Document:

Exhibit 4.9

                          OVATION PRODUCTS CORPORATION

                           THIRD AMENDED AND RESTATED
                       FIRST REFUSAL AND CO-SALE AGREEMENT

      THIS THIRD AMENDED AND RESTATED FIRST REFUSAL AND CO-SALE  AGREEMENT (this
"Agreement") is made and entered into as of this 30th day of June,  2004, by and
among OVATION PRODUCTS CORPORATION, a Delaware corporation (the "Company"), each
of the investors  listed on EXHIBIT B hereto and other future  investors who may
become a party to this  Agreement  (each referred to herein as an "Investor" and
collectively  as the  "Investors"),  and each of the persons listed on EXHIBIT A
hereto  (each  referred to herein as a  "Shareholder"  and  collectively  as the
"Shareholders").

                                    RECITALS

      WHEREAS,  the  Shareholders  are the beneficial  owners of an aggregate of
[404,800] shares of Common Stock of the Company;

      WHEREAS, SJ Electro Systems, Inc., a Minnesota corporation ("SJE"), is the
holder of 160,000 shares of the Company's  Series A Preferred Stock (the "Series
A Preferred  Stock") and a warrant to purchase up to an additional 40,000 shares
of Series A Preferred Stock;

      WHEREAS,  the Company  previously  issued  294,102 shares of the Company's
Series B Preferred Stock (the "Series B Preferred Stock") to certain Investors;

      WHEREAS,  the Company  previously  issued  131,000 shares of the Company's
Series  B-1  Preferred  Stock  (the  "Series  B-1  Preferred  Stock") to certain
Investors;

      WHEREAS, the Company will be issuing up to 400,000 shares of the Company's
Series C Preferred  Stock (the "Series C Preferred  Stock" and with the Series A
Preferred  Stock,  the Series B  Preferred  Stock and the  Series B-1  Preferred
Stock,  the  "Preferred  Stock") and  warrants  to purchase up to an  additional
120,000  shares of Series C  Preferred  Stock to certain  Investors  pursuant to
Subscription  Agreements  between such  Investors  and the Company (the Series C
Financing);

      WHEREAS,  in connection  with the  consummation of the Series C Financing,
the  parties  desire to enter into this  Agreement  in order to grant  rights of
first refusal and co-sale to the Investors.

                                    AGREEMENT

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

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1. DEFINITIONS.

      (A) "Stock" shall mean shares of the  Company's  Common Stock now owned or
subsequently  acquired by the Shareholders by gift, purchase,  dividend,  option
exercise or any other means whether or not such  securities are only  registered
in a Shareholder's  name or  beneficially or legally owned by such  Shareholder,
including any interest of a spouse in any of the Stock, whether that interest is
asserted pursuant to marital property laws or otherwise. The number of shares of
Stock owned by the  Shareholders  as of the date hereof are set forth on EXHIBIT
B,  which  exhibit  may be amended  from time to time by the  Company to reflect
changes in the number of shares owned by the Shareholders, but the failure to so
amend shall have no effect on such Stock being subject to this Agreement.

      (B) "Common  Stock"  shall mean the  Company's  Common Stock and shares of
Common Stock issued or issuable upon  conversion  of the  Company's  outstanding
Preferred Stock or exercise of any option, warrant or other security or right of
any kind convertible into or exchangeable for Common Stock.

      (C) For the purpose of this Agreement,  the term "Transfer"  shall include
any sale, assignment, encumbrance,  hypothecation,  pledge, conveyance in trust,
gift,  transfer by request,  devise or descent, or other transfer or disposition
of any kind  including,  but not limited to,  transfers  to  receivers,  levying
creditors,  trustees or receivers in bankruptcy proceedings or general assignees
for the benefit of creditors, whether voluntary or by operation of law, directly
or indirectly, of any of the Stock.

2. RIGHT OF FIRST REFUSAL.

      (A) GRANT.  Subject to the terms  hereof,  the Company  and, to the extent
such right is waived by the Company,  the  Investors  and the  Shareholders  are
hereby granted a right of first refusal with respect to any proposed disposition
of Stock by any  Shareholder  (or any  permitted  transferee  of the Stock under
Section  4  hereof,  hereafter  collectively  included  in all  references  to a
"Shareholder"),  in the following order of priority:  The Company shall have the
first right to purchase any Stock proposed to be transferred to a third party by
a Shareholder. In the event the Company elects not to exercise its first refusal
rights with respect to all or any portion of such proposed transfer, the Company
agrees  to waive  such  rights  with  respect  to such  portion  in favor of the
Investors' and the  nor-transferring  Shareholders' first refusal rights and the
Investors' co-sale rights under this Agreement.

      (B) NOTICE OF INTENDED DISPOSITION.  In the event a Shareholder desires to
accept a BONA FIDE third-party offer for the Transfer of any or all of the Stock
owned by the Shareholder  (such  Shareholder to be hereafter called the "Selling
Shareholder"  and the shares  subject to such offer to be  hereafter  called the
"Target Shares"), the Selling Shareholder shall promptly deliver to the Company,
each  Investor  and  the  other  Shareholders  written  notice  of the  intended
disposition  (the  "Disposition  Notice")  and the basic  terms  and  conditions
thereof, including the identity of the proposed purchaser.

      (C) EXERCISE OF RIGHT BY THE COMPANY.  The Company shall,  for a period of
30 days following receipt of the Disposition  Notice, have the right to purchase
all or any  portion of the

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Target Shares upon the same terms and  conditions  specified in the  Disposition
Notice, subject to the following conditions.  Such right shall be exercisable by
written notice (the  "Exercise  Notice")  delivered to the Selling  Shareholder,
each Investor and the other  Shareholders  prior to the expiration of the 30 day
exercise  period.  If such right is exercised  with respect to all of the Target
Shares  specified in the Disposition  Notice,  then the Company shall effect the
repurchase of such Target Shares,  including  payment of the purchase price, not
more than 15 days after the delivery of the Exercise  Notice.  At such time, the
Selling  Shareholder shall deliver to the Company the certificates  representing
the Target Shares to be repurchased,  each  certificate to be properly  endorsed
for transfer.  Alternatively,  if such right is exercised with respect to only a
portion of the Target Shares  specified in the Disposition  Notice,  the Company
shall  notify  the  Investors  and  the  other  Shareholders  of its  intent  to
repurchase only a portion of the Target Shares within the 30 day exercise period
defined  above.  The  Company's  repurchase  of  such  Target  Shares  shall  be
consummated at the time of any Investors' and the other  Shareholders'  exercise
of their repurchase  rights in accordance with Section 2(c) herein. In the event
no Investor nor any other  Shareholders elect to repurchase any of the remaining
Target  Shares,  the  Company's  repurchase of that portion of the Target Shares
that the Company  desires to repurchase  shall be consummated not more than five
days after the date of the expiration of the Investors' and other  Shareholders'
first refusal right.

