Document:

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                                                              EXHIBIT-10.3(A)(b)

                              EMPLOYMENT AGREEMENT

                    EMPLOYMENT AGREEMENT dated as of January 1, 2000, between
NEXT GENERATION NETWORK, INC., a Delaware corporation (the "Corporation"), and
THOMAS M. PUGLIESE (the "Employee").

1.   Employment, Acceptance and Term.

     1.1 The Corporation hereby employs the Employee and the Employee hereby
accepts employment from the Corporation for a term commencing January 1, 2000,
and continuing through January 31, 2004 (the "Term").

2.   Duties and Authority.

     2.1 During the Term, the Employee shall devote his full time and efforts to
fulfill his obligations hereunder, with the understanding that the Employee may
participate in charitable and civic activities and have business investments
which may, from time to time, require minor portions of his time but shall not
interfere with or breach his obligations under this Agreement. The Employee
agrees to use his best efforts, skill and abilities to promote the Corporation's
interests; to serve as a director and officer of the Corporation and any of its
subsidiary corporations if elected by the Board of Directors of the Corporation
(the "Board") or stockholders of the Corporation and any such subsidiary
corporation; and to perform such duties (consistent with his status as set forth
below in this Section 2) as may be assigned to him by the Board. The Employee
may continue to serve as a member of the boards of directors of business
corporations of which he is now a member and may serve as a member of the boards
of directors of other business corporations, provided that such activities do
not interfere with or breach his obligations under this Agreement.

     2.2 The Employee shall be the Vice Chairman and Chief Executive Officer of
the Corporation and shall report to the Board.

     2.3 The Corporation shall, for so long as the Employee's employment by the
Corporation continues under this Agreement, use its best efforts to (i) cause
the Employee to be nominated for election as a director and Vice Chairman and
Chief Executive Officer at each meeting of stockholders held for an election of
directors; (ii) cause the Employee to be continued in office as Vice Chairman
and Chief Executive Officer of the Corporation once so elected; (iii) cause the
Employee to be elected to serve as a member and Vice Chairman of an Executive
Committee so long as the Board shall appoint an Executive Committee; and (iv)
not confer on any other officer or employee authority, responsibility or powers
superior or, except in the case of Gerard P. Joyce, equal to the authority,
responsibility or powers vested in the Employee.

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3.   Principal Office.

     3.1 The Employee's services under this Agreement will be performed
primarily at the Corporation's offices, subject to reasonable travel
requirements on behalf of the Corporation.

4.   Compensation.

     4.1 During the Term, the Corporation shall pay to the Employee a salary at
the annual rate of $300,000, which shall be paid in equal monthly or more
frequent installments (the "Base Salary").

     4.2 In addition to the Base Salary, Employee shall be entitled to receive
an annual bonus at such time or times and in such amounts, but only if as and
when determined by the Board.

5.   Expenses.

     5.1 During the Term, the Corporation shall pay or reimburse the Employee
for all transportation (first-class), hotel and living expenses incurred by the
Employee on business trips, and for all other business and entertainment
expenses reasonably incurred by him in connection with the business of the
Corporation and its subsidiaries during the term of his employment hereunder.
Such expenses shall be subject to the Company's policies in effect from time to
time for its senior executives and shall include the cost of the Employee's
membership in one or more luncheon or other clubs utilized in the course of the
Employee's performance under this Agreement, and the costs of an automobile of
the Employee's selection, in each case subject to the Company's policies in
effect from time to time.

6.   Employee Benefits.

     6.1 During the Term, the Corporation shall, if the Employee is insurable at
standard rates, acquire and maintain, with a reputable insurer, a life insurance
policy on the life of the Employee naming the Employee's designee or designees
as beneficiary or beneficiaries and providing a net death benefit of not less
than $1,000,000. The Employee shall submit to such physical examinations as may
be required by the insurer as a condition to the issuance of such policy.

     6.2 During the Term, the Employee shall be permitted to participate in all
group health, hospitalization and disability insurance plans, health programs,
pension plans, participation or extra compensation plans, and similar benefits
and perquisites that are now or may become available to other senior executives
of the Corporation, on the same terms as such other senior executives. During
the Term, the Company shall purchase group disability

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insurance for senior executives (including the Employee) that is no less
favorable to the Employee than such insurance that the Company maintains on the
date hereof. During the Term, the Employee shall participate in any stock
option, restricted stock or other equity based plans. Effective upon
consummation of a public offering ("IPO") of the Corporation's Common Stock, the
Corporation shall grant the Employee options to purchase shares of Common Stock
at a price equal to the initial offering price of the IPO. The number of shares,
and the terms and conditions upon which such options may be exercised, shall be
determined by the Board.

     6.3 During each year of the Term, the Employee shall be entitled to
reasonable annual periods of vacation with full pay and allowances. The timing
and duration of individual vacation periods shall be determined by the Employee
taking into account the needs of the Corporation.

7.   Termination of Employment Prior to End of Term; Amounts Payable Upon Such
     Termination.

     7.1 In the event that the Employee becomes disabled before the expiration
of the Term so that he is unable to substantially perform his services hereunder
for an aggregate of six (6) consecutive months or a total of nine (9) months
within any consecutive eighteen (18) months, the Corporation may terminate the
employment of the Employee; provided that in such event the Corporation shall
pay to the Employee as severance for the balance of the Term, an annual amount,
payable monthly, equal to the lesser of (1) the sum of (A) the Base Salary in
effect on the date of termination and (B) one-half (1/2) of any bonuses awarded
to the Employee with respect to the preceding twenty-four (24) months (or if
less than two (2) years of the Term has then elapsed, the entire amount of any
bonus paid during the preceding twelve (12) months, or if less, the period of
the Term then elapsed) (such sum is hereinafter referred to as Employee's
"Current Annual Compensation"), and (2) $500,000, subject to the immediately
following sentence. If any payment otherwise due under the preceding sentence
would have the effect of reducing any insurance payment under the Company's
group disability insurance policy, then the payments due under the first
sentence of this Section 7.1 shall be reduced to permit the Employee to receive
the maximum available insurance payments; provided further however, that in no
event shall such reduction result in the Employee receiving on an after-tax
basis total payments (from the Company and the insurance company) less than
provided for in the first sentence of this Section 7.1. In addition, in the
event of termination pursuant to the first sentence of this Section 7.1, the
Employee shall be entitled receive, until the end of the month in which the
Employee reaches age 65, such health insurance and similar related health
coverage and health benefits as are generally made available to the
Corporation's senior executives from time to time. In the event of the
Employee's death during the Term, the Corporation shall pay the Employee's
salary to the date of death.

     7.2. [Intentionally omitted]

     7.3 If the Employee shall not be continued in office during the Term in the
same or similar positions to those presently held by him, or if the Employee
shall not be afforded in all

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material respects the authority, responsibilities and prerogatives contemplated
by this Agreement, the Employee shall have the right to terminate his employment
under this Agreement by sixty (60) days' prior written notice to the Corporation
setting forth the specific basis for termination given at any time within ninety
(90) days after such event; provided, however, that such termination by the
Employee may not be made if the Company remedies the event or events given rise
to such notice within 30 days after receipt of notice; and provided further that
such termination shall not apply in the event of a termination for cause or as a
result of death or disability (subject to the last sentence of this Section 7.3.
If the Employee elects to terminate his employment pursuant to this Section 7.3,
the Corporation shall pay to the Employee an amount, in monthly installments,
equal to the greater of Employee's Current Annual Compensation multiplied by two
(2) or Employee's Current Annual Compensation multiplied by the number of years
remaining in the Term. Upon completion of such payments, the Corporation shall
have no further obligations to the Employee under this Agreement other than such
obligations as are expressly set forth. If the Employee shall die or become
disabled subsequent to the notice of termination of employment provided for in
this Section 7.3, such death or disability shall not diminish or impair his (or
his legal representative's or other successor's) right to receive the payments
provided for in this Section 7.3.

     7.4 If the Employee shall be discharged without cause during the Term, he
shall be entitled to receive from the Corporation, on or before the date of
discharge, the payments determined as provided in Section 7.3 above.

