Document:

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                              EMPLOYMENT AGREEMENT

         This Employee Agreement, made as of November 17, 1999, by and between
SUPERIOR NATIONAL INSURANCE GROUP, INC. ("Superior National"), a Delaware
corporation, and ROBERT E. NAGLE ("Employee"), an individual, residing at 49
Peregrine Circle, Oak Park, California 91377.

                              W I T N E S S E T H:

         WHEREAS, Superior National and Employee wish to establish the terms and
conditions that shall apply to Employee's employment with Superior National;

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

         1. EMPLOYMENT. Superior National hereby employs Employee, and Employee
hereby accepts this employment as SENIOR VICE-PRESIDENT, GENERAL COUNSEL &
SECRETARY of Superior National (reference herein to Superior National shall also
mean each of the subsidiary companies of Superior National) and in conformance
with the terms and conditions set forth herein agrees to exercise and perform
faithfully and to the best of Employee's ability and experience on behalf of
Superior National the powers and duties customarily exercised and performed by a
SENIOR VICE-PRESIDENT, GENERAL COUNSEL & SECRETARY of an insurance group.
Employee shall devote Employee's full time efforts to the business affairs of
Superior National. The terms of the Employment Term Sheet attached hereto as
Addendum A are made a part hereof.

         2. LOCATION. Employee's services pursuant to this Agreement shall be
performed at Superior National's offices in Los Angeles County, California and
such other locations as Superior National's offices may be located. Employee
shall not be required to relocate outside of Southern California in order to
perform the services hereunder, without the Employee's consent, except for
travel reasonably required in the performance of Employee's duties hereunder.

         3. TERM OF EMPLOYMENT. Subject to section 7 hereof, Employer hereby
employs Employee, and Employee agrees to be so employed for an initial term of
two (2) years, commencing on NOVEMBER 17, 1999, and renewing automatically for a
term of twelve (12) months unless notice of non-renewal is given by Employer at
least sixty (60) days prior to the end of the then-current term of this
Agreement.

         4. COMPENSATION AND OTHER BENEFITS. As compensation in full for
services to be rendered by Employee hereunder, Superior National shall pay and
Employee shall accept the following:

                  4.1 SALARY. From the date of this Agreement until termination
of employment, Superior National shall pay Employee a salary determined by the
Board of Directors of Superior National, payable in accordance with Superior
National's payroll policies. Employee's starting salary shall be set forth in
Addendum "A".

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                  4.2 BENEFITS. In conformance with Superior National's standard
employment practices for senior executives, Employee shall be entitled to such
vacation, medical, life insurance, accident, disability and dental benefits and
auto allowance, as shall be authorized from time to time by Superior National's
Board of Directors.

                  4.3 BONUSES. During the term of this Agreement Employee shall
be entitled to such discretionary bonuses or incentive compensation as may be
authorized from time to time by Superior National's Board of Directors.

         5. EXPENSES. In addition to the salary and benefits provided hereunder,
Superior National shall pay for or reimburse Employee for those expenses
reasonably incurred in the course of Employee's activities for Superior
National, including transportation, living and related expenses incurred by
Employee during travel on behalf of Superior National away from Superior
National's principal office and for other business and entertainment expenses
reasonably incurred by Employee in connection with the business of Superior
National

         6. TERMINATION BY EMPLOYEE.

                  6.1 VOLUNTARY TERMINATION. In the event Employee voluntarily
resigns or quits employment with Superior National, then, without limitation of
Superior National's other legal or equitable remedies, Superior National shall
have no further obligation hereunder and no further payments of any kind shall
be payable by Superior National to Employee under this Agreement; provided,
however, Employee shall be entitled to receive payments, if any, under any
existing vacation pay, retirement and other benefit plans and policies then
maintained by Superior National and under which Employee may, at such time and
under the separate terms of such plans and policies, be eligible to receive
payment or other benefits.

         7. TERMINATION BY SUPERIOR NATIONAL.

                  7.1 TERMINATION FOR CAUSE. In the event Superior National
terminates Employee's employment for cause ("For Cause"), it shall have no
further obligation to compensate Employee other than to pay for services
rendered through the date of such termination For Cause. For the purposes of
this Agreement, termination For Cause shall be limited to the following:

                           (a) Employee is convicted of, or pleads guilty or
nolo centendere to, any felony or any crime involving fraud, dishonesty or moral
turpitude:

                           (b) Employee unlawfully misappropriates funds or
other assets of Superior National or its subsidiaries;

                           (c) Employee fails or refuses to comply with a
reasonable directive of Superior National's Board of Directors that is
consistent with the terms of this Agreement and with California law (as
applicable), or Employee materially neglects

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Employee's duties, is grossly negligent in the performance of those duties, or
engages in gross misconduct materially injurious to Superior National or
Employee breaches this Agreement;

                           (d) Employee engages or participates, directly or
indirectly, without the prior written consent of Superior National's Board of
Directors, in any business that is in competition in any manner with the
businesses of Superior National whether as an employee, agent, employer,
principal, partner, shareholder (except as a shareholder of any outstanding
class of securities of a corporation that has a class of securities traded on a
national securities exchange or in the over-the-counter market), officer,
director or any other individual or representative capacity whatsoever;

                           (e) A material conflict of interest between Superior
National and Employee, as defined by the Superior National Conflict of Interest
Policy.

                  For the purpose of effectuating a termination For Cause under
subsection 7.1(e), Superior National shall give Employee thirty (30) days prior
written notice setting forth the alleged basis of the Cause and the fact that
Employee shall have forty-five (45) days from the date of such notice to cure
such Cause. If Employee fails to cure such Cause within forty-five (45) days of
the date of such notice, Employee's employment shall be automatically terminated
on the 46th day following the date of such notice.