      (D) NON-EXERCISE OF RIGHT BY THE COMPANY. In the event the Exercise Notice
is not given by the Company to the Selling  Shareholder,  each  Investor and the
other Shareholders within 30 days following the date of the Company's receipt of
the Disposition  Notice, the Company shall be deemed to have waived its right of
first refusal with respect to such proposed disposition.

      (E) EXERCISE OF RIGHT BY THE  INVESTORS AND THE  SHAREHOLDERS.  Subject to
the right of the Company,  each Investor and the other Shareholders shall, for a
period ending on the earlier of (i) 45 days following receipt of the Disposition
Notice;  or (ii) 15 days from  receipt of the  written  notice of the  Company's
election  to either  waive its right of first  refusal or to  repurchase  only a
portion of the Target  Shares,  have the right to purchase all, but together not
less than all, of the  remaining  balance  after the  Company's  repurchase of a
portion of the Target Shares,  upon the same terms and  conditions  specified in
the Disposition  Notice.  The Investor and the other Shareholders shall exercise
this right of first  refusal in the same  manner and  subject to the same rights
and conditions as the Company,  as more  specifically  set forth in Section 2(e)
above.  To the extent  that the Target  Shares  need to be  allocated  among the
Investors  and the other  Shareholders,  they  shall be  allocated  based on the
holdings of Common Stock of each  Investor that desires to exercise the right of
first refusal with respect to such  disposition  (assuming the conversion of all
outstanding  shares of Preferred  Stock held by such  Investor)  and each of the
other  Shareholders  that desire to  exercise  the right of first  refusal  with
respect to such proposed disposition; PROVIDED, that each Investor and the other
Shareholders shall have a right of oversubscription such that if any Investor or
any Shareholder  fails to exercise their right of first refusal,  then the other
Investors and the other  Shareholders shall have the right to purchase up to the
balance of the Target  Shares not so purchased,  or the other  Investors and the
other  Shareholders  may elect to purchase the  remaining  Target Shares in such
other proportions as they may determine.

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<PAGE>

      (F)  NON-EXERCISE  OF RIGHT BY THE INVESTORS  AND THE OTHER  SHAREHOLDERS.
Subject to the Investors'  co-sale rights  described in Section 3 below,  in the
event the Exercise  Notice with  respect to any portion of the Target  Shares is
not given to the Selling Shareholder within the time period set forth in Section
2(e) above, the Selling Shareholder shall have a period of 60 days thereafter in
which to sell the portion of the Target  Shares that  neither the  Company,  the
Investors  nor the other  Shareholders  has elected to purchase,  upon terms and
conditions  (including the purchase  price) no more favorable to the third-party
transferee  than those  specified in the  Disposition  Notice.  The  third-party
transferee  shall acquire the Target Shares free and clear of subsequent  rights
of first refusal under this Section 2 upon the terms and conditions set forth in
such  Disposition  Notice.  In  the  event  the  Selling  Shareholder  does  not
consummate  the  Transfer of the Target  Shares  within the 60 day  period,  the
Company's,  the  Investors' and the other  Shareholders'  right of first refusal
shall  continue to be applicable  to any  subsequent  disposition  of the Target
Shares by the Selling  Shareholder  until such right lapses in  accordance  with
Section 8(e) herein.

      (G) PURCHASE PRICE. Should the purchase price specified in the Disposition
Notice be payable in property other than cash or evidences of indebtedness,  the
Company, the Investors and/or the other Shareholders,  as the case may be, shall
have the right to pay the purchase  price in the form of cash equal in amount to
the value of such  property.  If the Selling  Shareholder  and the Company,  the
Investors  and/or the other  Shareholders,  as the case may be,  cannot agree on
such cash value  within 10 days after the  Exercise  Notice is  received  by the
Selling  Shareholder,  the valuation shall be made by an appraiser of recognized
standing  selected by the Selling  Shareholder  and the Company,  the  Investors
and/or the other  Shareholders,  as the case may be, or, if they cannot agree on
an appraiser within 15 days after the Exercise Notice is received by the Selling
Shareholder,  each  (i.e.,  the  Selling  Shareholder  on the one hand,  and the
Company, the Investors and/or the other Stockholders, as the case may be, on the
other  hand)  shall  select an  appraiser  of  recognized  standing  and the two
appraisers  shall  designate a third  appraiser of  recognized  standing,  whose
appraisal shall be determinative of such value. The cost of such appraisal shall
be shared equally by the Selling Shareholder,  on the one hand, and the Company,
the  Investors  and/or the other  Shareholders,  on the other hand.  The closing
shall  then be held on the LATER of: (1) the 20th day  following  receipt of the
Exercise  Notice or (ii) the fifth day after such cash valuation shall have been
made.

3. CO-SALE RIGHTS.

      (A) NOTICE OF OFFER.  The provisions of Section 2(a) requiring the Selling
Shareholder to give notice of any intended Transfer of Stock are incorporated in
this Section 3.

      (B) GRANT. If neither the Company, any Investor nor the other Shareholders
elects to exercise  rights of first refusal  pursuant to Section 2 herein,  then
each  Investor may elect to  participate  in such  Transfer of Stock on the same
terms and conditions as those set forth in the Disposition Notice.

      (C)  EXERCISE OF RIGHTS.  If an  Investor  elects to  participate  in such
Transfer  of Stock,  then it shall  deliver an  Exercise  Notice to the  Selling
Shareholder prior to the expiration of the 30 day exercise period.  The Exercise
Notice shall indicate the number of shares of Common Stock such Investor  wishes
to sell under its right to  participate.  Such Investor may sell all or any part
of

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that number of shares  equal to the product  obtained  by  multiplying:  (i) the
aggregate  number of shares of Stock  covered by the Notice by (ii) a  fraction,
the  numerator  of which is the number of shares of Common  Stock  owned by such
Investor (assuming conversion of all securities, excluding warrants and options,
then outstanding that are directly convertible into Common Stock) at the time of
the  Transfer  and the  denominator  of which is the  total  number of shares of
Common  Stock  owned  by such  Shareholder  and the  Investors  that  desire  to
participate  in  such  disposition   (assuming  conversion  of  all  securities,
excluding  warrants and options,  then  outstanding  that are  convertible  into
Common Stock) at the time of the Transfer.

      (D)  CERTIFICATES.  If an Investor  elects to  participate in the Transfer
pursuant to this Section 3, it shall effect its participation in the Transfer by
promptly  delivering  to  such  Shareholder  for  transfer  to  the  prospective
purchaser  one or more  certificates,  properly  endorsed  for  transfer,  which
represent:

            (I) the type and  number  of  shares  of  Common  Stock  which  such
      Investor elects to sell; or

            (II) that number of shares of Preferred  Stock which is at such time
      convertible  into the number of shares of Common Stock which such Investor
      elects  to sell;  PROVIDED,  HOWEVER,  that if the  prospective  purchaser
      objects to the delivery of Preferred  Stock in lieu of Common Stock,  such
      Investor shall convert such Preferred  Stock into Common Stock and deliver
      Common Stock as provided in Section  3(d)(i) above.  The Company agrees to
      make any such  conversion  concurrent  with the  actual  Transfer  of such
      shares to the purchaser.