     7.5 If the Employee shall be discharged for cause during the Term, the
Corporation's obligations to pay compensation or other amounts payable hereunder
to or for the benefit of the Employee, except for compensation or other benefits
payable in respect of services rendered prior to the date of such discharge,
shall terminate on the date of such discharge. As used herein the term "for
cause" shall mean any material breach by the Employee under this Agreement,
which breach if susceptible to cure shall not have been cured within thirty (30)
days after the Employee has received written notice thereof from the Board, the
conviction of the Employee for a felony, or the continued wilful malfeasance or
gross negligence by the Employee in the performance of his duties under this
Agreement for a period of thirty (30) days after the Board has directed the
Employee in writing to cease the activity giving rise to such wilful malfeasance
or gross negligence. The term "for cause" shall not include a bona fide
disagreement over corporate policy so long as the Employee does not wilfully
violate specific written directions from the Board, which directions are
consistent with the provisions of this Agreement.

     7.6 In the event any amounts or other benefits are payable to or for the
Employee (or his legal representatives or other successors) pursuant to Sections
7.1, 7.3, or 7.4 hereof in respect of any period following the termination of
his employment hereunder, such amounts or other benefits shall not be reduced in
any manner by reason of any other earnings, income or benefits of or to the
Employee from any other source, except as expressly provided in Section 7.1. By
this provision the parties intend that the Corporation shall waive any
mitigation of damages rule that may otherwise apply in such circumstances. In
the event a termination of

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employment occurs pursuant to more than one
subsection of this Section 7 and there has not been a termination for cause
under Section 7.5, the Employee shall be entitled to payments under only one
applicable subsection of this Section 7 (which shall be the applicable
subsection providing for the greatest payments).

     7.7 In the event there is a termination of employment pursuant to Sections
7.1, 7.3 or 7.4, the Corporation shall as of the date of such termination vest,
or cause to vest, in the Employee all of his rights accrued in and under the
Corporation's existing pension plan.

8.   Indemnification and Payment of Legal Expenses.

     8.1 The Corporation shall indemnify the Employee and his legal
representatives, to the fullest extent permitted by the laws of the State of
Delaware and the existing By-laws of the Corporation, and the Employee shall be
entitled to the protection of any insurance policies the Corporation may elect
to maintain generally for the benefit of its directors and officers, against all
costs, charges and expenses whatsoever incurred or sustained by him or his legal
representatives in connection with any action, suit or proceeding, or any
threatened action, suit or proceeding, to which he or his legal representatives
may be made a party, or threatened to be made a party, by reason of his being or
having been director or officer of the Corporation or any of its subsidiaries.

     8.2 If the Employee or any Designated Representative shall be required to
initiate legal action in order to enforce or retain any right or benefit
provided by this Agreement in the event of a breach of or default under this
Agreement by the Corporation, and if the Employee or Designated Representative
shall prevail in such legal action, the Corporation shall indemnify the Employee
or such Designated Representative for all reasonable legal and accounting fees
and expenses incurred in connection therewith.

9.   Non-Competition.

     9.1 The Employee shall not, during the Restricted Period (as defined
below), any where in the Restricted Area (as defined below), directly or
indirectly engage in or become associated as an employee, consultant, partner,
owner, agent, stockholder, officer or director of, any person or organization
engaged in, or about to become engaged in, a business that competes, directly or
indirectly, with the business of the Corporation. "Restricted Period" means the
period commencing on the date hereof and continuing until the date twenty-four
(24) months after the date this Agreement is terminated for any reason
whatsoever. "Restricted Area" means the United States of America and any of its
possessions or anywhere else in the world. Notwithstanding the foregoing, this
Section 9.1 shall not prohibit the Employee from owning up to 1% of the
outstanding shares of any class of stock that is registered under the Securities
Exchange Act of 1934, as amended, and listed on a national stock exchange or
traded or quoted for trading on any national securities market.

     9.2 During the and for two (2) years thereafter, the Employee will not,
without

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the prior written consent of the Corporation, either directly or indirectly
solicit or otherwise encourage any person employed by the Corporation to leave
the employ of the Corporation.

     9.3 The Employee agrees that the Corporation will suffer irreparable injury
if, in breach of the covenants contained herein, he competes with the business
of the Corporation, or any of its subsidiaries or affiliates, and that by reason
of such competition the Corporation will be entitled to injunctive relief in a
court of competent jurisdiction. The Employee hereby stipulates to the entry of
temporary, preliminary and permanent injunctive relief prohibiting him from
competing with the Corporation, or any of its subsidiaries or affiliates, in
breach of such covenants.

     9.4 The Employee agrees that if in any judicial proceeding a court shall
refuse to enforce any covenant contained in this Agreement because it covers too
extensive a geographic area or too broad a scope of activities or too long a
period of time, such covenant shall be reduced in scope to the extent required
by law.

10.  Nondisclosure Agreement.

     Except as the Corporation may otherwise permit or direct in writing, the
Employee will not disclose, during the Term and thereafter for a period of three
(3) years, any information, knowledge or data (unless readily ascertainable from
public information or sources, or required by law to be disclosed) concerning
the Corporation or any of its subsidiaries or affiliates, which he has obtained
prior to the date of this Agreement or hereafter obtains during the Term that
relates to the business processes, trade secrets, methods, customers, machines,
inventions, discoveries or any other matters concerning the respective
businesses, products or work of the Corporation or any of its subsidiaries or
affiliates. All records, documents and other writings relating to the businesses
of such corporations which are or have been prepared or created by Employee or
which have come or hereafter come into his possession during the Term are the
property of such corporations and upon termination of the Term shall be
delivered to or shall remain in the possession of such corporations, as the case
may be.

11.  Notices.

     Any notice or other communication required to or which may be given to any
party hereunder shall be in writing and shall be deemed given effectively if
delivered personally to such party or if mailed by registered or certified mail,
postage prepaid, addressed to such party as follows (the third business day
following the date of mailing of any such notice is deemed the date of delivery
thereof):

                  To Employee:

                           Mr. Thomas M. Pugliese

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

                           ------------------------
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                  To the Corporation:

                           Next Generation Network,Inc.
                           11010 Prairie Lakes Drive, Suite 300
                           Minneapolis, MN 55344

Any party may change the persons and addresses to which notices or other
communications are to be sent by giving written notice of such change to the
other party in the manner provided herein for giving notice.

12.  Miscellaneous.

     12.1 This Agreement shall be binding upon and inure to the benefit of the
heirs, next-of-kin and legal representatives of the Employee and the successors
and assigns of the Corporation, including any corporation into or with the
Corporation shall consolidate or merge or to which it shall sell or otherwise
transfer substantially all of its assets, properties and business. This
Agreement is not assignable by the Employee.

     12.2 This Agreement is to be governed by and interpreted in accordance with
the laws of the State of Minnesota applicable to agreements made and to be
performed wholly within such State.

     12.3 This instrument is the entire agreement of the parties with respect to
the subject matter hereof and may not be amended, supplemented, cancelled or
discharged except by written instrument executed by both parties hereto. Without
limiting the generality of the foregoing, this Agreement supersedes and replaces
any prior employment agreement with the Company or any of its subsidiaries to
which the Employee is or was a party. The parties do not intend to confer any
benefit hereunder on any third person and, without limiting the generality of
the foregoing, the parties may, in writing, without notice to or consent of any
third person, at any time waive any rights hereunder or amend this Agreement in
any respect or terminate this Agreement.

     12.4 The termination of the Employee's employment hereunder shall not
affect those provisions of this Agreement that by their terms apply to any
period or periods subsequent to such termination.

13.  Grant of Restricted Stock.

     13.1 As a reward for past, and an incentive for future, employment
performance by the Employee and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Corporation
previously has awarded to Employee 49,830 shares (taking into account a 10 for 1
stock split effective April 26, 1999) and ________ shares (pursuant to the
conversion of 230 shares of Series C Senior Cumulative Compounding

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Convertible Redeemable Preferred Stock) (together, the "Initial Shares") of
Common Stock of the Company, par value $.01 per share (the "Common Stock"). As
used in this Section 13, (i) the term "Restricted Shares" will mean all Initial
Shares and any and all other shares of stock and other securities which the
Employee later acquires or has the right to acquire by reason of ownership of or
otherwise with respect to any Initial Shares or other Restricted Shares,
irrespective of the time and manner of such acquisition, including, without
limitation, any shares or other securities (whether issued by the Corporation or
otherwise) acquired by reason of any split-up, recapitalization, dividend,
distribution, combination, conversion or exchange of shares of capital stock or
other securities of the Corporation (or any other issuer), or acquired by reason
of any merger or consolidation of the Corporation (or any other issuer) or any
dissolution of the Corporation (or any other issuer); and (ii) the term
"Restricted Share Distributions" means any cash or other property, except stock
or other securities, which the Employee acquires or receives or has the right to
acquire or receive by reason of ownership of or otherwise with respect to any
Restricted Shares, including, without limitation, any cash or other such
property acquired or received by reason of any event specified in clause (i) of
this sentence.