                  7.2 TERMINATION OTHER THAN FOR CAUSE.

                           (a) Any termination of Employee's employment under
this Agreement by Superior National other than For Cause (as defined in
Paragraph 7.1) or significant diminution of Employee's job duties and
responsibilities shall be deemed to be a termination without cause ("Without
Cause"). Superior National may terminate Employee's employment under this
Agreement Without Cause at any time. In the event that Superior National
terminates Employee's employment Without Cause, then from the effective date of
this termination and continuing for the then remaining full term of this
Agreement provided for in section 3, Superior National will pay Employee a
termination benefit equal to One Hundred Percent (100%) of Employee's fixed
monthly salary and all other medical benefits and allowances to which Employee
was entitled in the month in which such termination occurred (the termination
benefit). This termination benefit shall be a minimum of two (2) year's salary
and all other medical benefits and allowances to which Employee was entitled.

                           (b) During the period of payment of monthly
termination benefits Employee shall be entitled to also receive, under the same
terms and conditions, those medical, dental, disability, life and other existing
benefits in effect at the time of termination. Employee shall be responsible for
"employee premium contributions" for such medical and dental coverages on the
same basis that Superior National's full-time senior executives are assessed for
individual and/or dependent coverages, and such contributions will be deducted
from sums due Employee hereunder.

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                           (c) Any termination of Employee or significant
diminution of Employee's duties and responsibilities in connection with any
reorganization, merger, conservatorship or consolidation of Superior National, a
result of which Superior National does not survive or in which the outstanding
voting stock of Superior National prior to such event represents less than Fifty
Percent (50%) of the outstanding voting stock of the surviving entity
(collectively, "Change of Control:), shall be deemed a termination Without
Cause. In the event of a termination occurring as a result of a Change of
Control, this Agreement shall be deemed to have a three-year term and Superior
National or the surviving entity will pay Employee the full three (3) year fixed
monthly salary and benefits package in accordance with Subparagraph 7.2(a)
above.

                  7.3 During any period (prior to a termination) for which
Employee is unable to carry on the full-time duties and services required of
Employee due to physical or mental illness or injury, salary and benefits, as of
the beginning of the period of incapacity, shall be payable in accordance with
Superior National's policies.

         8. NON-HIRING OF SUPERIOR NATIONAL PERSONNEL. As long as Superior
National is making payments to Employee under the terms of this Agreement and
for a period twelve months subsequent to the termination of any such payments,
Employee will not hire or cause any person employed by Superior National as of
Employee's termination date or during the six-month period prior to such
termination date to be hired by another employer competing in any manner with
the businesses of Superior National. Recognizing the irreparable nature of the
injury that could be caused by Employee's violation of any provision of this
Paragraph 8, Employee agrees that in addition to and without limitation of any
rights which Superior National may have hereunder, any such violation shall be
the proper subject matter for immediate injunctive relief and entitle Superior
National to terminate this Agreement whereupon no further amounts shall be
payable by Superior National to Employee under this Agreement.

         9. CONFIDENTIAL INFORMATION. Employee shall not, except as may be
required by law, use any Confidential Information for any purpose other than on
behalf of Superior National and to not use any Confidential Information for any
purpose adverse to Superior National. For purposes of this Agreement, the term
Confidential Information shall refer to certain confidential information
developed by Superior National as a necessary function of the conduct of its
businesses including, but not limited to, the identity, lists and/or
descriptions of producers or policyholders, financial data, projections, plans
and reports developed for management purposes and not otherwise disseminated,
internal policies and procedures, management systems and procedures, employee
records and information, and other information that may be developed from time
to time by Superior National and be designated as confidential. Such
Confidential Information is unique and has been developed and effectively
applied by Superior National in the conduct of its businesses and constitutes a
valuable and essential asset of the businesses of Superior National. Employee
agrees to protect the confidentiality of and to take all appropriate steps to
prevent unauthorized disclosure or use of the Confidential Information, and
otherwise prevent the Confidential Information from entering the public domain
or the possession by unauthorized persons, with the same

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degree of reasonable and appropriate care as Employee uses with respect to
Employee's own confidential information.

                  9.1 All documents or media containing the Confidential
Information are, and at all times shall remain, the sole property of Superior
National.

                  9.2 Without diminishing or waiving any rights of Superior
National otherwise available under law, the term of Employee's covenants of
non-disclosure set forth in this section 9 shall be continuing and shall survive
the termination of this Agreement. Employee's covenants not to use or disclose
the Confidential Information shall terminate as to any information that is or
becomes public knowledge through no fault of Employee and may be utilized by the
public without obligation to Superior National. Termination of Employee's
obligations pursuant to the previous sentence shall have no effect on Superior
National's rights to enforce the non-disclosure obligations with respect to
conduct occurring before the information became public knowledge.

         10. REMEDIES OF SUPERIOR NATIONAL. Employee recognizes and agrees that
the duties and services to be rendered by Employee hereunder are of a special,
unique and intellectual character and that Employee's failure to perform those
duties and services will cause irreparable and immeasurable harm to Superior
National. Employee also recognizes and agrees that the restrictions on
Employee's activities contained in this Agreement are required for the
reasonable protection of Superior National's business. Superior National will be
entitled, if it so elects, to institute and prosecute proceedings at law or in
equity or obtain damages with respect to such breach or to enforce the specific
performance of this Agreement by Employee or to enjoin Employee from engaging in
any activity in violation hereof.