      (E) PAYMENT OF PROCEEDS.  The stock  certificate or  certificates  that an
Investor  delivers  to such  Shareholder  pursuant  to  Section  3(d)  shall  be
transferred  to the  prospective  purchaser in  consummation  of the sale of the
Common Stock pursuant to the terms and conditions  specified in the Notice,  and
the Shareholder shall concurrently therewith remit to such Investor that portion
of the sale  proceeds  to which  such  Investor  is  entitled  by  reason of its
participation  in such  sale.  To the  extent  that  any  prospective  purchaser
prohibits  such  assignment  or  otherwise  refuses to purchase  shares or other
securities from a particular  Investor,  such Shareholder shall not sell to such
prospective  purchaser or purchasers any Stock unless and until,  simultaneously
with such sale, such Shareholder  shall purchase such shares or other securities
from such Investor on the same terms and conditions specified in the Notice.

      (F)  NON-EXERCISE OF RIGHTS.  The exercise or non-exercise of the right of
an Investor  hereunder to  participate in one or more Transfers of Stock made by
such  Shareholder  shall not  adversely  affect  its  rights to  participate  in
subsequent Transfers of Stock subject to this Section 3.

      (G) DISPOSITION  NOTICE.  If no Investor elects to participate in the sale
of the Stock subject to the Disposition  Notice, such Shareholder may, not later
than 60 days  following  delivery to the  Investors of the  Disposition  Notice,
enter into an agreement  providing  for the closing of the Transfer of the Stock
covered by the Disposition  Notice within 30 days of such agreement on terms and
conditions not more materially  favorable to the transferor than those described
in the  Disposition  Notice.  Any  proposed  transfer  on terms  and  conditions
materially  more favorable than those described in the  Disposition  Notice,  as
well as any subsequent

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<PAGE>

proposed  transfer of any of the Stock by a Shareholder,  shall again be subject
to the  co-sale  right  of the  Investors  and  shall  require  compliance  by a
Shareholder with the procedures described in this Section 3.

4. EXEMPT TRANSFERS.

      (A) Notwithstanding the foregoing, the rights of first refusal and co-sale
of the  Investors  shall  not  apply  to:  (i) any  transfer  to the  ancestors,
descendants  or spouse or to  trusts  for the  benefit  of such  persons  or the
Shareholder;  (ii) any  pledge  of  Stock  made  pursuant  to a BONA  FIDE  loan
transaction that creates a mere security interest;  or (iii) any BONA FIDE gift;
PROVIDED  that  in  the  event  of  any  transfer  made  pursuant  to one of the
exemptions  provided by clauses (i), (ii) and (iii),  (A) the Shareholder  shall
inform the Investors of such pledge,  transfer or gift prior to effecting it and
(B) the pledgee,  transferee or donee shall furnish the Investors with a written
agreement  to be bound by and comply  with all  provisions  of  Sections 2 and 3
herein. Such transferred Stock shall remain "Stock" hereunder, and such pledgee,
transferee or donee shall be treated as the  "Shareholder"  for purposes of this
Agreement.

      (B) Notwithstanding the foregoing,  the provisions of this Agreement shall
not  apply to the sale of any Stock to the  public  pursuant  to a  registration
statement  filed with,  and declared  effective by, the  Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"):

5. PROHIBITED TRANSFERS.

      (A)  In  the  event  that a  Shareholder  should  Transfer  any  Stock  in
contravention  of the co-sale  right of the  Investors  under this  Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder,  shall have the put option provided
below, and such Shareholder shall be bound by the applicable  provisions of such
option.

      (B) In the event of a Prohibited  Transfer,  each Investor  shall have the
right to sell to such  Shareholder the type and number of shares of Common Stock
equal to the number of shares such Investor would have been entitled to transfer
to the  purchaser  under  Section 3(c) hereof had the  Prohibited  Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall be
made on the following terms and conditions:

            (I) The price per  share at which the  shares  are to be sold to the
      Shareholder shall be equal to the price per share paid by the purchaser to
      such Shareholder in such Prohibited  Transfer.  The Shareholder shall also
      reimburse such Investor for any and all fees and expenses, including legal
      fees and  expenses,  incurred  pursuant to the  exercise or the  attempted
      exercise of such Investor's rights under Section 3.

            (II) Within 90 days after the date on which such  Investor  received
      notice  of the  Prohibited  Transfer  or  otherwise  became  aware  of the
      Prohibited Transfer, such Investor shall, if exercising the option created
      hereby,  deliver  to  the  Shareholder  the  certificate  or  certificates
      representing  shares to be sold, each certificate to be properly  endorsed
      for transfer.

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<PAGE>

            (III) Such  Shareholder  shall,  upon receipt of the  certificate or
      certificates for the shares to be sold by such Investor,  pursuant to this
      Section 5(b), pay the aggregate  purchase price therefor and the amount of
      reimbursable fees and expenses,  as specified in Section 5(b)(i),  in cash
      or by other means acceptable to such Investor.

            (IV) Notwithstanding the foregoing,  any attempt by a Shareholder to
      transfer  Stock in  violation of Section 3 hereof shall be voidable at the
      option of such  Investor if such  Investor  does not elect to exercise the
      put option set forth in this  Section 5, and the  Company  agrees it shall
      not effect such a transfer  nor shall it treat any alleged  transferee  as
      the holder of such shares without the written consent of such Investor.

6. REDEMPTION RIGHT OF THE COMPANY.

      (A)  EXERCISE  OF  REDEMPTION  RIGHT.  In the event  that more than  fifty
percent  (50%) of the voting stock of SJE is acquired by an  independent  person
who is not, as of the date of this Agreement, the owner of more than one percent
(1%) of the  capital  stock of the  Company  in a single or a series of  related
transactions,  then SJE shall  notify the  Company's  president  of that fact in
writing and the Company shall have the option for a period of 90 days  following
receipt of such notice to purchase  all, but not less than all, of the Preferred
Stock owned by SJE. Such option shall be exercised by providing  written  notice
to SJE of the  Company's  exercise  of its  redemption  option.  In the event an
exercise notice is not given to SJE within such 90 day period,  then the Company
shall be deemed to have waived its right to redeem the Preferred  Stock owned by
SJE pursuant to this Section 6.