     13.2 If a Forfeiture Event (as defined below) occurs at any time prior to
the Vesting Date (as defined below), all Restricted Shares and, subject to the
last sentence of Section 13.3, Restricted Share Distributions held by or for the
account of the Employee or which the Employee has the right to acquire or
receive, and all rights benefits of Employee with respect to such Restricted
Shares and Restricted Share Distributions, automatically will be forfeited to
and vest in the Corporation. As used is Section 13, (i) the term "Forfeiture
Event" means either (a) the termination of the Employee's employment with the
Corporation by the Corporation for cause or (b) the termination of the
Employee's employment with the Corporation by the Employee; (ii) the term
"Vesting Date" means the first to occur of (A) December 31, 2006 (B) the death
of the Employee, (C) the Employee's Disability, (D) the termination by the
Corporation of the Employee's employment with the Corporation otherwise than for
cause, (E) any consolidation, merger, binding share exchange or reorganization
to which the Corporation is a party (other than a consolidation, merger, share
exchange or reorganization in which the Corporation is the continuing
corporation and which does not result in any change in, distribution upon or
exchange of the outstanding shares of any class or series of capital stock of
the Corporation which includes Restricted Shares) or any sale, conveyance,
transfer or lease to another corporation of the properties and assets of the
Corporation as an entirety or substantially as an entirety, (F) the effective
date of a public offering of the Corporation's Common Stock registered under the
Securities Act of 1933, as now or subsequently in effect (the "Securities Act")
in which the Restricted Shares have been registered for sale or (G) the first
date as of which, pursuant to Rule 144 under the Securities Act, the Restricted
Shares may be publicly offered and sold by Employee without registration under
the Securities Act and without any limitation or restriction, including any
limitation as to volume or manner of sale; and (iii) the term "Disability" means
the inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months, as determined by the Board of Directors of
the Corporation in good faith. For purposes of this Section 13, "cause" for
termination of Employee's employment shall have the meaning set forth in Section
7.5.

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     13.3 By giving notice to the Employee, the Corporation at any time: (i) may
require that any or all of the certificates or other instruments or property
evidencing or constituting any or all of the Restricted Shares or any or all
Restricted Share Distributions then subject to forfeiture be held in escrow by a
bank or other institution, or by the Corporation itself, until the Vesting Date;
(ii) may require that the Employee deliver a stock power or other instrument
endorsed in blank relating to any Restricted Shares held in escrow; and (iii)
may require that any and all Restricted Shares be held in the name of such
escrow agent (in such capacity) as registered or record owner. Any Restricted
Shares and Restricted Share Distributions held in escrow which no longer are
subject to forfeiture (as determined pursuant to Section 13.2 hereof) will be
delivered out of escrow to the Employee within a reasonable time after the
applicable Vesting Date, subject to Section 13.12 of this Agreement and the
satisfaction by the Employee of applicable federal and state securities laws and
withholding tax requirements, including any federal, state or local withholding
taxes. Subject to Section 13.12 of this Agreement, any Restricted Share
Distributions which are not held in escrow may be received and retained by the
Employee free of the restrictions and forfeiture provisions of this Section 13.

     13.4 Except as provided by this Agreement, prior to the Vesting Date, the
Employee will not transfer or otherwise dispose of any Restricted Shares which
are subject to forfeiture or transfer or dispose of any Restricted Share
Distributions held in escrow pursuant to Section 13.3 or in pledge pursuant to
Section 13.12, and any such attempt to dispose of or transfer any such
Restricted Shares or Restricted Share Distributions will be void and ineffective
for all purposes. Each stock certificate or other instrument evidencing
Restricted Shares subject to forfeiture will bear the following legend:

                    SHARES OF THE CORPORATION REPRESENTED BY
                    THIS   CERTIFICATE   ARE  SUBJECT  TO  A
                    EMPLOYMENT AGREEMENT DATED AS OF JANUARY
                    1,  2000  AS  AMENDED   WHICH   CONTAINS
                    PROVISIONS  RESTRICTING TRANSFER OF SUCH
                    SHARES,  REQUIRING  SUCH  SHARES  TO  BE
                    FORFEITED TO THE MENTUS  GROUP,  INC. IN
                    CERTAIN CIRCUMSTANCES AND OTHER MATTERS.
                    A COPY OF SUCH  AGREEMENT  IS  AVAILABLE
                    FOR    INSPECTION   AT   THE   PRINCIPAL
                    EXECUTIVE OFFICES OF THE CORPORATION.

The words "transfer" and "dispose" include the making of any sale, exchange or
other transfer or disposition of any ownership interest whatsoever with respect
to the Restricted Shares or subject to the last sentence of Section 13.3,
Restricted Share Distributions. Subject to Section 13.2, nothing in this Section
13.4 will prevent the transfer or other disposition, without consideration, of
Restricted Shares or Restricted Share Distributions to a personal representative
of the Employee or to one or more members of the Employee's immediate family or
to trusts or similar entities for their benefit; provided, however, that in the
case of such a transfer, each transferee must agree in writing to take such
Restricted Shares or Restricted Share Distributions subject to

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the forfeiture provisions described above and to be fully bound by this Section
13. As used in this Agreement, the term "personal representative" will mean the
executor or executors of the will or administrator or administrators of the
estate and all other legal representatives (by operation of law or otherwise) of
the Employee.

     13.5 Whenever any Restricted Shares become free of the rights and
restrictions imposed by this Agreement, including any pledge pursuant to Section
13.12, the holder of such Restricted Shares will be entitled to receive a
certificate or certificates not bearing the restrictive legend provided for in
Section 13.4. If the certificate(s) evidencing such Restricted Shares are not
held in escrow pursuant to Section 13.4, then the holders thereof must deliver
them to the Corporation in order to receive the unlegended certificate(s)
contemplated by this Section 13.5.

     13.6 The Employee represents and warrants that he will be acquiring the
Restricted Shares to be acquired by him pursuant to this Agreement for his own
account and not with a view to reselling or distributing all or any part of the
Restricted Shares in any transaction which would constitute a "distribution"
within the meaning of the Securities Act. The Employee acknowledges that the
Restricted Shares will not be registered under the Securities Act; that the
Corporation neither is obligated nor intends to effect such registration; that
absent such registration (or an exemption from registration), the Employee may
be required to hold the Restricted Shares for an indefinite period of time; that
the exemption from registration under the Securities Act provided by Rule 144
promulgated under the Securities Act likely will not be available to the
Employee; and that even if available, such Rule would permit resales of the
Restricted Shares only in limited amounts and upon compliance with the terms and
conditions of such Rule.

     13.7 The Employee agrees that the certificates evidencing Restricted Shares
to be registered in the name of the employee will bear the following legend:

                    THE   SECURITIES   REPRESENTED  BY  THIS
                    CERTIFICATE  HAVE  NOT  BEEN  REGISTERED
                    UNDER  THE  SECURITIES  ACT OF 1933,  AS
                    AMENDED,   AND   MAY   NOT  BE  SOLD  OR
                    OTHERWISE     TRANSFERRED    UNLESS    A
                    REGISTRATION STATEMENT UNDER SUCH ACT IS
                    IN   EFFECT   WITH   RESPECT   TO   SUCH
                    SECURITIES   OR   AN   EXEMPTION    FROM
                    REGISTRATION    UNDER    SUCH   ACT   IS
                    APPLICABLE.