         11. NON-COMPETITION. During such employment and for a period of two (2)
years thereafter, Employee shall not at any time, directly or indirectly, use or
disclose to any persons, except Superior National and its duly authorized
officers and employees entitled thereto, Employee's customer, brokers and agents
lists, credit classifications, records, statistics or other information acquired
by Employee in the course of his employment in any capacity whatsoever, nor in
any manner, directly or indirectly, aid or be party to any acts the effect of
which would tend to divert, diminish or prejudice the good will or business of
Superior National.

         12. NOTICES. All notices which Superior National is required or
permitted to give to Employee shall be given by first class mail addressed to
Employee at Employee's residence indicated above or such other place as Employee
may, from, time to time, designate in writing to Superior National. All notices
which Employee is required to give to Superior National hereunder will be given
in duplicate by registered mail, one copy addressed to Superior National's Board
of Directors and the other to Superior National's Corporate Secretary, at
Superior National's principal place of business.

         13. ENTIRE AGREEMENT; AMENDMENT. This Agreement supersedes and
terminates any and all prior understandings, agreements or contracts, whether
oral or in writing, if any, entered into between Employee and Superior National
as of the effective

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date of this Agreement with respect to all matters covered hereunder. This
Agreement constitutes the entire agreement between the parties pertaining to the
subject matters hereof. No representative of Superior National is authorized to
make to any person any representation, warranty or promise with respect to the
subject matters hereof not contained or referred to herein. No change,
termination, waiver or other modification of any provision hereof shall be
binding on Superior National or Employee unless in writing and entered into
between Employee and the Board of Directors of Superior National.

         14. CALIFORNIA LAW; SEVERABILITY. This Agreement shall be governed and
construed in accordance with the laws of the State of California. In the event
any provision of this Agreement or the application of any provision to any
signatory hereto shall be held by a court of competent jurisdiction to the
contrary to any applicable California or Federal law, the remaining provisions
of this Agreement shall remain in full force and effect. In the event of a
declaratory, injunctive or enforcement action or in the event of any other
litigation between Employee or Superior National arising under or with respect
to this Agreement and not found subject to the terms of section 16 following
shall be conducted in a State or Federal court sitting in Los Angeles County,
California.

         15. COOPERATION. Each of the parties hereto, without further
consideration, agrees to execute and deliver such other documents and to take
such other actions as may be necessary or appropriate to consummate fully the
transactions that are the subject matter of this Agreement.

         16. ARBITRATION.

                  16.1 In the event of any dispute, claim, question or
disagreement arising out of or relating to this Agreement or the breach thereof,
the parties hereto shall use their best efforts to settle such disputes, claims,
questions or disagreement. To this effect, they shall consult and negotiate with
each other, in good faith and, recognizing their mutual interests, attempt to
reach a just and equitable solution satisfactory to both parties.

                  16.2 If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if said dispute cannot be settled through direct
discussions, the parties agree to first endeavor to settle the dispute in an
amicable manner by mediation administered by a mediator mutually agreeable to
all parties, before resorting to arbitration. Thereafter, any unresolved
controversy or claim arising out of or relating to this Agreement, or breach
thereof, except for the rights of the parties to apply to a court of competent
jurisdiction for a Temporary Restraining Order to preserve the status quo or
prevent irreparable harm pending the selection and confirmation of any
arbitrator, shall be settled by arbitration administered by and in accordance
with the provisions of California Code of Civil Procedure Sections 1280 et seq.,
and judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.

                  16.3 The arbitration shall be held in Los Angeles, California
or at such other place as may be selected by mutual agreement.

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                  16.4 Within fifteen days after the demand for commencement of
arbitration, each party shall select one person to act as arbitrator, and the
two selected shall select a third arbitrator within ten days of their
appointment who will act as sole arbitrator of the dispute. If the arbitrators
selected by the parties are unable or fail to agree upon the third arbitrator,
the third arbitrator shall be appointed by a Superior Court Judge pursuant to
California Code of Civil Procedure Section 1281.6 on petition of a party to the
arbitration agreement.

                  16.5 The arbitrator will be selected from a panel of persons
having experience with and knowledge of workers' compensation insurance and the
workers' compensation insurance industry.

                  16.6 The arbitrator shall have the authority to award any
remedy or relief that a court of this state could order or grant, including,
without limitation, specific performance of any obligation created under the
Agreement, the awarding of punitive damages, the issuance of an injunction, or
the imposition of sanctions for abuse or frustration of the arbitration process.

                  16.7 The arbitrator shall award to the prevailing party, if
any, as determined by the arbitrator, all of its costs and fees. "Costs and
fees' means all reasonable pre-award expense of the arbitration, including the
arbitrator's fees, administrative fees, travel expenses, out-of-pocket expenses
such as copying and telephone, court costs, witness fees and attorneys' fees.

                  16.8 Neither party nor the arbitrator may disclose the
existence, content, or results of any arbitration hereunder without the prior
written consent of both parties.

                  16.9 Limited civil discovery shall be permitted for the
production of documents and taking of depositions. All discovery shall be
governed by the California Rules of Civil Procedure. All issues regarding
conformation with discovery requests shall be decided by the arbitrator.

                  16.10 The arbitration award shall be in writing and shall
specify the factual and legal bases for the award.

                  16.11 Within twenty days after receipt of Notice of Decision
by the Arbitrator, either party may appeal the arbitration panel(`s) award to an
appellate arbitrator by filing a written Notice of Appeal served on the opposing
party and the arbitrator.

                  16.12 Within fifteen days after Notice of Appeal, each party
shall select one person to act as appellate arbitrator, and the two selected
shall select a third appellate arbitrator within ten days of their appointment
who will act as sole arbitrator of the dispute. If the arbitrator selected by
the parties is unable or fails to agree upon the third appellate arbitrator, the
third arbitrator shall by appointed by a Superior Court Judge pursuant to
California Code of Civil Procedure section 1281.6 on petition of party to the
Arbitration Agreement.