      (B) REDEMPTION  PRICE. The purchase price to be paid by the Company in the
event it elects to exercise  its  redemption  option  pursuant to this Section 6
shall be the higher of (i) the purchase price  originally paid for the Preferred
Stock, plus any accrued but unpaid  dividends,  or (ii) the fair market value of
the  stock.  The  redemption  price  shall  be paid in  full at the  closing  by
cashier's or  certified  check,  wire  transfer or other  immediately  available
funds.  If SJE and the Company  cannot  agree on the stock's  fair market  value
within 10 days after SJE's receipt of the Company's  exercise  notice,  then the
fair market value of the Preferred  Stock shall be determined by an appraiser of
recognized  standing selected by SJE and the Company or, if they cannot agree on
an appraiser  within 20 days after SJE's  receipt of the exercise  notice,  each
shall select an appraiser of recognized  standing and that two appraisers  shall
designate a third  appraiser of recognized  standing,  whose  appraisal shall be
determinative  of such value. The cost of such appraisal shall be shared equally
by SJE and the Company.  The closing  shall be held on the later of (x) the 15th
day following the delivery of the exercise notice or (y) the 15th day after fair
market value of the stock has been determined.

      (C) The Company's  redemption right shall expire at the time SJE no longer
holds,  or has a right to purchase  pursuant to a warrant,  shares of  Preferred
Stock.

7. LEGEND.

      (A) Each certificate  representing  shares of Stock now or hereafter owned
by the  Shareholders  or issued  to any  person in  connection  with a  Transfer
pursuant to this Agreement shall be endorsed with the following legend:

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<PAGE>

            "THE SALE,  PLEDGE,  HYPOTHECATION  OR  TRANSFER  OF THE  SECURITIES
            REPRESENTED  BY  THIS  CERTIFICATE  IS  SUBJECT  TO  THE  TERMS  AND
            CONDITIONS OF A CERTAIN  FIRST REFUSAL AND CO-SALE  AGREEMENT BY AND
            AMONG THE  SHAREHOLDER,  THE COMPANY AND CERTAIN HOLDERS OF STOCK OF
            THE COMPANY.  COPIES OF SUCH  AGREEMENT MAY BE OBTAINED UPON WRITTEN
            REQUEST TO THE SECRETARY OF THE COMPANY."

      (B) The  Shareholders  agree that the Company may  instruct  its  transfer
agent to impose transfer  restrictions on the shares represented by certificates
bearing the legend  referred to in Section 6(a) above to enforce the  provisions
of this  Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.

8. MISCELLANEOUS.

      (A) CONDITIONS TO EXERCISE OF RIGHTS.  Exercise of each Investor's  rights
under  this  Agreement  shall  be  subject  to and  conditioned  upon,  and  the
Shareholders and the Company shall use their best efforts to assist the Investor
in, compliance with applicable laws.

      (B) GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of Delaware  (without regard to principles of conflicts of
law).

      (C)  AMENDMENT.  Any  provision of this  Agreement  may be amended and the
observance  thereof may be waived (either generally or in a particular  instance
and either  retroactively or prospectively),  only by the written consent of (i)
as to the  Company,  only  the  Company,  (ii)  as to the  Investors,  only  the
Investors  (and their  assignees  pursuant  to  Section  8(d)  hereof  holding a
majority  in  interest  of the  shares of capital  stock  held by the  Investors
hereof; (iii) as to the Shareholders,  only the Shareholders; and (iv) as to SJE
under Section 6, only SJE. Any amendment or waiver  effected in accordance  with
clauses  (i),  (ii) and (iii) of this  Section  7(c) shall be  binding  upon the
Investors, its successors and assigns, the Company and the Shareholders.

      (D) ASSIGNMENT OF RIGHTS. This Agreement  constitutes the entire agreement
between the parties relative to the specific subject matter hereof. Any previous
agreement  among the parties  relative to the specific  subject matter hereof is
superseded by this  Agreement.  This Agreement and the rights and obligations of
the parties  hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.

      (E) TERM.  This Agreement shall continue in full force and effect from the
date hereof through the earliest of the following  dates, on which date it shall
terminate in its entirety:

            (I) the date of the closing of a firmly underwritten public offering
      of the Common Stock  pursuant to a registration  statement  filed with the
      Securities  and  Exchange  Commission,  and declared  effective  under the
      Securities  Act of 1933,  as  amended,  with  gross  proceeds  of at least
      $5,000,000  which  results  in the  Preferred  Stock  being  automatically
      converted into Common Stock; or

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<PAGE>

            (II)  the  date  as of  which  the  parties  hereto  terminate  this
      Agreement by written  consent of the  Investors and a majority in interest
      of the Shareholders.

      (F)  OWNERSHIP.  The  Shareholders  represent and warrant that each is the
sole legal and  beneficial  owner of those  shares of Stock he or she  currently
holds subject to the Agreement and that no other person has any interest  (other
than a community property interest) in such shares.

      (G)  NOTICES.  All notices  required or  permitted  hereunder  shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified;  (ii) when sent by confirmed  electronic mail or facsimile
if sent during normal business hours of the recipient;  if not, then on the next
business  day;  (iii) 5 days after having been sent by  registered  or certified
mail, return receipt requested,  postage prepaid;  or (iv) one day after deposit
with a nationally  recognized  overnight courier,  specifying next day delivery,
with written  verification of receipt.  All communications  shall be sent to the
party to be  notified  at the  address  as set  forth on the  signature  page or
EXHIBIT A hereof or at such other address as such party may designate by 10 days
advance written notice to the other parties hereto.

      (H)  SEVERABILITY.  In the  event  one or more of the  provisions  of this
Agreement  should,   for  any  reason,  be  held  to  be  invalid,   illegal  or
unenforceable in any respect,  such invalidity,  illegality or  unenforceability
shall not affect any other  provisions  of this  Agreement,  and this  Agreement
shall be construed as if such invalid,  illegal or  unenforceable  provision had
never been contained herein.

      (I) ATTORNEYS' FEES. In the event that any suit or action is instituted to
enforce any provision in this  Agreement,  the prevailing  party in such dispute
shall be entitled to recover from the losing party all fees,  costs and expenses
of enforcing  any right of such  prevailing  party under or with respect to this
Agreement  including,  without limitation,  such reasonable fees and expenses of
attorneys and accountants,  which shall include,  without limitation,  all fees,
costs and expenses of appeals.

      (J)  ENTIRE  AGREEMENT.  This  Agreement  constitutes  the full and entire
understanding  and  agreement  between the parties  with regard to the  subjects
hereof  and  thereof  and no party  shall be liable or bound to any other in any
manner by any  representations,  warranties,  covenants and agreements except as
specifically set forth herein and therein.

      (K) SPECIFIC  PERFORMANCE.  The parties  hereto hereby  declare that it is
impossible  to measure in money the damages  which will accrue to a party hereto
or to their heirs, personal representatives or assigns by reason of a failure to
perform any of the obligations  under this Agreement and agree that the terms of
this Agreement  shall be  specifically  enforceable.  If any party hereto or its
heirs,  personal  representatives or assigns institutes any action or proceeding
to  specifically  enforce the  provisions  hereof,  any person against whom such
action or proceeding is brought hereby waives the claim or defense  therein that
such party or such personal  representative  has an adequate  remedy at law, and
such  person  shall not  offer in any such  action  or  proceeding  the claim or
defense that such remedy at law exists.