     13.8 If at any time the Board of Directors of the Corporation determines,
in its discretion, that the listing, registration or qualifications of any
Restricted Shares issuable pursuant to Section 13.1 or otherwise upon any
securities exchange or under any state or federal law, or the consent or
approval in connection with such issuance, then such Restricted Shares need not
be issued unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Corporation's Board of Directors. The Corporation in no event will be
obligated to issue any Restricted Shares in any manner in contravention of the
Securities Act or any state securities law; provided, however, that if the

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Corporation does not issue such Restricted Shares for the reasons set forth in
this sentence or the prior sentence, it will substitute a distribution of cash
or other property to compensate for the failure to issue such Restricted Shares.
The Board of Directors of the Corporation may, in connection with any issuance
of Restricted Shares pursuant to Section 13.1, require that, as a condition
precedent to such issuance, in whole or in part, the Employee make written
representations to the effect set forth in Section 13.1 and also may impose such
other terms and conditions as the Corporation's Board of Directors may
reasonably require in order to cause such issuance to comply with all applicable
laws.

     13.9 The Employee will make appropriate arrangements with the Corporation
for any taxes which either of them is obligated to collect in connection with
any issuance, payment, distribution, transfer or disposition of any Restricted
Shares or Restricted Share Distributions, including any federal, state or local
withholding taxes, and the Corporation, as applicable, will be entitled to
withhold from amounts or other considerations payable or issuable to the
Employee under this Agreement or otherwise such amounts as may be required by
applicable law.

     13.10 Subject to Sections 13.1 through 13.9, the Employee will have, with
respect to each type or class of Restricted Shares, all rights of a holder of
Restricted Shares of such type or class, including, without limitation,
conversion rights, voting rights and rights to receive dividends or other
distributions with respect to the Restricted Shares.

     13.11 The Corporation may refuse to effect the transfer by the Employee or
any subsequent holder (except as otherwise expressly contemplated hereby) of any
of the Restricted Shares on its books during any period in which such Restricted
Shares are subject to forfeiture to the Corporation as set forth in Section 13.2
hereof. A copy of this Agreement shall be filed with the Secretary of the
Corporation.

     13.12 If, at any time or from time to time while the Employee continues to
be employed by the Corporation pursuant to this Agreement, any federal, state or
local income taxes shall become due and payable by Employee by reason of the
grant, issuance or delivery by the Corporation of Restricted Shares to Employee
or by reason of any compensation under this Agreement which was earned by
Employee after December 31, 1992 and prior to September 1, 1996 but the payment
of which was deferred, then provided that no Forfeiture Event shall have
occurred, the Corporation shall, if requested by Employee, make loans to
Employee for the purpose of permitting Employee to pay such taxes, subject to
the following terms and conditions:

     (i) The amount of any such loan shall not exceed the net amount of such
federal, state and local income taxes which are then or which will within 14
days after such loan is made become due and payable by Employee, calculated
after taking into account all credits to which Employee is entitled by virtue of
any amounts (including taxes, interest and penalties) which the Corporation has
withheld or otherwise paid or for which the Corporation is liable with respect
to the event which results in such taxes, and the proceeds of such loan shall be
used solely for the payment of such taxes when or before due.

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     (ii) At the time the Corporation is to make any such loan (a) a petition
seeking liquidation, reorganization or other relief with respect to Employee or
his debt has not been filed under any bankruptcy, insolvency or other similar
law now or hereafter in effect, (b) relief has not been granted with respect to
Employee or his debts in any case or proceeding for liquidation, reorganization,
or otherwise under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (c) a trustee, receiver, liquidator, custodian or other
similar official has not been appointed (either with or without the consent of
Employee) for any substantial part of Employee's properties, (d) Employee has
not been adjudicated to be insolvent, and (e) Employee has not made a general
assignment for the benefit of his creditors.

     (iii) Each such loan shall be evidenced by a note payable to the order of
the Corporation and executed and delivered by Employee and shall be secured by a
perfected, first priority security interest in and pledge of Restricted Shares
then existing or thereafter acquired which shall have a fair market value,
determined on the date such loan is made and on a semi-annual basis thereafter,
of not less than the principal amount of such loan and such note and the
documents and instruments by which such security interest is granted and such
pledge is made shall be in customary form and contain customary provisions
(including, without limitation, provisions regarding events permitting
acceleration of the maturity of such note), in addition to any other provisions
which the Corporation may reasonably request. As contemplated by the foregoing,
the fair market value of such Restricted Shares securing each such loan shall be
determined on a semi-annual basis and the number of Restricted Share held in
pledge by the Corporation as security for such loan shall be adjusted as
necessary so that fair market value of such Restricted Shares shall be at least
equal to the principal amount of such loan. Each such loan shall be without
recourse to Employee or his property, other than all Restricted Shares and
Restricted Share Distributions then existing or thereafter acquired, together
with all proceeds thereof, substitutions therefor and replacements thereof.

     (iv) Each such loan shall bear interest at a fluctuating rate per annum at
all times equal to the rate of interest publicly announced from time to time by
The Bank of New York, as its prime rate in effect at its principal office in the
City of New York, State of New York, and such rate of interest shall change when
and as such prime rate changes. Accrued interest will be payable quarterly in
arrears.

     (v) The entire principal amount of each such loan, together with any
accrued and unpaid interest thereon, shall become due and payable on the first
to occur of (a) the first anniversary of the termination of Employee's
employment with the Corporation for any reason, (b) the fifth anniversary of the
date of the first such loan or (c) acceleration in accordance with the terms of
the note contemplated by claus (i) above. The terms of each such loan shall
provide that in the event of any sale, transfer, exchange or other disposition
by Employee of shares of capital stock of the Corporation for cash or other
consideration, Employee shall promptly make a prepayment of such loan in an
amount equal to the lesser of (x) the amount of such cash or the fair market
value of such other consideration or (y) the then outstanding principal of and
accrued but unpaid interest on such note.

<PAGE>   13
                                                                              13

14.  Amendments to Stock Option Agreements.

     Within thirty (30) days of the date of this Agreement, the Corporation
shall amend Employee's existing Stock Option Agreement dated as of ____________,
so that, in the event Employee's employment with the Corporation is terminated
by the Corporation, other than a termination by the Corporation for cause (as
defined under Section 7.5 of this Agreement), all of Employee's options subject
to such Stock Option Agreement shall immediately vest and be exercisable.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>   14
                                                                              14

                    IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.

                              NEXT GENERATION NETWORK, INC.

                              By:
                                 -----------------------------------------------
                              Title:
                                    --------------------------------------------

                              --------------------------------------------------
                              Thomas M. Pugliese<PAGE>   1
                                                              EXHIBIT 10.3(A)(c)

                          NEXT GENERATION NETWORK, INC.

                            2000 STOCK INCENTIVE PLAN

                         (As Adopted February 23, 2000)

<PAGE>   2

                          NEXT GENERATION NETWORK, INC.

                            2000 STOCK incentive PLAN

     1.   Purpose.

     The purpose of this Plan is to strengthen Next Generation Network, Inc., a
Delaware corporation (the "Company"), by providing an incentive to its
employees, officers, consultants and directors and thereby encouraging them to
devote their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
employees, officers, consultants and directors of the Company and its
Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance
Awards and Restricted Stock (as each term is herein defined).

     2.   Definitions.

          For purposes of the Plan:

          2.1 "Affiliate" means any entity, directly or indirectly, controlled
by, controlling or under common control with the Company or any corporation or
other entity acquiring, directly or indirectly, all or substantially all the
assets and business of the Company, whether by operation of law or otherwise.

          2.2 "Agreement" means the written agreement between the Company and an
Optionee or Grantee evidencing the grant of an Option or Award and setting forth
the terms and conditions thereof.

          2.3 "Award" means a grant of Restricted Stock, a Stock Appreciation
Right, a Performance Award, a Dividend Equivalent Right or any or all of them.

          2.4 "Board" means the Board of Directors of the Company.

          2.5 "Cause" means:

               (a) (i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of duties,
(iii) involvement in a transaction in connection with the performance of duties
to the Company or any of its Subsidiaries which transaction is adverse to the
interests of the Company or any of its Subsidiaries and which is engaged in for
personal profit or (iv) willful violation of any law, rule or regulation in
connection with the performance of duties (other than traffic violations or
similar offenses).

          2.6 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the

<PAGE>   3

Shares or exchange of Shares for a different number or kind of shares or other
securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.