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                  16.13 The appellate arbitrator shall be a retired judge of a
court of record in the state in which the arbitration was held.

                  16.14 Within twenty days after selection of an appellate
arbitrator, a written brief, not to exceed twenty pages, stating the reasons why
the panel's decision should be reversed or modified shall be filed with the
appellate arbitrator and served to the opposing party. The opposing party shall
file with the appellate arbitrator and serve on the appealing party, within
twenty days after receiving the appeal brief, an opposition brief, not to exceed
twenty pages. Either party may request oral argument which must be conducted
within fourteen days following the submission of the final brief. The appellate
arbitration shall be based only on the record of the initial hearing and oral
argument, if any. The appellate arbitrator shall render a written decision
affirming reversing, modifying or remanding the arbitration panel's decision
within thirty days after receiving the final appellate submissions.

                  16.15 The appellate arbitrator may reverse, modify or remand
the matter for further proceedings by the arbitration panel only on one of the
following grounds:

                  (1) Any ground specified in 901 et. seq. of the California
                  Code of Civil Procedure;

                  (2) If the award contains material errors of applicable law;

                  (3) If the award is arbitrary or capricious;

                  (4) If there is a demonstration of bias, prejudice or
                  undisclosed conflict of interest between the arbitrator and
                  the prevailing party.

                  16.16 The appellate arbitrator may render a final decision on
appeal or remand the matter for further proceedings by the arbitration panel.

                  16.17 The arbitrators shall award to the prevailing party, if
any, as determined by the arbitrators, all of its costs and fees. "Costs and
fees" means all reasonable pre-award expenses of the arbitration, including the
arbitrator's fees, administrative fees, travel expenses, out-of-pocket expenses
such as copying and telephone, court costs, witness fees and attorneys' fees.

         17. WAIVER. Waiver by Superior National or Employee of any provision or
any rights under any provision of this Agreement in any instance shall not be
taken as a waiver of any subsequent breach of such provision or as a continuing
waiver of the provision itself.

         18. ASSIGNMENT. The rights of Employee hereto shall inure to the
benefit of and be binding upon the successors and assigns of Superior National
consistent with the terms of this Agreement and regardless of the form in which
such succession or assignment takes place. This Agreement and the rights,
interest and benefits hereunder

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are personal to Employee and shall not be assigned, transferred, pledged, or
hypothecated in any way by Employee, and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge, or
hypothecation, or the levy of any execution, attachment of similar process
thereon, shall be null and void and without effect.

         19. ATTORNEYS' FEES, COSTS. If either party shall bring an action
against the other party hereto by reason of a breach of any covenant, warranty,
representation or condition herein, or otherwise arising out of this Agreement,
whether for declaratory or other relief, the prevailing party in such suit shall
be entitled to such party's costs of suit and attorneys' fees, which shall be
payable whether or not such action is prosecuted to judgment. Costs and
attorneys fees resulting from any arbitration shall be governed by section 16,
hereof.

         20. PARAGRAPH HEADINGS. Paragraph headings are for the purpose of
convenience only and shall not be considered to be any part of this Agreement.

         21. COUNTERPARTS. More than one counterpart of this Agreement may be
executed by the parities hereto, and each counterpart shall be deemed an
original, and all counterparts together shall be one agreement.

         22. EFFECT OF PARTIAL INVALIDITY. The invalidity of any portion of this
agreement will not and shall not be deemed to affect the validity of any other
provision. In the event that any provision of this agreement is held to be
invalid, the parties agree that the remaining provisions shall be deemed to be
in full force and effect as if they had been executed by both parties subsequent
to the expungement of the invalid provision.

         23. LATEST AGREEMENT. This is the latest version of Employee's
Agreement. All prior Employment Agreements are revoked, rescinded and void.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to take
effect the date first stated above.

EMPLOYEE

     /s/ Robert E. Nagle                       Date:    11-17-99
-----------------------------------                 ----------------------
         ROBERT E. NAGLE

SUPERIOR NATIONAL INSURANCE GROUP, INC.

By:    /s/ J. Chris Seaman                     Date:    11-17-99
   --------------------------------                 ----------------------
         J. CHRIS SEAMAN
Title:   President & Chief Executive Officer

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By:    /s/ William L. Gentz                    Date:    11-17-99
   --------------------------------                 ----------------------
         WILLIAM L. GENTZ
Title:   Chairman of the Board

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                                  ADDENDUM "A"

                     EMPLOYMENT TERM SHEET - ROBERT E. NAGLE

Position:          Senior Vice-President, General Counsel & Secretary
                   Superior National Insurance Group, Inc. and subsidiaries

Salary:            Effective November 17, 1999,   $160,000 annually

Car Allowance:     $900 per month

Health Insurance:  On same terms, conditions and coverages of other
                   Superior National senior executives.

Expenses:          Usual and customary

                                       11<PAGE>

                                                                     EXHIBIT 4.9

                                  CYNET, INC.

                        1997 RESTATED STOCK OPTION PLAN

                      (As amended through June 28, 2000)

                                   ARTICLE I

SECTION 1.  PURPOSE.

      The purposes of the Plan are to advance the best interest of the Company
and to attract, retain, and motivate key employees, and persons affiliated with
the Company (the "Participants"), and provide such persons with additional
incentive to further the business, promote the long-term financial success and
increase shareholder value of the Company by increasing their proprietary
interest in the success of the Company. Pursuant to the Plan, the Company may
grant (i) non-qualified stock options ("Stock Options"), and (ii) incentive
stock options ("ISO Options") (collectively herein "Options"). The ISO Options
to be granted under the Plan are intended to be qualified pursuant to Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"); and the Stock
Options to be granted are intended to be non-qualified stock options as
described in Sections 83 and 421 of the Code.

