrictions shall lapse as to equal pro rata portions
    of a Restricted Stock Award over the total Restriction Period. Except for
    such restrictions, unless otherwise determined by the Committee, the
    Restricted Stock Grantee as owner of the shares of Stock subject to the
    Restricted Stock Awards shall have all the rights of a stockholder,
    including but not limited to the right to receive any dividends paid on such
    shares of Stock and the right to vote such shares of Stock. The restrictions
    shall terminate upon the expiration of the Restriction Period, or, if
    determined by the Committee, earlier upon the Restricted Stock Grantee's
    death, Disability, Retirement, or other voluntary or involuntary termination
    of employment without cause.

        (b) TERMINATION OF EMPLOYMENT. If a Restricted Stock Grantee ceases to
    be an employee of the Company or a Related Corporation, all Restricted Stock
    Awards theretofore granted to him as to which the restrictions imposed under
    this Section 8 have not terminated or do not thereby terminate shall, except
    as otherwise provided in this Plan, upon such cessation of employment be
    forfeited and returned to the Company. Notwithstanding the foregoing, the
    Committee in its discretion may waive such forfeiture, but only where the
    termination of employment of a Restricted Stock Grantee is due to
    Retirement, Disability, death or voluntary or involuntary termination of
    employment without cause. In any of such events the Committee may provide
    that any remaining restriction period shall terminate for all Restricted
    Stock Awards of the Restricted Stock Grantee and the Company shall deliver,
    upon remittance by the Restricted Stock Grantee of the amount of any taxes
    or other amounts which have been withheld by the Company, the shares of
    Stock subject to the Restricted Stock Award to or for the benefit of the
    Restricted Stock Grantee free of restrictions. In the event that the
    Restricted Stock Grantee forfeits any shares of Stock subject to the
    Restricted Stock Award, the Company shall reacquire such shares without
    making any payment to the Restricted Stock Grantee therefor.

        (c) LEGEND. Each certificate issued in respect of Restricted Stock
    Awards granted under the Plan shall be registered in the name of the
    Restricted Stock Grantee and deposited by him, together with a stock power
    endorsed in blank, with the Company and shall bear the following (or a
    similar) legend:

        "The transferability of this certificate and the shares of stock
    represented hereby are subject to the terms, conditions and restrictions
    (including forfeiture) contained in a Plan and an Agreement between the
    registered owner and Ionics, Incorporated. A copy of such Plan and Agreement
    will be furnished to the holder of this certificate upon written request and
    without charge."

        (d) RESTRICTED STOCK AGREEMENT. The Restricted Stock Grantee shall enter
    into an Agreement (a "Restricted Stock Agreement") with the Company, in a
    form not inconsistent with the Plan, agreeing to the terms and conditions of
    the grant and such other matters as the Committee shall in its sole
    discretion determine. The Restricted Stock Agreement may be amended by the
    Committee at any time to modify the Restriction Period with respect to any
    Restricted Stock Awards the restrictions on which have not then lapsed or in
    any other respect; provided that, except as provided in Section 10, no
    amendment shall adversely affect the terms and conditions of an outstanding
    grant without the written consent of the Restricted Stock Grantee.

        (e) TERMINATION OF RESTRICTIONS. Upon the termination of the
    restrictions imposed under this Section 8, the Company shall return to the
    Restricted Stock Grantee (or his legal representative, beneficiary, or heir)
    certificates, without a legend, for the shares of Common Stock deposited
    with it pursuant to subsection (c) hereof.

    8.2 TAXES. The Company or a Related Corporation, as the case may be, shall
have the right to deduct from amounts payable to the Restricted Stock Grantee,
or to require such grantee to pay, any taxes required by law to be withheld with
respect to Restricted Stock Awards. In the Committee's discretion such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the grant creating the tax obligation, valued at their fair
market value on the date of delivery.