          2.7 A "Change in Control" shall mean the occurrence during the term of
the Plan of:

               (a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of fifty percent (50%) or more of the then
outstanding Shares or the combined voting power of the Company's then
outstanding Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Shares or Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Subsidiary"), (ii) the Company or its
Subsidiaries, or (iii) any Person in connection with a "Non-Control Transaction"
(as hereinafter defined);

               (b) The individuals who, as of February 23, 2000 are members of
the Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the members of the Board; provided, however, that if the election,
or nomination for election by the Company's common stockholders, of any new
director was approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Plan, be considered as a member of
the Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or

                                       2
<PAGE>   4

               (c) The consummation of:

                    (i) A merger, consolidation or reorganization with or into
               the Company or in which securities of the Company are issued,
               unless such merger, consolidation or reorganization is a
               "Non-Control Transaction." A "Non-Control Transaction" shall mean
               a merger, consolidation or reorganization with or into the
               Company or in which securities of the Company are issued where:

                         (A) the stockholders of the Company, immediately before
                    such merger, consolidation or reorganization, own directly
                    or indirectly immediately following such merger,
                    consolidation or reorganization, at least fifty percent
                    (50%) of the combined voting power of the outstanding voting
                    securities of the corporation resulting from such merger or
                    consolidation or reorganization (the "Surviving
                    Corporation") in substantially the same proportion as their
                    ownership of the Voting Securities immediately before such
                    merger, consolidation or reorganization,

                         (B) the individuals who were members of the Incumbent
                    Board immediately prior to the execution of the agreement
                    providing for such merger, consolidation or reorganization
                    constitute at least two-thirds of the members of the board
                    of directors of the Surviving Corporation, or a corporation
                    beneficially directly or indirectly owning a majority of the
                    Voting Securities of the Surviving Corporation, and

                         (C) no Person other than (i) the Company, (ii) any
                    Subsidiary or entity formed by the Company, (iii) any
                    employee benefit plan (or any trust forming a part thereof)
                    that, immediately prior to such merger, consolidation or
                    reorganization, was maintained by the Company or any
                    Subsidiary, or (iv) any Person who, immediately prior to
                    such merger, consolidation or reorganization had Beneficial
                    Ownership of fifty percent (50%) or more of the then
                    outstanding Voting Securities or Shares, has Beneficial
                    Ownership of fifty percent (50%) or more of the combined
                    voting power of the Surviving Corporation's then outstanding
                    voting securities or its common stock.

                    (ii) A complete liquidation or dissolution of the Company;
               or

                                       3
<PAGE>   5
                    (iii) The sale or other disposition of all or substantially
               all of the assets of the Company to any Person (other than a
               transfer to a Subsidiary).

     Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Shares or
Voting Securities as a result of the acquisition of Shares or Voting Securities
by the Company which, by reducing the number of Shares or Voting Securities then
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Shares or
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities which increases the percentage of the then
outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.

     If an Eligible Individual's employment is terminated by the Company without
Cause prior to the date of a Change in Control but the Eligible Individual
reasonably demonstrates that the termination (A) was at the request of a third
party who has indicated or intention or taken steps reasonably calculated to
effect a Change in Control or (B) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed, such
termination shall be deemed to have occurred after a Change in Control for
purposes of this Plan provided a Change in Control shall actually have occurred.

          2.8 "Code" means the Internal Revenue Code of 1986, as amended.

          2.9 "Committee" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to perform
the functions set forth herein.

          2.10 "Company" means Next Generation Network, Inc..

          2.11 "Director" means a director of the Company.

          2.12 "Director Options" means Options granted to Directors.

          2.13 "Disability" means:

               (a) in the case of an Optionee or Grantee whose employment with
the Company or a Subsidiary is subject to the terms of an employment agreement
between such Optionee or Grantee and the Company or Subsidiary, which employment
agreement includes a definition of "Disability", the term "Disability" as used
in this Plan or any Agreement shall have the meaning set forth in such
employment agreement during the period that such employment agreement remains in
effect; and

                                       4
<PAGE>   6

               (b) in all other cases, the term "Disability" as used in this
Plan or any Agreement shall mean a physical or mental infirmity which impairs
the Optionee's or Grantee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.

          2.14 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.

          2.15 "Dividend Equivalent Right" means a right to receive all or some
portion of the cash dividends that are or would be payable with respect to
Shares.

          2.16 "Eligible Individual" means any director, officer or employee of
the Company or a Subsidiary, or any consultant or advisor who is receiving cash
compensation from the Company or a Subsidiary, designated by the Committee as
eligible to receive Options or Awards subject to the conditions set forth
herein.

          2.17 "Employee Options" means Options granted to any employee of the
Company or a Subsidiary.

          2.18 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          2.19 "Fair Market Value" on any date means the closing sales prices of
the Shares on such date on the principal national securities exchange on which
such Shares are listed or admitted to trading, or, if such Shares are not so
listed or admitted to trading, the average of the per Share closing bid price
and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the Fair
Market Value shall be the value established by the Board in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.

          2.20 "Grantee" means a person to whom an Award has been granted under
the Plan.

          2.21 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.

          2.22 "Initial Public Offering" means the consummation of the first
public offering of Shares pursuant to a registration statement (other than on
Form S-8 or successor forms) filed with, and declared effective by, the
Securities and Exchange Commission.

          2.23 "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.

                                       5
<PAGE>   7

          2.24 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.

          2.25 "Option" means a Nonqualified Stock Option or an Incentive Stock
Option.

          2.26 "Optionee" means a person to whom an Option has been granted
under the Plan.

          2.27 "Outside Director" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.

          2.28 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.

          2.29 "Participant" means an employee, consultant, service provider, or
director of the Company or any of its Subsidiaries and any other individual who
will become an employee, consultant, service provider or director of the Company
or any of its Subsidiaries after the date of grant, in either case, who is
selected to participate in the Plan in accordance with Section 2.

          2.30 "Performance Awards" means Performance Units, Performance Shares
or either of both of them.

          2.31 "Performance Cycle" means the time period specified by the
Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.

          2.32 "Performance Objectives" has the meaning set forth in Section 9.

          2.33 "Performance Shares" means Shares issued or transferred to an
Eligible Individual under Section 9.

          2.34 "Performance Units" means Performance Units granted to an
Eligible Individual under Section 9.

          2.35 "Plan" means the Next Generation Network, Inc. 2000 Stock
Incentive Plan, as amended and restated from time to time.

          2.36 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.

          2.37 "Restricted Stock" means Shares issued or transferred to an
Eligible Individual pursuant to Section 10.

                                       6
<PAGE>   8

          2.38 "Shares" means the common stock, par value $.01 per share, of the
Company.

          2.39 "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 8
hereof.

          2.40 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.

          2.41 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.

          2.42 "Ten-Percent Stockholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.

     3. Administration.

          3.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not fewer than two members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members of the Committee shall be as fully
effective as if made by a majority vote at a meeting duly called and held. Prior
to the date of an Initial Public Offering, the Committee shall consist of at
least two (2) directors of the Company and may consist of the entire Board. From
and after the date of an Initial Public Offering, the Committee shall consist of
at least two (2) directors of the Company and may consist of the entire Board;
provided, however, that (A) if the Committee consists of less than the entire
Board, each member shall be a Nonemployee Director and (B) to the extent
necessary for any Option or Award intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, each member of the
Committee, whether or not it consists of the entire Board, shall be an Outside
Director. No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder, except for liability arising from his or her
own willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee for
all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.

                                       7
<PAGE>   9

          3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:

               (a) determine those Eligible Individuals to whom Options shall be
granted under the Plan and the number of such Options to be granted and to
prescribe the terms and conditions (which need not be identical) of each such
Option, including the purchase price per Share subject to each Option, and make
any amendment or modification to any Option Agreement consistent with the terms
of the Plan;

               (b) select those Eligible Individuals to whom Awards shall be
granted under the Plan and to determine the number of Stock Appreciation Rights,
Performance Awards, Shares of Restricted Stock and/or Dividend Equivalent Rights
to be granted pursuant to each Award, the terms and conditions of each Award,
including the restrictions or Performance Objectives relating to Shares, the
maximum value of each Performance Share and make any amendment or modification
to any Award Agreement consistent with the terms of the Plan;

               (c) to construe and interpret the Plan and the Options and Awards
granted hereunder and to establish, amend and revoke rules and regulations for
the administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or in any Agreement, in the manner and to the extent it shall deem necessary or
advisable so that the Plan complies with applicable law including Rule 16b-3
under the Exchange Act and the Code to the extent applicable, and otherwise to
make the Plan fully effective. All decisions and determinations by the Committee
in the exercise of this power shall be final, binding and conclusive upon the
Company, its Subsidiaries, the Optionees and Grantees, and all other persons
having any interest therein;

               (d) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee or Grantee on an individual basis without
constituting a termination of employment or service for purposes of the Plan;

               (e) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and

               (f) generally, to exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.