SECTION 2.  GENERAL.

      The terms and provisions of this Article I shall be applicable to Stock
Options and ISO Options, unless the context herein clearly indicates to the
contrary.

SECTION 3.  ADMINISTRATION OF THE PLAN.

      The Plan shall be administered by the Board of Directors (the "Board") of
the Company. The Board, at its discretion, may designate and appoint a committee
(the "Compensation Committee") which shall be constituted solely of outside
directors (within the meaning of Section 162(m) of the Code) and so as to permit
the Plan to comply with Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All references to the Board shall also
include the Committee, if one is appointed. The members of the Committee shall
serve at the pleasure of the Board. The Board shall have the power consistent
with the general purpose and intent of the Plan to (i) modify the requirements
of the Plan to conform with the law or to meet special circumstances not
anticipated or covered in the Plan, (ii) establish policies, (iii) adopt rules
and regulations and (iv) prescribe forms for carrying out the purposes and
provisions of the Plan, including the form of any stock option agreements
("Option Agreements"). Unless otherwise provided in the Plan, the Board shall
have the authority to interpret and construe the Plan and determine all
questions arising under the Plan and any agreement made pursuant to the Plan.
Any interpretation, decision or determination made by the Board shall be final,
binding and conclusive. A majority of the Board shall constitute a quorum and an
act of the majority of the members present at any meeting at which a quorum is
present shall be the act of the Board.

<PAGE>

SECTION 4.  STOCK SUBJECT TO THE PLAN.

      The aggregate number of shares of the Company's Class A Common Stock, no
par value ("Common Stock"), which may be issued upon the exercise of Options
granted under the Plan shall not exceed 5,000,000, subject to adjustment under
the provisions of Section 7 of this Article I. The shares of Common Stock to be
issued upon the exercise of Options may be authorized but unissued shares,
shares issued and reacquired by the Company or shares bought in the open market
for the purposes of the Plan. In the event any Option shall, for any reason,
terminate or expire or be surrendered without having been exercised in full, the
shares subject to such Option but not purchased thereunder shall again be
available for Options to be granted under the Plan.

SECTION 5.  PARTICIPATION IN THE PLAN.

      The Board shall determine from time to time those Participants who are to
be granted Options, and the number of shares of Common Stock covered thereby.

SECTION 6.  DETERMINATION OF FAIR MARKET VALUE.

      As used in the Plan, "Fair Market Value" shall mean on any particular day
(i) if the Common Stock is listed or admitted for trading on any national
securities exchange or the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System, the last sale price, or if
no sale occurred, the mean between the closing high bid and low asked quotations
for such date of the Common Stock on the principal securities exchange on which
shares of the Common Stock are listed, (ii) if the Common Stock is not traded on
any national securities exchange but is quoted on the National Association of
Securities Dealers, Inc. Automated Operations System, or any similar system of
automated dissemination of quotations or securities prices in common use, the
mean between the closing high bid and low asked quotations for such day of the
Common Stock on such system, (iii) if neither clause (i) nor (ii) is applicable,
the mean between the high bid and low asked quotations for the Common Stock as
reported by the National Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and asked quotations for shares of the
Common Stock on at least five (5) of the ten (10) preceding days or (iv) if none
of the conditions set forth above is met, the fair market value of shares of the
Common Stock as determined in a good faith manner by the Board. Provided, for
purposes of determining Fair Market Value of the Common Stock of the Company,
such value shall be determined without regard to any restriction other than a
restriction which will never lapse.

SECTION 7.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.

      The aggregate number of shares of Common Stock under Options granted under
the Plan, the Stock Option Price and the ISO Price, and the total number of
shares of Common Stock which may be purchased by a Participant upon exercise of
an Option shall be appropriately adjusted by the Board to reflect any
recapitalization, stock split, merger, consolidation, reorganization,
combination, liquidation, stock dividend or similar transaction involving the
Company.

                                       -2-

<PAGE>

SECTION 8.  AMENDMENT AND TERMINATION OF THE PLAN.

      The Plan shall terminate at midnight, October 19, 2007, but prior thereto
may be altered, changed, modified, amended or terminated by written amendment
approved by the Board. Provided, that no action of the Board may, without the
approval of the shareholders; (i) increase the aggregate number of shares of
Common Stock which may be purchased under Options granted under the Plan, or
(ii) withdraw the administration of the Plan from the Board. Except as provided
in this Article I, no amendment, modification or termination of the Plan shall
in any manner adversely affect any Option previously granted under the Plan
without the consent of the affected Participant.

SECTION 9.  EFFECTIVE DATE.

      The Plan shall be effective October 20, 1997, subject to approval by the
holders of a majority of the Common Stock of the Company present or represented
and entitled to vote at a meeting called for such purpose within twelve (12)
months before or after the Plan's adoption by the Board.

SECTION 10.  SECURITIES LAW REQUIREMENTS.

      (a)   LEGALITY OF ISSUANCE.

            No Common Stock shall be issued upon the exercise of any Option
      unless and until the Board has determined that:

            (i) The Company and the Participant have taken all actions required
      to register the Common Stock under the Securities Act of 1933, as amended
      (the "Securities Act"), or to perfect an exemption from registration
      requirements of the Securities Act, or to determine that the registration
      requirements of the Securities Act do not apply to such exercise;

            (ii) Any applicable listing requirement of any stock exchange on
      which the Common Stock is listed has been satisfied; and

            (iii) Any other applicable provision of state, federal or foreign
      law has been satisfied.

      (b)   RESTRICTIONS ON TRANSFER; REPRESENTATIONS OF PARTICIPANT; LEGENDS.