                                       9
<PAGE>

      (L)  COUNTERPARTS.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

      (M)  ARBITRATION.  All disputes,  controversies  or differences  which may
arise  between the parties  out of, in  relation to or in  connection  with this
Agreement  (or its breach),  which  cannot be amicably  resolved by the parties,
shall be finally  settled by arbitration in Chicago,  Illinois,  pursuant to the
Commercial  Arbitration  Rules of the American  Arbitration  Association  or its
successor,  before a panel of one arbitrator with investment banking experience,
to be  selected  in  accordance  with said  rules.  Unless  otherwise  agreed in
writing:  (i) the costs of  arbitration  shall be  shared  equally  between  the
parties  involved in the dispute,  and (ii) each party shall be responsible  for
its own  attorneys'  fees.  The  parties  shall have the right to  discovery  as
provided for in the Federal Rules of Civil  Procedure,  and the arbitrator shall
be empowered to compel such discovery. The award rendered therein shall be final
and binding  upon all the parties and may be reduced to a judgment in a court of
competent jurisdiction.

      The  parties  agree  that a  party  may  apply  to a  court  of  competent
jurisdiction   for   injunctive   relief   pending   completion  of  arbitration
proceedings.  The court  shall  refer  proceedings  to the  arbitrator  selected
hereunder to determine  whether any injunction  issued  hereunder  shall be made
permanent  or be  dissolved.  The  arbitrator's  findings  shall be binding  and
conclusive upon the parties.

      (N) This  Agreement  supersedes  the Second  Amended  and  Restated  First
Refusal and Co-Sale  Agreement  among  certain of the  parties,  the Amended and
Restated  First Refusal and Co-Sale  Agreement  among certain of the parties and
the  First  Refusal  and  Co-Sale   Agreement   among  certain  of  the  parties
(collectively,  the  "Prior  Agreements").  Each  of  the  Prior  Agreements  is
hereafter null, void and of no legal effect.

                                       10
<PAGE>

      This THIRD  AMENDED AND RESTATED  FIRST  REFUSAL AND CO-SALE  AGREEMENT is
hereby executed as of the date first above written.

THE COMPANY:

OVATION PRODUCTS CORPORATION

Signature:   /s/ William E. Lockwood
           ----------------------------------

Print Name:  William E. Lockwood
            ---------------------------------

Title:  President and COO
       --------------------------------------

ADDRESS:

395 East Dunstable Road
Nashua, NH 03062
Phone: (603) 891-3224
Fax:   (603) 891-4957

THE SHAREHOLDERS:

/s/ William H. Zebuhr
-------------------------------------------
William H. Zebuhr

/s/ William Lockwood
-------------------------------------------
William E. Lockwood

/s/ Robert R. MacDonald
-------------------------------------------
Robert R. MacDonald

/s/ Beverly A. Shaw
-------------------------------------------
Beverly A. Shaw

/s/ Louis Padulo
-------------------------------------------
Louis Padulo

<PAGE>

      This THIRD  AMENDED AND RESTATED  FIRST  REFUSAL AND CO-SALE  AGREEMENT is
hereby executed as of the date first above written.

INVESTOR:

Signature:   /s/ William E. Lockwood
           ----------------------------------

Print Name:  William E. Lockwood
            ---------------------------------

Title:  President and COO
       --------------------------------------

ADDRESS:

                                       12Exhibit 10.1

                          OVATION PRODUCTS CORPORATION

                             1999 STOCK OPTION PLAN

      The  purposes of the 1999 Stock  Option Plan (the "Plan") are to encourage
eligible Directors,  employees,  and consultants of Ovation Products Corporation
(the  "Company")  and any  subsidiary  in which the  Company  owns,  directly or
indirectly,  at least fifty percent (50%) of the total combined  voting power of
all classes of stock  ("Subsidiary"),  including officers who are employees,  to
increase their efforts to make the Company and each Subsidiary more  successful,
to provide an  additional  inducement  for such  individuals  to remain with the
Company or a Subsidiary, to reward such individuals by providing the opportunity
to acquire the common stock,  no par value,  of the Company (the "Common Stock")
on favorable  terms and to provide a means through which the Company may attract
able persons to enter the employ of the Company or its Subsidiaries.

                                    SECTION 1

                                 ADMINISTRATION

      The Plan shall be  administered  by the Board of  Directors of the Company
(the "Board").  The Board may appoint a Stock Option Committee  comprised of two
or more members to act on behalf of the Board in administering the Plan. A Stock
Option  Committee  may be delegated  any or all of the authority of the Board in
the administration of the Plan. Members of any such Stock Option Committee shall
be eligible to receive stock options only if so authorized by the Board.

      The Board or such Committee as it may appoint (hereinafter  referred to as
the "Board") shall interpret the Plan and prescribe such rules,  regulations and
procedures  in  connection  with the Plan as it shall  deem to be  necessary  or
advisable for the administration of the Plan consistent with the purposes of the
Plan. The Board shall keep records of actions taken at its meetings.

                                    SECTION 2

                                   ELIGIBILITY

      The Directors of the Company or any Subsidiary, consultants to the Company
or any Subsidiary,  and those employees ("Key  Employees") of the Company or any
Subsidiary who share the primary  responsibility  for the management,  growth or
protection of the business of the Company or any Subsidiary shall be eligible to
receive stock options and/or stock appreciation rights as described herein. Only
Key Employees shall be eligible to receive  incentive stock options as described
herein.

      Subject to the provisions of the Plan, the Board shall have full and final
authority to grant stock options and/or stock  appreciation  rights as described
herein  and, in its  discretion,  to  determine  the  individuals  to whom stock
options  and/or  stock  appreciation  rights  shall be granted and the number of
shares to be covered by each stock option and/or stock  appreciation  right.  In
determining  the  eligibility of any  individual,  as well as in determining the
number of shares covered by each stock option and/or stock  appreciation  right,
the Board shall consider the position and the responsibilities of the individual
being considered,  the nature and value to the

<PAGE>

Company  or a  Subsidiary  of his or her  services,  his or her  present  and/or
potential  contribution  to the success of the Company or a Subsidiary  and such
other factors as they may deem relevant.

                                    SECTION 3

                       SHARES AVAILABLE FOR STOCK OPTIONS
                          AND STOCK APPRECIATION RIGHTS

      The aggregate  number of shares of the Common Stock which may be issued or
delivered  under  the Plan is  250,000  shares,  as  constituted  at the time of
adoption of the Plan by the Board, subject to adjustment and substitution as set
forth in Section 6. The shares may be either  authorized but unissued  shares or
treasury shares or partly each, as shall be determined by the Board.

      If any stock option or stock  appreciation right granted under the Plan is
canceled in full, the shares subject to such stock option or stock  appreciation
right shall again be available  for the purposes of the Plan except that, to the
extent that an alternative stock  appreciation right granted in conjunction with
a stock option is  exercised,  the number of shares  thereby made  available for
purposes of the Plan shall be reduced by the number of shares, if any, delivered
in exchange for the surrender of the related unexercised option.