     4. Stock Subject to the Plan.

          4.1 The maximum number of Shares that may be made the subject of
Options and Awards granted under the Plan is 1,300,000 shares of Stock plus
263,940 of shares of Stock that have not been awarded under the Company's 1993
Stock Option Plan. (the "1993 Plan"), 1994 Stock Option Plan (the "1994 Plan")
and the 1998 Non-Qualified Stock Option Plan (the "1998 Plan") as of February
23, 2000 (plus those that may be forfeited or cancelled under the 1993 Plan, the
1994 Plan or the 1998 Plan after the effective date of this Plan). Upon a Change
in Capitalization, the maximum number

                                      8
<PAGE>   10

of Shares referred to in the first two sentences of this Section 4.1 shall be
adjusted in number and kind pursuant to Section 11. The Company shall reserve
for the purposes of the Plan, out of its authorized but unissued Shares or out
of Shares held in the Company's treasury, or partly out of each, such number of
Shares as shall be determined by the Board.

          4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards shall
be reduced as follows:

               (a) In connection with the granting of an Option or an Award
(other than the granting of a Performance Unit denominated in dollars), the
number of Shares shall be reduced by the number of Shares in respect of which
the Option or Award is granted or denominated.

               (b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.

          4.3 Whenever any outstanding Option or Award or portion thereof
expires, is canceled or is otherwise terminated for any reason without having
been exercised or payment having been made in respect of the entire Option or
Award, the Shares allocable to the expired, canceled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.

     5. Option Grants.

          5.1 Authority of Committee. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Options, and the terms and conditions of the grant
to such Eligible Individuals shall be set forth in an Agreement.

          5.2 Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option shall be
determined by the Committee and set forth in the Agreement; provided, however,
that the purchase price per Share under each Incentive Stock Option shall not be
less than 100% of the Fair Market Value of a Share on the date the Option is
granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).

          5.3 Maximum Duration. Options granted hereunder shall be for such term
as the Committee shall determine, provided that an Incentive Stock Option shall
not be exercisable after the expiration of ten (10) years from the date it is
granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted.
The Committee may, subsequent to the granting of any Option, extend the term
thereof, but in no event shall the term as so extended exceed the maximum term
provided for in the preceding sentence.

                                       9
<PAGE>   11

          5.4 Vesting. Subject to Section 5.9, each Option shall become
exercisable in such installments (which need not be equal) and at such times as
may be designated by the Committee and set forth in the Agreement. To the extent
not exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Option expires. The Committee may accelerate the exercisability of any Option or
portion thereof at any time.

          5.5 Modification. No modification of an Option shall adversely alter
or impair any rights or obligations under the Option without the Optionee's
consent.

          5.6 Non-Transferability. Unless set forth in the Agreement evidencing
the Option (other than an Incentive Stock Option) at the time of grant or at any
time thereafter, an Option granted hereunder shall not be transferable by the
Optionee to whom granted except by will or the laws of descent and distribution
or pursuant to a domestic relations order (within the meaning of Rule 16a-12
promulgated under the Exchange Act), and an Option may be exercised during the
lifetime of such Optionee only by the Optionee or his or her guardian or legal
representative. The terms of such Option shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and successors of the
Optionee.

          5.7 Method of Exercise. Unless another procedure is established by the
Committee, the exercise of an Option shall be made only by a written notice
delivered in person or by mail to the Secretary of the Company at the Company's
principal executive office, specifying the number of Shares to be purchased and
accompanied by payment therefor and otherwise in accordance with the Agreement
pursuant to which the Option was granted. The purchase price of Shares acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash or check at the time the Option is
exercised or (ii) at the discretion of the Committee at the time of the grant of
the Option (or subsequently in the case of a Nonstatutory Stock Option) (a) by
delivery to the Company of other Common Stock, or (b) in any other form of legal
consideration that may be acceptable to the Committee, including, without
limitation, a "cashless" exercise program established with a broker following
the Initial Public Offering. Unless otherwise specifically provided in the
Option, the purchase price of Shares acquired pursuant to an Option that is paid
by delivery to the Company of other Shares acquired, directly or indirectly from
the Company, shall be paid only with Shares that have been held for more than
six (6) months (or such longer or shorter period of time required to avoid a
charge to earnings for financial accounting purposes). At any time that the
Company is incorporated in Delaware, payment of the "par value" (as defined in
the Delaware General Corporation Law) of Shares acquired pursuant to the Option
shall not be made by deferred payment or promissory note. No fractional Shares
(or cash in lieu thereof) shall be issued upon exercise of an Option and the
number of Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.

          5.8 Rights of Optionees. Optionee shall not be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the Company
shall have issued and delivered Shares to the Optionee, and (iii) the Optionee's
name shall have

                                       10
<PAGE>   12

been entered as a stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other ownership rights with
respect to such Shares, subject to such terms and conditions as may be set forth
in the applicable Agreement.

          5.9 Effect of Change in Control. In the event of a Change in Control,
all Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable for a period of 30 days immediately prior to
the Change in Control date, and each holder thereof shall be provided with
timely notice of the right to exercise such Options in full prior to such date.

          Immediately following the consummation of a Change in Control, all
outstanding Options shall terminate and cease to be outstanding, except to the
extent assumed by a successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of any
agreement governing a Change in Control.

          Each Option that is assumed in connection with a Change in Control
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities that would have been issuable to the
Participant in connection with such Change in Control had the Option been
exercised immediately prior to such Change in Control. Appropriate adjustments
to reflect such Change in Control shall also be made to the exercise price
payable per share under each outstanding Option, provided the aggregate exercise
price payable for such securities available for issuance shall remain the same.

     6. Stock Appreciation Rights.

          The Committee may in its discretion, either alone or in connection
with the grant of an Employee Option, grant Stock Appreciation Rights in
accordance with the Plan, the terms and conditions of which shall be set forth
in an Agreement. If granted in connection with an Option, a Stock Appreciation
Right shall cover the same Shares covered by the Option (or such lesser number
of Shares as the Committee may determine) and shall, except as provided in this
Section 6, be subject to the same terms and conditions as the related Option.

          6.1 Time of Grant. A Stock Appreciation Right may be granted (i) at
any time if unrelated to an Option, or (ii) if related to an Option, either at
the time of grant, or at any time thereafter during the term of the Option.

          6.2 Stock Appreciation Right Related to an Option.

               (a) Exercise. A Stock Appreciation Right granted in connection
with an Option shall be exercisable at such time or times and only to the extent
that the related Options are exercisable, and will not be transferable except to
the extent the related Option may be transferable. A Stock Appreciation Right
granted in connection with an Incentive Stock Option shall be exercisable only
if the Fair Market

                                       11
<PAGE>   13

Value of a Share on the date of exercise exceeds the purchase price specified in
the related Incentive Stock Option Agreement.

               (b) Amount Payable. Upon the exercise of a Stock Appreciation
Right related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the per Share purchase price under the related Option, by (B) the number of
Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.

               (c) Treatment of Related Options and Stock Appreciation Rights
Upon Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.

          6.3 Stock Appreciation Right Unrelated to an Option. The Committee may
grant to Eligible Individuals Stock Appreciation Rights unrelated to Options.
Stock Appreciation Rights unrelated to Options shall contain such terms and
conditions as to exercisability (subject to Section 6.7), vesting and duration
as the Committee shall determine, but in no event shall they have a term of
greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date the Stock Appreciation Right was
granted, by (B) number of Shares as to which the Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.

          6.4 Method of Exercise. Stock Appreciation Rights shall be exercised
by a Grantee only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office, specifying
the number of Shares with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Grantee.