            Regardless of whether the offering and sale of Common Stock under
      the Plan have been registered under the Securities Act or have been
      registered or qualified under the securities laws of any state, the
      Company may impose restrictions and/or prohibitions upon the sale, pledge,
      or other transfer of such Common Stock (including the placement of
      appropriate legends on stock certificates) if, in the judgment of the
      Company and its counsel, such restrictions and/or prohibitions are
      necessary or desirable to achieve compliance with the provisions of the
      Securities Act, the securities laws of any state, or any other law or
      rule, including rules of accounting. If the offering and/or sale of Common
      Stock under the Plan is not registered under the Securities Act and the
      Company determines that the registration requirements of the Securities
      Act apply but an exemption is available which requires an

                                       -3-

<PAGE>

      investment representation or other representation, the Participant shall
      be required, as a condition to acquiring such Common Stock, to represent
      that such Common Stock is being acquired for investment, and not with a
      view to the sale or distribution thereof, except in compliance with the
      Securities Act, and to make such other representations as are deemed
      necessary or appropriate by the Company and its counsel. Certificates
      evidencing Common Stock acquired pursuant to an unregistered transaction
      to which the Securities Act applies shall bear a restrictive legend as may
      be required or deemed advisable under the Plan or the provisions of any
      applicable law.

      Any determination by the Company and its counsel in connection with any of
the matters set forth in this Section 10 shall be conclusive and binding on all
persons.

      (c)   REGISTRATION OR QUALIFICATION OF SECURITIES.

            The Company may, but shall not be obligated to, register or qualify
      the offering or sale of Common Stock under the Securities Act or any other
      applicable law.

      (d)   EXCHANGE OF CERTIFICATES.

            If, in the opinion of the Company and its counsel, any legend placed
      on a stock certificate representing shares of Common Stock issued pursuant
      to the Plan is no longer required, the Participant or the holder of such
      certificate shall be entitled to exchange such certificate for a
      certificate representing the same number of shares of Common Stock but
      lacking such legend.

SECTION 11.  SEPARATE CERTIFICATE.

      Separate certificates representing the Common Stock of the Company to be
delivered to a Participant upon the exercise of any Option will be issued to
such Participant.

SECTION 12.  PAYMENT FOR STOCK.

      Payment for shares of Common Stock purchased under this Plan shall be made
in full and in cash or check made payable to the Company. However, the Board in
its discretion may allow payment for shares of Common Stock purchased under this
Plan to be made in Common Stock of the Company or a combination of cash and
Common Stock of the Company. Further, the Option Agreement may provide for a
"cashless exercise" of Options pursuant to procedures established by the Board.
In the event that Common Stock of the Company is utilized in consideration for
the purchase of Common Stock upon the exercise of an Option, then, such Common
Stock shall be valued at the Fair Market Value as defined in Section 6 of this
Article I as of the date the payment is made.

                                      -4-
<PAGE>

SECTION 13.  INCURRENCE OF DISABILITY.

      A Participant shall be deemed to have terminated employment or consulting
and incurred a disability ("Disability") if such Participant suffers a physical
or mental condition which (i) satisfies the definition of "total disability" in
the disability policy or plan provided by the Company covering the Participant;
or (ii) if no such policy or plan is then covering the Participant, in the
judgment of the Board, totally and permanently prevents a Participant from
engaging in any substantial gainful employment or consulting with the Company.

SECTION 14.  STOCK OPTIONS AND ISO OPTIONS GRANTED SEPARATELY.

      Since the Board is authorized to grant Stock Options and ISO Options to
Participants, the grant thereof and Option Agreements relating thereto will be
made separately and totally independent of each other. Except as it relates to
the total number of shares of Common Stock which may be issued under the Plan,
the grant or exercise of a Stock Option shall in no manner affect the grant and
exercise of any ISO Options. Similarly, the grant and exercise of any ISO Option
shall in no manner affect the grant and exercise of any Stock Option.

SECTION 15.  GRANTS OF OPTIONS AND OPTION AGREEMENT.

      Each Option granted under this Plan shall be evidenced by a written Option
Agreement effective on the date of grant and executed by the Company and the
Participant. Each Option granted hereunder shall contain such terms,
restrictions and conditions as the Board may determine, which terms restrictions
and conditions may or may not be the same in each case.

SECTION 16.  USE OF PROCEEDS.

      The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of Options granted under the Plan shall be added to the
Company's general funds and used for general corporate purposes.

SECTION 17.  NON-TRANSFERABILITY OF OPTIONS.

      Except as otherwise herein provided, any Option granted shall not be
transferable otherwise than by will or the laws of descent and distribution and
only the Participant may exercise the Option during his lifetime. Specifically
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged or hypothecated in any
way, shall not be assignable by operation of law, and shall not be subject to
execution, attachment, or similar process. Any attempted assignment, transfer,
pledge, hypothecation, or other disposition of the Option contrary to the
provisions hereof shall be null and void and without effect.

SECTION 18.  ADDITIONAL DOCUMENTS ON DEATH OF PARTICIPANT.

      No transfer of an Option by the Participant by will or the laws of descent
and distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice and such other evidence as the Board may
deem necessary to establish the validity of the transfer and the acceptance by
the successor to the Option of the terms and conditions of such Option.

                                       -5-

<PAGE>

SECTION 19.  CHANGES IN EMPLOYMENT.

      So long as the Participant shall continue to be an employee or consultant
of the Company, any Option granted to him shall not be affected by any change of
duty or position.

SECTION 20.  SHAREHOLDER RIGHTS.

      No Participant shall have any rights as a shareholder with respect to any
shares of Common Stock subject to an Option prior to the purchase of such shares
of Common Stock by exercise of the Option.