                                   SECTION 4

              GRANT OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

      The Board shall have the authority, in its discretion, to grant "incentive
stock options"  pursuant to Section 422 of the Internal Revenue Code of 1986, as
the  same  may  from  time  to  time  be  amended  (the  "Code"),  or  to  grant
"nonstatutory  stock options"  (stock options which do not qualify under Section
422 of the Code),  or to grant both types of stock  options (but not in tandem).
The Board also shall  have the  authority,  in its  discretion,  to grant  stock
appreciation  rights in addition to  nonstatutory  stock options with the effect
provided in Section  5(D), to grant  alternative  stock  appreciation  rights in
conjunction with nonstatutory  stock options or incentive stock options with the
effect provided in Section 5(E), or to grant stock  appreciation  rights without
related stock options with the effect provided in Section 5(F).

      The aggregate fair market value, determined as of the date of grant and as
set forth in Section 5(J), of all shares issuable upon exercise of all incentive
stock  options  which  become  exercisable  by a Key Employee for the first time
during any calendar year under all plans of the  corporation  employing such Key
Employee,  any parent or subsidiary  corporations  of such  corporation  and any
predecessor corporation of any such corporation, shall not exceed $100,000.

                                   SECTION 5

                      TERMS AND CONDITIONS OF STOCK OPTIONS
                        AND/OR STOCK APPRECIATION RIGHTS

      Stock options and stock  appreciation  rights granted under the Plan shall
be subject to the following terms and conditions:

                                       2
<PAGE>

      A. The purchase  price at which each stock  option may be  exercised  (the
"option  price") shall be such price (either  greater than, the same as, or less
than the fair market  value per share of the Common  Stock on the date of grant)
as the Board, in its absolute discretion, shall determine but (i) in the case of
incentive  stock options granted to a Key Employee who together with the members
of his immediate family owns, or may be deemed to own,  beneficially,  more than
10% of the outstanding voting securities of the Company (as the terms "immediate
family" and "beneficial ownership" are defined under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (such a Key Employee being hereinafter
referred to as a  "Principal  Shareholder"),  shall not be less than one hundred
and ten  percent  (110%) of the fair  market  value  per share of the  shares of
Common Stock covered by the stock option on the date of grant,  (ii) in the case
of incentive stock options, shall not be less than one hundred percent (100%) of
the fair  market  value per share of the shares of Common  Stock  covered by the
stock option on the date of grant,  and (iii) in the case of nonstatutory  stock
options, shall not be less than the greater of the par value of the Common Stock
or fifty  percent  (50%) of the fair  market  value per  share of the  shares of
Common  Stock  covered  by the  stock  option  on the  date of  grant.  If stock
appreciation  rights are granted  without a related stock option,  the Board, in
its absolute discretion, shall determine the base price per share for such stock
appreciation  rights (the "base price") which shall not be less than the greater
of the par value of the Common Stock or fifty  percent  (50%) of the fair market
value per share of the  Common  Stock on the date of grant.  In  exercising  its
discretion,  the Board  shall take into  account  the fair  market  value of the
Common Stock,  the book value of the Common  Stock,  the nature and value to the
Company of the  Director's or Key  Employee's  service and such other factors as
the Board may deem  relevant.  For  purposes of this Section  5(A),  fair market
value shall be determined as set forth in Section 5(J).

      B. The option  price is to be paid in full in cash upon the  exercise of a
stock option;  provided,  however,  that in lieu of cash an  individual  may, if
authorized  by the  Board at the  time of  grant,  exercise  a stock  option  by
tendering  to the Company  shares of Common  Stock owned by the  individual  and
having a fair market value on the date of exercise,  determined  as set forth in
Section  5(J),  equal to the option price.  The  provisions of this Section 5(B)
shall not  preclude  the  payment of the option  price of a stock  option by any
other legally permissible method  specifically  approved by the Board. No shares
shall be issued or delivered  upon  exercise of a stock option until  payment of
the option price in full has been made. When payment of the option price in full
has been made, the optionee shall be considered for all purposes to be the owner
of the shares with respect to which payment has been made.

      C. No stock option or stock appreciation right shall be exercisable during
the first six months of its term (except that this limitation shall not apply if
the optionee  dies or becomes a Disabled  Optionee,  as defined in Section 5(H),
and is  voluntarily  terminated  with the consent of the Company or a Subsidiary
during such six-month period). No nonstatutory stock option shall be exercisable
after the  expiration  of ten years and six  months  from the date of grant.  No
incentive  stock option (or  alternative  stock  appreciation  rights granted in
conjunction  with an incentive  stock  option)  shall be  exercisable  after the
expiration  of ten years from the date of grant or, in the case of an  incentive
stock option (or alternative  stock  appreciation  rights granted in conjunction
with an incentive stock option) granted to a Principal  Shareholder,  five years
from the date of grant.  No  alternative  stock  appreciation  rights granted in
conjunction  with an incentive stock option shall be exercisable  until the then
fair market value of the Common Stock,  determined as set forth in Section 5(J),
exceeds the option price. Except as provided in this Section 5(C) and in Section
5(H), stock options or stock appreciation rights may be exercised at such times,
in such amounts and subject to such  restrictions  as shall be determined by the
Board.

                                       3
<PAGE>

      D. If stock appreciation  rights are granted in addition to a nonstatutory
stock  option,  such stock  appreciation  rights shall entitle the optionee upon
exercise of the related stock option,  or any portion  thereof,  to receive from
the Company  (in  addition  to the shares to be  received  upon  exercise of the
related  stock  option)  that  number of shares of the  Common  Stock  having an
aggregate  fair market value on the date of exercise of the related stock option
equal to the excess of the fair market value of one share of the Common Stock on
such date of  exercise  over the option  price per share of such  related  stock
option  times the  number of shares  covered by the  related  stock  option,  or
portion thereof,  which is exercised.  No fractional  shares shall be issued but
instead,  except as provided below, cash shall be paid in lieu of any fractional
shares. The Board shall have the authority, in its discretion, to determine that
the obligation of the Company shall be paid in cash, or part in cash and part in
shares  except  that the Board  shall not pay to any  Director  or Key  Employee
subject to the  provisions  of Section  16(b) of the Exchange Act any portion of
the Company's  obligation in cash (including cash in lieu of a fractional share)
unless such related stock option is exercised during the period beginning on the
third and ending on the twelfth  business day  following the date of release for
publication of the Company's  quarterly or annual summary  statements of income.
For purposes of this Section 5(D),  fair market value shall be determined as set
forth in Section 5(J).