          6.5 Form of Payment. Payment of the amount determined under Sections
8.2(b) or 8.3 may be made in the discretion of the Committee solely in whole
Shares in a number determined at their Fair Market Value on the date preceding
the date

                                       12
<PAGE>   14

of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.

          6.6 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Stock Appreciation Rights or
accept the surrender of outstanding Awards of Stock Appreciation Rights (to the
extent not exercised) and grant new Awards in substitution for them.
Notwithstanding the foregoing, no modification of an Award shall adversely alter
or impair any rights or obligations under the Agreement without the Grantee's
consent.

          6.7 Effect of Change in Control. In the event of a Change in Control,
all Stock Appreciation Rights shall become immediately and fully exercisable
immediately prior thereto.

     7. Dividend Equivalent Rights.

          Dividend Equivalent Rights may be granted to Eligible Individuals in
tandem with an Option or Award or as a separate award. The terms and conditions
applicable to each Dividend Equivalent Right shall be specified in the Agreement
under which the Dividend Equivalent Right is granted. Amounts payable in respect
of Dividend Equivalent Rights may be payable currently or deferred until the
lapsing of restrictions on such Dividend Equivalent Rights or until the vesting,
exercise, payment, settlement or other lapse of restrictions on the Option or
Award to which the Dividend Equivalent Rights relate. In the event that the
amount payable in respect of Dividend Equivalent Rights are to be deferred, the
Committee shall determine whether such amounts are to be held in cash or
reinvested in Shares or deemed (notionally) to be reinvested in Shares. If
amounts payable in respect of Dividend Equivalent Rights are to be held in cash,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Dividend Equivalent Rights may
be settled in cash or Shares or a combination thereof, in a single installment
or multiple installments.

     8. Restricted Stock.

          8.1 Grant. The Committee may grant Awards to Eligible Individuals of
Restricted Stock, which shall be evidenced by an Agreement between the Company
and the Grantee. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this Section 8.

          8.2 Rights of Grantee. Shares of Restricted Stock granted pursuant to
an Award hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the Grantee has
executed an

                                       13
<PAGE>   15

Agreement evidencing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the Agreement evidencing a Restricted Stock Award,
the appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require within
the time period prescribed by the Committee at the time the Award is granted,
the Award shall be null and void. At the discretion of the Committee, Shares
issued in connection with a Restricted Stock Award shall be deposited together
with the stock powers with an escrow agent (which may be the Company) designated
by the Committee. Unless the Committee determines otherwise and as set forth in
the Agreement, upon delivery of the Shares to the escrow agent, the Grantee
shall have all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.

          8.3 Non-transferability. Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 10.4, such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated, nor shall they
be delivered to the Grantee.

          8.4 Lapse of Restrictions.

               (a) Generally. Restrictions upon Shares of Restricted Stock
awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine. The Agreement evidencing the Award
shall set forth any such restrictions.

               (b) Effect of Change in Control. Unless the Committee shall
determine otherwise at the time of the grant of an Award of Restricted Stock,
the restrictions upon Shares of Restricted Stock shall lapse immediately prior
to a Change in Control. The Agreement evidencing the Award shall set forth any
such provisions.

          8.5 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Restricted Stock or accept the
surrender of outstanding Shares of Restricted Stock (to the extent the
restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.

          8.6 Treatment of Dividends. At the time an Award of Shares of
Restricted Stock is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on such Shares by the Company shall be (i) deferred until the
lapsing of the restrictions imposed upon such Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Shares of Restricted Stock) or held in cash. If deferred dividends
are to

                                       14
<PAGE>   16

be held in cash, there may be credited at the end of each year (or portion
thereof) interest on the amount of the account at the beginning of the year at a
rate per annum as the Committee, in its discretion, may determine. Payment of
deferred dividends in respect of Shares of Restricted Stock (whether held in
cash or as additional Shares of Restricted Stock), together with interest
accrued thereon, if any, shall be made upon the lapsing of restrictions imposed
on the Shares in respect of which the deferred dividends were paid, and any
dividends deferred (together with any interest accrued thereon) in respect of
any Shares of Restricted Stock shall be forfeited upon the forfeiture of such
Shares.

          8.7 Delivery of Shares. Upon the lapse of the restrictions on Shares
of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.

     9. Performance Awards.

          9.1 (a) Performance Objectives. Performance Objectives for Performance
Awards may be expressed in terms of (i) earnings per Share, (ii) Share price,
(iii) pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi)
revenues, (vii) EBITDA, (viii) market share or market penetration, (ix) any
other criteria or objective established by the Committee, or (x) any combination
of the foregoing. Performance Objectives may be in respect of the performance of
the Company and its Subsidiaries (which may be on a consolidated basis), a
Subsidiary or a Division. Performance Objectives may be absolute or relative and
may be expressed in terms of a progression within a specified range. The
Performance Objectives with respect to a Performance Cycle shall be established
in writing by the Committee by the earlier of (i) the date on which a quarter of
the Performance Cycle has elapsed or (ii) the date which is ninety (90) days
after the commencement of the Performance Cycle, and in any event while the
performance relating to the Performance Objectives remain substantially
uncertain. At the time of the granting of a Performance Award and to the extent
permitted under Section 162(m) of the Code and the regulations thereunder, the
Committee may provide for the manner in which the Performance Objectives will be
measured to reflect the impact of specified corporate transactions,
extraordinary events, accounting changes and other similar events.

          9.2 (b) Determination of Performance. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance Award
made to a Grantee who is subject to Section 162(m) of the Code, the Committee
shall certify in writing that the applicable Performance Objectives have been
satisfied.

          9.3 Performance Units. The Committee, in its discretion, may grant
Awards of Performance Units to Eligible Individuals, the terms and conditions of
which shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and,
contingent upon the attainment of specified Performance Objectives within the
Performance Cycle, represent the right to receive payment as provided in Section
9.2(b) of (i) in the case of Share-denominated Performance Units, the Fair
Market Value of a Share on the date the Performance Unit was granted, the date
the Performance Unit became vested or any other

                                       15
<PAGE>   17

date specified by the Committee, (ii) in the case of dollar-denominated
Performance Units, the specified dollar amount or (iii) a percentage (which may
be more than 100%) of the amount described in clause (i) or (ii) depending on
the level of Performance Objective attainment; provided, however, that, the
Committee may at the time a Performance Unit is granted specify a maximum amount
payable in respect of a vested Performance Unit. Each Agreement shall specify
the number of Performance Units to which it relates, the Performance Objectives
which must be satisfied in order for the Performance Units to vest and the
Performance Cycle within which such Performance Objectives must be satisfied.

               (a) Vesting and Forfeiture. Subject to Sections 9.1(b) and 9.4, a
Grantee shall become vested with respect to the Performance Units to the extent
that the Performance Objectives set forth in the Agreement are satisfied for the
Performance Cycle.

               (b) Payment of Awards. Subject to Section 9.1(b), payment to
Grantees in respect of vested Performance Units shall be made as soon as
practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral of
payment, in which event the terms and conditions of the deferral shall be set
forth in the Agreement. Subject to Section 9.4, such payments may be made
entirely in Shares valued at their Fair Market Value as of the day preceding the
date of payment or such other date specified by the Committee, entirely in cash,
or in such combination of Shares and cash as the Committee in its discretion
shall determine at any time prior to such payment; provided, however, that if
the Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the extent
to which such payment will be in Shares of Restricted Stock and the terms of
such Restricted Stock at the time the Award is granted.

          9.4 Performance Shares. The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Individuals, the terms and conditions
of which shall be set forth in an Agreement between the Company and the Grantee.
Each Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:

               (a) Rights of Grantee. The Committee shall provide at the time an
Award of Performance Shares is made the time or times at which the actual Shares
represented by such Award shall be issued in the name of the Grantee; provided,
however, that no Performance Shares shall be issued until the Grantee has
executed an Agreement evidencing the Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of such
Performance Shares. If a Grantee shall fail to execute the Agreement evidencing
an Award of Performance Shares, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require within the time period prescribed by the Committee at
the time the Award is granted, the Award shall be null and void. At the
discretion of the Committee, Shares issued in connection with an

                                       16
<PAGE>   18

Award of Performance Shares shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Except as restricted by the terms of the Agreement, upon delivery of the Shares
to the escrow agent, the Grantee shall have, in the discretion of the Committee,
all of the rights of a stockholder with respect to such Shares, including the
right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.