SECTION 21.  CHANGE OF CONTROL.

      (a)   In the event of a Change of Control (as defined in Section 21(b) of
            this Article I),

            (i) all outstanding Options shall immediately vest and become
      exercisable; and

            (ii) the Board, in its discretion, may act to effect one or more of
      the following alternatives with respect to outstanding Options, which may
      vary among individual Participants and which may vary among Options held
      by any individual Participant:

                  (1) Determine a limited period of time after which all
            unexercised Options and all rights of Participants thereunder shall
            terminate.

                  (2) Require the mandatory surrender to the Company by selected
            Participants of some or all of the outstanding Options held by such
            Participants (irrespective of whether such Options are then
            exercisable under the provisions of the Plan) as of a date specified
            by the Board, in which event the Board shall thereupon cancel such
            Options and the Company shall pay to each Participant an amount of
            cash per share equal to the excess, if any, of the Change of Control
            value (as determined by the Board) of the shares subject to such
            Option over the exercise price(s) under such Options for such
            shares.

                  (3) Make such adjustments, if any, to Options then outstanding
            as the Board deems appropriate in its sole discretion, to reflect
            such Change of Control.

                  (4) Provide that upon the exercise of an Option, the
            Participant shall be entitled to purchase, in lieu of the Common
            Stock covered by such Option, the number and class of shares of
            stock, other securities or property (including, without limitation,
            cash) to which the Participant would have been entitled pursuant to
            the terms of the agreement of merger, consolidation or sale of
            assets and dissolution if, immediately prior to such merger,
            consolidation or sale of assets and dissolution the Participant had
            been the holder of record of the number of shares of Common Stock
            covered by such Option.

                                       -6-

<PAGE>

            The foregoing provisions shall not terminate any rights of the
      Participant to further payments pursuant to any other agreement with the
      Company following a Change of Control.

      (b) For purposes of this Plan, the term "Change of Control" means the
occurrence, following successful completion of the Company's IPO (as defined in
Section 21(c) of this Article I), of any one of the following events:

            (i) The Company shall not be the surviving entity in any merger,
      consolidation or other reorganization (or survives only as a subsidiary of
      an entity other than a previously wholly-owned subsidiary of the Company).

            (ii) The Company sells, leases or exchanges all or substantially all
      of its assets to any other person or entity (other than a wholly-owned
      subsidiary of the Company).

            (iii) The Company is to be dissolved and liquidated.

            (iv) Any person or entity, including a "group" as contemplated by
      Section 13(d)(3) of the Exchange Act, acquires or gains ownership or
      control (including, without limitation, power to vote) of more than 50% of
      the outstanding shares of the Company's voting stock (based upon voting
      power).

            (v) As a result of or in connection with a contested election of
      directors, the persons who were directors of the Company before such
      election, together with their nominees, shall cease to constitute a
      majority of the Board.

      (c) For purposes of this Plan, the term "IPO" means the first underwritten
public offering of the Company's Common Stock other than any offering pursuant
to any registration statement (i) relating to any capital stock of the Company
or options, warrants or other rights to acquire any such capital stock issued or
to be issued primarily to directors, officers or employees of the Company, or
any of its subsidiaries, (ii) relating to any employee benefit plan or interest
therein, (iii) relating principally to any preferred stock or debt securities of
the Company or (iv) filed pursuant to Rule 145 under the Securities Act, as
amended, or any successor or similar provisions.

SECTION 22.  NON-QUALIFYING OPTIONS.

      Notwithstanding anything to the contrary contained in this Plan, with
respect to all or any portion of any Option granted under the Plan not
qualifying as an "incentive stock option" under Section 422 of the Code, such
Option shall be considered as a Stock Option granted under this Plan for all
purposes.

                                      -7-
<PAGE>

SECTION 23.  TAX STATUS.

      The Board shall take all appropriate steps at the time of the grant of
Options or the exercise of Options, or both, consistent with such Options'
status for federal income tax purposes (including but not limited to,
designating whether such Option is considered a Stock Option or an ISO Option).

                                  ARTICLE II

                           GRANTING OF STOCK OPTIONS

SECTION 1.  GRANTS AND TERMS OF STOCK OPTIONS.

      Stock Options shall be granted by the Board on the following terms and
conditions: No Stock Option shall be exercisable within six (6) months from the
date of grant (except as specifically provided in Section 3 of this Article II,
with regard to the death or Disability of a Participant), nor more than ten (10)
years after the date of grant. Subject to such limitation, the Board shall have
the discretion to fix the period during which any Stock Option may be exercised
(the "Option Period"). No Stock Option shall be exercisable after the expiration
of its Option Period. Each Stock Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Board shall approve. Each Option Agreement shall
specify the effect of termination of employment or consulting on the
exercisability of Stock Options.

SECTION 2.  STOCK OPTION PRICE.

      The option price for shares of Common Stock subject to a Stock Option
("Stock Option Price") shall be determined by the Board, but in no event shall
such Stock Option Price be less than 85% of the Fair Market Value of the Common
Stock on the date of grant.

SECTION 3.  ACCELERATION OF OTHERWISE UNEXERCISABLE STOCK OPTIONS ON RETIREMENT,
            DEATH, DISABILITY OR OTHER SPECIAL CIRCUMSTANCES.