    8.3 NOTICE OF ELECTION UNDER SECTION 83(B). Each Restricted Stock Grantee
making an election under Section 83(b) of the Code and the regulations and
rulings promulgated thereunder, will provide a copy

                                        8
<PAGE>

thereof to the Company within thirty days of the filing of such election with
the Internal Revenue Service and the Restricted Stock Agreement referred to in
Section 8 shall so provide. In the event a Restricted Stock Grantee does not
provide to the Company a copy of a valid election under Section 83(b) of the
Code filed with the Internal Revenue Service with respect to a Restricted Stock
Award, the Company may presume that no such election was filed and, accordingly,
withhold from any payments (including salary and bonuses) otherwise payable to
the Restricted Stock Grantee in order to comply with any withholding obligation
arising upon the termination of any restriction.

    9. CHANGE IN CONTROL PROVISIONS.

    9.1 CONSEQUENCES OF EVENT. In the event of a Change in Control, in addition
to the adjustment provided for in Section 4(c), the Committee may in its
discretion determine whether, with respect to all Stock Options granted and
Awards made before the Change in Control, the following acceleration and
valuation provisions shall apply:

        (a) Any Stock Options awarded under the Plan not previously exercisable
    shall thereupon become fully exercisable.

        (b) Any remaining restrictions on Restricted Stock Awards shall lapse;

        (c) Any outstanding Long-Term Performance Awards shall be paid out in
    cash within thirty days following the Change in Control based on prorated
    target results for the Performance Periods in question.

    In case of any reorganization, merger or consolidation of the Company into
or with another company or in the case of any sale or conveyance to another
company or entity of the property of the Company as a whole or substantially as
a whole, each Stock Option and other Award shall be automatically converted into
either (i) a stock option or other award which covers shares of stock or other
securities equivalent in kind and value to the shares or other securities the
optionee or holder would have held if the Stock Option or other Award had been
exercised or received in full prior to such reorganization, merger,
consolidation, sale or conveyance and no disposition thereof had subsequently
been made, and the option price under each Stock Option or other Award shall be
proportionately adjusted, or (ii) a cash amount equal to the excess if any, of
the consideration per share to be paid with respect to each share of Stock
pursuant to such reorganization, merger, consolidation, sale or conveyance of
the Company over the option price under each Stock Option or other Award.

    9.2 CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
means the happening of any of the following:

        (a) The acquisition, other than from the Company, by any individual,
    entity or group (within the meaning of Section 12(d)(3) or 14(d)(2) of the
    Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
    beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
    Exchange Act) of 20% 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
    "Company Voting Securities"); provided, however, that any acquisition by (x)
    any noncorporate shareholder of the Company as of the effective date of the
    initial registration of an offering of Stock under the Securities Act of
    1933, (y) the Company or any of its subsidiaries, or any employee benefit
    plan (or related trust) sponsored or maintained by the Company or any of its
    subsidiaries, or (z) any corporation with respect to which, following such
    acquisition, more than 60% of, respectively, the then outstanding shares of
    common stock of such corporation and combined voting power of the then
    outstanding voting securities of such corporation entitled to vote generally
    in the election of directors is then beneficially owned, directly or
    indirectly, by all or substantially all of the individuals and entities who
    were the beneficial owners, respectively, of the Outstanding Company Common
    Stock and Company Voting Securities immediately prior to such acquisition in
    substantially the same proportion as their ownership, immediately prior to
    such acquisition, of the Outstanding Company Common Stock

                                        9
<PAGE>

    and Company Voting Securities, as the case may be, shall not constitute a
    Change in Control of the Company; or

        (b) Continuing Directors constitute less than a majority of the Board,
    where a Continuing Director is (i) each person who was a director of the
    Company on January 2, 1997, and (ii) each person who subsequently becomes a
    director of the Company and whose election or nomination was approved by a
    vote of at least a majority of the Continuing Directors in office at the
    time of the election or nomination unless that person became a director in
    connection with an actual or threatened election contest; or