      E. If  alternative  stock  appreciation  rights are granted in conjunction
with a nonstatutory or incentive stock option,  such stock  appreciation  rights
shall be  exercisable  only to the  extent  that the  related  stock  option  is
exercisable.  Such  alternative  stock  appreciation  rights  shall  entitle the
optionee to  surrender  unexercised  the related  stock  option,  or any portion
thereof,  and to receive  from the Company in exchange  therefor  that number of
shares of the Common Stock having an aggregate  fair market value on the date of
exercise of the alternative stock appreciation rights equal to the excess of the
fair market value of one share of the Common Stock on such date of exercise over
the  option  price per share  times the  number of shares  covered  by the stock
option, or portion thereof, which is surrendered.  No fractional shares shall be
issued but instead,  except as provided below, cash shall be paid in lieu of any
fractional  shares.  The Board shall have the authority,  in its discretion,  to
determine  that the  obligation of the Company shall be paid in cash, or part in
cash and part in shares  except that the Board shall not pay to any  Director or
Key Employee  subject to the provisions of Section 16(b) of the Exchange Act any
portion  of the  Company's  obligation  in  cash  (including  cash  in lieu of a
fractional  share)  unless  such  alternative  stock  appreciation   rights  are
exercised  during the period  beginning  on the third and ending on the  twelfth
business day  following  the date of release for  publication  of the  Company's
quarterly  or annual  summary  statements  of income.  For the  purposes of this
Section  5(E),  fair market  value shall be  determined  as set forth in Section
5(J).

      F. If stock  appreciation  rights  are  granted  without a  related  stock
option,  such stock  appreciation  rights  shall  entitle  the  Director  or Key
Employee to receive  from the Company  that number of shares of the Common Stock
having an  aggregate  fair  market  value on the date of  exercise  of the stock
appreciation rights equal to the excess of the fair market value of one share of
the Common Stock on such date of exercise  over the base price per share of such
stock  appreciation  rights  times the  number of  shares  covered  by the stock
appreciation rights. No fractional shares shall be issued but instead, except as
provided below, cash shall be paid in lieu of any fractional  shares.  The Board
shall have the authority, in its discretion, to determine that the obligation of
the  Company  shall be paid in cash,  or part in cash and part in shares  except
that the Board shall not pay to any Director or Key Employee  subject to Section
16(b) of the  Exchange  Act any  portion  of the  Company's  obligation  in cash
(including  cash in lieu of a fractional  share) unless such stock  appreciation
rights are exercised  during the period beginning on the third and ending on the
twelfth  business  day  following  the date of release  for

                                       4
<PAGE>

publication of the Company's  quarterly or annual summary  statements of income.
For the purposes of this Section 5(F),  fair market value shall be determined as
set forth in Section 5(J).

      G. No stock option or stock  appreciation right shall be transferable by a
Director or Key  Employee  other than by will,  or if a Director or Key Employee
dies intestate, by the laws of descent and distribution of the state of domicile
of the Director or Key  Employee at the time of death,  and each stock option or
stock  appreciation right shall be exercisable during the lifetime of a Director
or Key Employee only by the Director or Key Employee.

      H.  Except  as  otherwise  provided  in  the  following  sentence,  if the
employment of a Key Employee is voluntarily  terminated  with the consent of the
Company or a Subsidiary or a Key Employee  retires under any retirement  plan of
the Company or a Subsidiary, any then outstanding incentive stock option held by
such Key Employee shall be exercisable (to the extent exercisable on the date of
termination  of  employment) by such Key Employee at any time prior to the stock
option  expiration  date or within three months after the date of termination of
employment, whichever is the shorter period. If the employment of a Key Employee
who is disabled  within the meaning of Section  422(C)(6) of the Code ("Disabled
Optionee")  is  voluntarily  terminated  with the  consent  of the  Company or a
Subsidiary,  any  outstanding  incentive  stock  option  held by  such  Disabled
Optionee  shall  be  exercisable  by  such  Disabled  Optionee  (to  the  extent
exercisable)  on the date of termination of employment) at any time prior to the
stock option expiration date or within one year after the date of termination of
employment,  whichever is the shorter period.  Whether termination of employment
is a voluntary  termination  with consent and whether a Key Employee is disabled
within the meaning of Section  422(c)(6) of the Code shall be determined in each
case by the Board  and any such  determination  by the Board  shall be final and
binding.

      If the  employment  of a Key  Employee,  or the service of a Director,  is
voluntarily terminated with the consent of the Company or a Subsidiary,  or such
Key Employee  retires under any retirement  plan of the Company or a Subsidiary,
any then  outstanding  nonstatutory  stock  option held by such Key  Employee or
Director  shall  be  exercisable  (to  the  extent  exercisable  on the  date of
termination of employment) by such Key Employee or Director at any time prior to
the  stock  option  expiration  date  or  within  one  year  after  the  date of
termination of employment, whichever is the shorter period.

      If the employment of a Key Employee, or the service of a Director, holding
stock appreciation  rights granted without a related stock option is voluntarily
terminated with the consent of the Company or a Subsidiary, or such Key Employee
retires under any retirement plan of the Company or a Subsidiary,  any such then
outstanding  stock  appreciation  rights  held by such Key  Employee or Director
shall be  exercisable  (to the extent  exercisable on the date of termination of
employment) by such Key Employee or Director at any time prior to the expiration
date of the  stock  appreciation  rights or  within  one year  after the date of
termination of employment, whichever is the shorter period.

      Following the death of a Director or Key Employee,  any outstanding  stock
option or stock appreciation  rights granted without a related stock option held
by such  Director or Key Employee at the time of death shall be  exercisable  in
full (whether or not so  exercisable on the date of the death of the Director or
Key  Employee,  but  subject  to such  other  restrictions  on the  exercise  of
incentive  stock  options  as are set  forth in  Section  5(C) by the  person or
persons entitled to do so under the will of the Director or Key Employee, or, if
the Director or Key Employee shall fail to make testamentary disposition of such
stock option or stock appreciation  rights or shall die intestate,  by the legal
representative of the Director or Key Employee, in

                                       5
<PAGE>

either  case at any time prior to the  expiration  date of such stock  option or
stock appreciation rights or within one year after the date of death,  whichever
is the shorter period.

      If the employment of a Key Employee or the service of a Director who is an
optionee or holds stock  appreciation  rights  granted  without a related  stock
option  terminates  for any reason other than as set forth in this Section 5(H),
the rights of such  Director or Key Employee  under any then  outstanding  stock
option or stock appreciation rights granted without a related stock option shall
terminate at the time of such termination of employment.

      I. Each stock option shall be confirmed by a stock option  agreement which
shall be executed by the Chairman of the Board or the President on behalf of the
Company  and by  the  person  to  whom  such  stock  option  is  granted.  Stock
appreciation  rights which are granted  without a related  stock option shall be
confirmed by a stock  appreciation  rights  agreement which shall be executed by
the  Chairman of the Board or the  President on behalf of the Company and by the
person to whom such stock appreciation rights are granted.