               (b) Non-transferability. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 9.3(c) or 9.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may also
impose such other restrictions and conditions on the Performance Shares, if any,
as it deems appropriate.

               (c) Lapse of Restrictions. Subject to Sections 9.1(b) and 9.4,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of Performance Objectives as the Committee may, in
its discretion, determine at the time an Award is granted.

               (d) Treatment of Dividends. At the time the Award of Performance
Shares is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on actual Shares represented by such Award which have been issued by the
Company to the Grantee shall be (i) deferred until the lapsing of the
restrictions imposed upon such Performance Shares and (ii) held by the Company
for the account of the Grantee until such time. In the event that dividends are
to be deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Performance
Shares) or held in cash. If deferred dividends are to be held in cash, there may
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends in
respect of Performance Shares (whether held in cash or in additional Performance
Shares), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Performance Shares in respect of which
the deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Performance Shares shall be
forfeited upon the forfeiture of such Performance Shares.

               (e) Delivery of Shares. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.

          9.5 Effect of Change in Control. In the event of a Change in Control:

               (a) With respect to Performance Units, the Grantee shall (i)
become vested in a percentage of Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set forth in
the Agreement and

                                       17
<PAGE>   19

(ii) be entitled to receive in respect of all Performance Units which become
vested as a result of a Change in Control a cash payment within ten (10) days
after such Change in Control in an amount as determined by the Committee at the
time of the Award of such Performance Unit and as set forth in the Agreement.

               (b) With respect to Performance Shares, restrictions shall lapse
immediately on all or a portion of the Performance Shares as determined by the
Committee at the time of the Award of such Performance Shares and as set forth
in the Agreement.

               (c) The Agreements evidencing Performance Shares and Performance
Units shall provide for the treatment of such Awards (or portions thereof) which
do not become vested as the result of a Change in Control, including, but not
limited to, provisions for the adjustment of applicable Performance Objectives.

          9.6 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Performance Awards or accept the surrender
of outstanding Performance Awards and grant new Performance Awards in
substitution for them. Notwithstanding the foregoing, no modification of a
Performance Award shall adversely alter or impair any rights or obligations
under the Agreement without the Grantee's consent.

     10. Effect of a Termination of Employment.

          The Agreement evidencing the grant of each Option and each Award shall
set forth the terms and conditions applicable to such Option or Award upon a
termination or change in the status of the employment of the Optionee or Grantee
by the Company, a Subsidiary or a Division (including a termination or change by
reason of the sale of a Subsidiary or a Division), which, shall be as the
Committee may, in its discretion, determine at the time the Option or Award is
granted or thereafter.

     11. Adjustment Upon Changes in Capitalization.

               (a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted under the Plan, (ii) the maximum number
and class of Shares or other stock or securities with respect to which Options
or Awards may be granted to any Eligible Individual during the term of the Plan,
(iii) the number and class of Shares or other stock or securities which are
subject to outstanding Options or Awards granted under the Plan and the purchase
price therefor, if applicable, and (iv) the Performance Objectives.

               (b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.

                                       18
<PAGE>   20

               (c) If, by reason of a Change in Capitalization, a Grantee of an
Award shall be entitled to, or an Optionee shall be entitled to exercise an
Option with respect to, new, additional or different shares of stock or
securities, such new, additional or different shares shall thereupon be subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Shares subject to the Award or Option, as the case may be,
prior to such Change in Capitalization.

     12. Effect of Certain Transactions.

          Subject to Sections 5.9, 6.7, 8.4(b) and 9.4 or as otherwise provided
in an Agreement, in the event of (i) the liquidation or dissolution of the
Company or (ii) a merger or consolidation of the Company (a "Transaction"), the
Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms, except that following a Transaction each
Optionee and Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be, upon exercise
of any Option or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property or other consideration that each
holder of a Share was entitled to receive in the Transaction in respect of a
Share; provided, however, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.

     13. Interpretation.

          Following the required registration of any equity security of the
Company pursuant to Section 12 of the Exchange Act:

               (a) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.

               (b) Unless otherwise expressly stated in the relevant Agreement,
each Option, Stock Appreciation Right and Performance Award granted under the
Plan is intended to be performance-based compensation within the meaning of
Section 162(m)(4)(C) of the Code. The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Options or Awards if the ability to exercise such discretion or the exercise of
such discretion itself would cause the compensation attributable to such Options
or Awards to fail to qualify as performance-based compensation.

     14. Pooling Transactions.

          Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change in Control which is also intended to
constitute a Pooling Transaction, the Committee shall take such actions, if any,
as are specifically recommended by an independent accounting firm retained by
the Company to the extent

                                       19
<PAGE>   21

reasonably necessary in order to assure that the Pooling Transaction will
qualify as such, including but not limited to (i) deferring the vesting,
exercise, payment, settlement or lapsing of restrictions with respect to any
Option or Award, (ii) providing that the payment or settlement in respect of any
Option or Award be made in the form of cash, Shares or securities of a successor
or acquirer of the Company, or a combination of the foregoing, and (iii)
providing for the extension of the term of any Option or Award to the extent
necessary to accommodate the foregoing, but not beyond the maximum term
permitted for any Option or Award.

     15. Termination and Amendment of the Plan.

          The Plan shall terminate on the day preceding the tenth anniversary of
the date of its adoption by the Board and no Option or Award may be granted
thereafter. The Board may sooner terminate the Plan and the Board may at any
time and from time to time amend, modify or suspend the Plan; provided, however,
that:

          (a) no such amendment, modification, suspension or termination shall
impair or adversely alter any Options or Awards theretofore granted under the
Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and

          (b) to the extent necessary under applicable law, no amendment shall
be effective unless approved by the stockholders of the Company in accordance
with applicable law.

     16. Non-Exclusivity of the Plan.

          The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.

     17. Limitation of Liability.

          As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:

               (i) give any person any right to be granted an Option or Award
other than at the sole discretion of the Committee;

               (ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;

                                       20
<PAGE>   22

               (iii) limit in any way the right of the Company or any Subsidiary
to terminate the employment of any person at any time; or

               (iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.

     18. Regulations and Other Approvals; Governing Law.

          18.1 Except as to matters of federal law, the Plan and the rights of
all persons claiming hereunder shall be construed and determined in accordance
with the laws of the State of Delaware without giving effect to conflicts of
laws principles thereof.

          18.2 The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.

          18.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.

          18.4 Each Option and Award is subject to the requirement that, if at
any time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.

          18.5 Notwithstanding anything contained in the Plan or any Agreement
to the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option or Award granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the

                                       21
<PAGE>   23

Securities Act or the rules and regulations promulgated thereunder. The
certificates evidencing any of such Shares shall be appropriately amended to
reflect their status as restricted securities as aforesaid.

     19. Miscellaneous.

          19.1 Multiple Agreements. The terms of each Option or Award may differ
from other Options or Awards granted under the Plan at the same time, or at some
other time. The Committee may also grant more than one Option or Award to a
given Eligible Individual during the term of the Plan, either in addition to, or
in substitution for, one or more Options or Awards previously granted to that
Eligible Individual.

          19.2 Withholding of Taxes.

               (a) At such times as an Optionee or Grantee recognizes taxable
income in connection with the receipt of Shares or cash hereunder (a "Taxable
Event"), the Optionee or Grantee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
Shares or the payment of such cash. To the extent provided by the terms of an
Agreement, an Optionee or Grantee may satisfy payment of any Withholding Taxes
that are due because of the exercise of an Option or acquisition of Common Stock
under an Award by any of the following means (in addition to the Company's right
to withhold from any compensation paid to the Participant by the Company) or by
a combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold Shares from the Shares otherwise issuable to the Optionee or
Grantee as a result of the exercise or acquisition of Shares under the Option or
Award, provided, however, that no Shares may be withheld with a value exceeding
the minimum amount of tax required to be withheld by law; or (iii) delivering to
the Company owned and unencumbered Shares acceptable to the Committee.

               (b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.

          19.3 Effective Date. The effective date of this Plan shall be as
determined by the Board, subject only to the approval by the affirmative vote of
the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting of stockholders duly held in
accordance with the applicable laws of the State of Delaware within twelve (12)
months of the adoption of the Plan by the Board.

                                       22

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