        (c) Approval by the shareholders of the Company of a reorganization,
    merger or consolidation (a "Business Combination"), in each case, with
    respect to which all or substantially all of the individuals and entities
    who were the respective beneficial owners of the Outstanding Company Common
    Stock and Company Voting Securities immediately prior to such Business
    Combination do not own beneficially, 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 Business Combination in substantially the
    same proportion as their ownership immediately prior to such Business
    Combination of the Outstanding Company Common Stock and Company Voting
    Securities, as the case may be; or

        (d) a complete liquidation or dissolution of the Company or a sale or
    other disposition of all or substantially all of the assets of the Company
    other than to a corporation with respect to which, following such sale or
    disposition, 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 is then
    owned beneficially, directly or indirectly, by all or substantially all of
    the individuals and entities who were the beneficial owners, respectively,
    of the Outstanding Company Common Stock and Company Voting Securities
    immediately prior to such sale or disposition in substantially the same
    proportion as their ownership of the Outstanding Company Common Stock and
    Company Voting Securities, as the case may be, immediately prior to such
    sale or disposition.

    10. AMENDMENT AND TERMINATION. The Board may terminate or amend the Plan at
any time and from time to time; provided, however, that the Board may not,
without approval of the stockholders of the Company, increase the maximum number
of shares of Stock issuable under the Plan or change the description of the
individuals eligible to receive Awards. No termination of or amendment to the
Plan may adversely affect the rights of a Participant with respect to any Award
theretofore granted under the Plan without such Participant's consent.

    The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 4 above, no such
amendment shall (i) decrease the exercise price of an outstanding Stock Option,
or (ii) effect the simultaneous cancellation of an outstanding Stock Option and
new grant of a replacement Stock Option, or (iii) without the Participant's
consent, impair the rights of any Participant.

    11. UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of any
other general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to Awards hereunder; provided, however, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan.

    12. GENERAL PROVISIONS.

    12.1 INVESTMENT REPRESENTATION. The Committee may require each person
acquiring shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the Participant is

                                       10
<PAGE>

acquiring the shares for investment without a view to distribution thereof. The
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer. All certificates for shares
of Stock or other securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

    12.2 ADOPTION OF OTHER PLANS. Nothing contained in this Plan shall prevent
the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.

    12.3 NO EMPLOYMENT RIGHTS. Neither the establishment or continuation of the
Plan, nor the grant of any Award hereunder, shall confer upon any employee or
consultant of the Company or any Related Corporation any right to continued
employment or association with the Company and any Related Corporation, nor
shall it interfere in any way with the right of the Company and any Related
Corporation to terminate the employment or association of any of its employees
or consultants at any time.

    12.4 PARTICIPANT NOT TO COMPETE. In consideration of the Company's grant of
an Award, a Participant shall agree in the agreement setting forth the terms of
such Award that during the period of his employment by or other service with the
Company or any Related Corporation, and for a period of at least two (2) years
after the date such employment or service terminates, he will not without the
consent of the Board accept or perform work for any entity whose business is
competitive with the business carried on by the Company and any Related
Corporation, or engage in activities which are significantly competitive with
the business of the Company and any Related Corporation. In the event a
Participant breaches such agreement, the Participant shall forfeit all rights to
any unexercised Options or unearned Awards held as of the date of such breach.

    12.5 TAX WITHHOLDING. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal income tax
purposes with respect to any Award, the Participant shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Committee, the
minimum required withholding obligations may be settled with Stock. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.

    12.6 PAYMENTS ON DEATH. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid.

    12.7 GOVERNING LAW. The Plan and all Awards and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.

    13. TERM OF PLAN. The Plan shall become effective upon the approval of the
Plan by the stockholders of the Company. No Award shall be granted pursuant to
the Plan on or after the tenth anniversary of the Plan's approval by
stockholders, but Awards theretofore granted may extend beyond that date.

                                       11

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