      J. So long as the Common  Stock is not listed on a  national  or  regional
securities exchange or quoted in the inter-dealer quotation system maintained by
the National  Association of Securities  Dealers,  Inc., the Board shall in good
faith  determine  the fair market value of the Common Stock on or as of the date
on which fair market value is to be determined. At such time as the Common Stock
shall be listed on a national or regional  securities  exchange or quoted in the
inter-dealer   quotation  system  maintained  by  the  National  Association  of
Securities Dealers,  Inc., the Board shall adopt such rules for determining fair
market value of the Common  Stock,  which shall employ such  generally  accepted
criteria of value and make  reference to such  generally  available and reliable
publications as the Board in its discretion may determine to be appropriate.

      Subject  to the  foregoing  provisions  of this  Section  5 and the  other
provisions of the Plan,  any stock option or stock  appreciation  rights granted
under the Plan shall be subject to such other terms and  conditions as the Board
shall deem advisable on the date of grant.

                                   SECTION 6

                      ADJUSTMENT AND SUBSTITUTION OF SHARES

      If a dividend  or other  distribution  shall be  declared  upon the Common
Stock payable in shares of the Common Stock,  the number of shares of the Common
Stock then subject to any outstanding stock option or stock appreciation  rights
granted  without a related  stock  option and the number of shares  which may be
issued or delivered  under the Plan but are not then  subject to an  outstanding
stock option or stock appreciation rights granted without a related stock option
shall be adjusted by adding  thereto the number of shares  which would have been
distributable  thereon if such shares had been outstanding on the date fixed for
determining  the  shareholders  entitled  to  receive  such  stock  dividend  or
distribution.

      If the  outstanding  shares of the Common  Stock shall be changed  into or
exchangeable  for a  different  number  or kind of  shares  of  stock  or  other
securities   of  the   Company   or   another   corporation,   whether   through
reorganization, reclassification,  recapitalization, stock split-up, combination
of shares,  merger or  consolidation,  then there shall be substituted  for each
share of the Common Stock subject to any then outstanding  stock option or stock
appreciation rights granted without a related stock option and for each share of
the Common  Stock  which may be issued or  delivered  under the Plan but are not
then subject to an outstanding stock option or stock

                                       6
<PAGE>

appreciation  rights granted without a related stock option, the number and kind
of shares of stock or other securities into which each outstanding  share of the
Common  Stock  shall  be so  changed  or for  which  each  such  share  shall be
exchangeable.

      In case of any adjustment or  substitution as provided for in this Section
6,  (i)  the  aggregate  option  price  for all  shares  subject  to  each  then
outstanding  stock option prior to such adjustment or substitution  shall be the
aggregate  option price for all shares of stock or other  securities  (including
any  fraction) to which such shares shall have been adjusted or which shall have
been  substituted  for such  shares  and (ii) the  aggregate  base price for all
shares  subject to  outstanding  stock  appreciation  rights  granted  without a
related  stock  option  shall be the base price for all shares of stock or other
securities  (including  any  fraction)  to which  such  shares  shall  have been
adjusted or which shall have been  substituted  for such shares.  Any new option
price or base price per share shall be carried to at least 3 decimal places with
the last decimal place rounded upwards to the nearest whole number.

      No adjustment or substitution provided for in this Section 6 shall require
the  Company  to  issue  or  sell a  fraction  of a  share  or  other  security.
Accordingly,  all fractional  shares or other  securities  which result from any
such adjustment or  substitution  shall be eliminated and not carried forward to
any subsequent adjustment or substitution.

      All  references  in this  Plan to  shares  shall,  where  the  context  so
requires, be deemed to be references to such shares as adjusted pursuant to this
Section 6. If any such  adjustment to the number of shares  subject to the grant
of stock options  requires the approval of  stockholders  in order to enable the
Company to issue incentive  stock options then no such adjustment  shall be made
without the approval of the stockholders.  Notwithstanding the foregoing, in the
case of incentive stock options, if the effect of any adjustment or substitution
is to cause the stock  option to fail to  continue  to qualify  as an  incentive
stock  option or to cause a  modification,  extension  or  renewal of such stock
option within the meaning of Section  424(h) of the Code, the Board of Directors
may elect not to make such  adjustment  or  substitution  but  rather  shall use
reasonable  efforts to effect  such other  adjustment  of each then  outstanding
stock  option  as the  Board of  Directors  in its sole  discretion  shall  deem
equitable  and  which  will not  result in any  disqualification,  modification,
extension or renewal  (within the meaning of Section 424(h) of the Code) of such
stock option.

                                    SECTION 7

           EFFECT OF THE PLAN ON THE RIGHTS OF DIRECTORS OR EMPLOYEES

      Neither the  adoption of the Plan nor any action of the Board  pursuant to
the Plan  shall be  deemed  to give any  Director  or  employee  any right to be
granted a stock  option  and/or  stock  appreciation  rights  under the Plan and
nothing in the Plan,  in any stock  option or in any stock  appreciation  rights
granted  under  the  Plan,  or in  any  stock  option  agreement  or  any  stock
appreciation rights agreement shall confer any right to any Director or employee
to continue as a Director of the Company or any Subsidiary or to continue in the
employ of the Company or any  Subsidiary or interfere in any way with the rights
of the Company or any  Subsidiary to terminate the employment of any employee at
any time.

                                       7
<PAGE>

                                    SECTION 8

                                    AMENDMENT

      The  right to alter  and  amend the Plan at any time and from time to time
and the right to revoke or terminate the Plan are hereby  specifically  reserved
to the Board;  provided  always that no such  revocation  or  termination  shall
terminate  any  outstanding  stock  option  and/or  stock  appreciation   rights
theretofore granted under the Plan; and provided further that no such alteration
or amendment of the Plan shall, without prior shareholder approval, (i) increase
the total number of shares which may be issued or delivered under the Plan, (ii)
make any changes in the class of eligible Directors or employees or (iii) extend
the periods  set forth in the Plan  during  which  stock  options  and/or  stock
appreciation  rights may be granted.  No  alteration,  amendment,  revocation or
termination  of the Plan shall,  without the written  consent of the holder of a
stock option  and/or stock  appreciation  rights  theretofore  granted under the
Plan,  adversely  affect the rights of such  holder  with  respect to such stock
option or stock appreciation rights.

                                    SECTION 9

                       EFFECTIVE DATE AND DURATION OF PLAN

      The date of adoption of the Plan with respect to incentive  stock  options
shall be October 1, 2001  provided that the Plan is ratified and approved by the
affirmative vote of the holders of at least a majority of the outstanding shares
of  voting  stock of the  Company  at a meeting  of such  holders  duly  called,
convened  and held on or prior to September  30,  2002.  The date of Adoption of
Plan for nonstatutory stock options shall be August 27, 1999. No stock option or
stock  appreciation  rights granted under the Plan may be exercised  until after
such ratification and approval. No stock option or stock appreciation rights may
be granted under the Plan subsequent to August 26, 2009.

                                       8

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