      All Stock Options which are not exercisable as of the date of termination
of a Participant's employment or consulting shall expire as of such date;
provided, however, the Board, in its sole discretion, may permit any Participant
whose employment or consulting with the Company terminates, for any cause
whatsoever, to exercise, at any time within the Option Period, any or all Stock
Options previously granted to such Participant notwithstanding that such Stock
Options have not yet vested, in whole or in part, as of the date of termination
of such Participant's employment or consulting. However, such discretionary
authority of the Board shall not be exercised with respect to any Stock Option
(or portion thereof) if the applicable six-month waiting period for exercise has
not yet expired, except in the event of the death or Disability of the
Participant when the personal representative of the Participant or the disabled
Participant may, with the consent of the Board, exercise such Stock Option
notwithstanding that the applicable six-month waiting period has not yet
expired.

                                      -8-

<PAGE>

SECTION 4.  NUMBER OF STOCK OPTIONS GRANTED.

      Subject to the applicable limitations contained in the Plan, the Board
shall determine the number of Stock Options which are to be granted to each
Participant. In making such determinations, the Board shall obtain the advice
and recommendation of the officers of the Company. The granting of a Stock
Option under the Plan shall not affect any outstanding Option previously granted
to a Participant under the Plan.

SECTION 5.  NOTICE TO EXERCISE STOCK OPTION.

      Upon exercise of a Stock Option, a Participant shall give written notice
to the Secretary of the Company, or other officer designated by the Board at the
Company's principal office in Houston, Texas. No Common Stock shall be issued to
any Participant until the Company receives full payment for the Common Stock
purchased, if applicable, and any required state and federal withholding taxes.

                                  ARTICLE III

                            GRANTING OF ISO OPTIONS

SECTION 1.  GENERAL.

      With respect to ISO Options granted on or after the effective date of the
Plan, the following provisions in this Article III shall apply to the exclusion
of any inconsistent provisions in any other Article in this Plan since the ISO
Options to be granted under the Plan are intended to qualify as "incentive stock
options" as defined in Section 422 of the Code.

SECTION 2.  GRANT OF ISO OPTIONS.

      ISO Options may be granted only to key employees of the Company and any of
its subsidiaries. No ISO Options shall be granted to any person who is not
eligible to receive incentive stock options as provided in Section 422 of the
Code. No ISO Options shall be granted to any key employee if, immediately before
the grant of an ISO Option, such employee owns more than 10% of the total
combined voting power of all classes of stock of the Company or its subsidiaries
(as determined in accordance with the stock attribution rules contained in
Section 424(d) of the Code). Provided, the preceding sentence shall not apply if
at the time the ISO Option is granted, the ISO Price is at least 110% of the
Fair Market Value of the Common Stock subject to the ISO Option, and such ISO
Option by its terms is not exercisable after the expiration of five years from
the date such ISO Option is granted.

SECTION 3.  ISO OPTION PRICE.

      The option price for shares of Common Stock subject to an ISO Option ("ISO
Price") shall be determined by the Board, but in no event shall such ISO Price
be less than the Fair Market Value of the Common Stock on the date of grant.

                                      -9-
<PAGE>

SECTION 4.  ANNUAL ISO OPTION LIMITATION.

      The aggregate Fair Market Value (determined as of the time the ISO Option
is granted) of the Common Stock with respect to which ISO Options are
exercisable for the first time by any Participant during any calendar year
(under all "incentive stock option" plans qualified under Section 422 of the
Code sponsored by the Company) shall not exceed $100,000.

SECTION 5.  TERMS OF ISO OPTIONS.

      ISO Options shall be granted by the Board on the following terms and
conditions: No ISO Option shall be exercisable within six (6) months from the
date of grant (except as specifically provided in Section 6 of this Article III
with regard to the death or Disability of a Participant), nor more than ten (10)
years after the date of grant. Subject to such limitation, the Board shall have
the discretion to fix the period during which any ISO Option may be exercised
(the "ISO Period"). No ISO Option shall be exercisable after the expiration of
its ISO Period. Each ISO Option shall be evidenced by an Option Agreement in
such form and containing such provisions not inconsistent with the provisions of
the Plan as the Board shall approve, including provisions to qualify an ISO
Option under Section 422 of the Code. Each Option Agreement shall specify the
effect of termination of employment or consulting on the exercisability of ISO
Options.

SECTION 6. ACCELERATION OF OTHERWISE UNEXERCISABLE ISO OPTION ON RETIREMENT,
           DEATH, DISABILITY OR OTHER SPECIAL CIRCUMSTANCES.

      All ISO Options which are not exercisable as of the date of termination of
a Participant's employment, shall expire as of such date; provided, however, the
Board, in its sole discretion, may permit any Participant whose employment with
the Company terminates, for any cause whatsoever, to exercise, at any time
within the ISO Period, any or all ISO Options previously granted to such
Participant notwithstanding that such ISO Options have not yet vested, in whole
or in part, as of the date of the termination of such Participant's employment.
However, that such discretionary authority of the Board shall not be exercised
with respect to any ISO Options (or portion thereof) if the applicable six-month
waiting period has not yet expired, except in the event of the death or
Disability of the Participant, when the personal representative of the
Participant or the disabled Participant may, with the consent of the Board,
exercise such ISO Options notwithstanding that the six-month waiting period has
not yet expired.

SECTION 7.  NUMBER OF ISO OPTIONS GRANTED.

      Subject to the applicable limitations contained in the Plan, the Board
shall determine the number of ISO Options which are to be granted to each
Participant. In making such determinations, the Board shall obtain the advice
and recommendation of the officers of the Company. The granting of an ISO Option
under the Plan shall not affect any outstanding Option previously granted to a
Participant under the Plan.

SECTION 8.  NOTICE TO EXERCISE ISO OPTION.

      Upon exercise of an ISO Option, a Participant shall give written notice to
the Secretary of the Company, or other officer designated by the Board at the
Company's principal office in Houston, Texas. No Common Stock shall be issued to
any Participant until the Company receives full payment for the Common Stock
purchased, if applicable, and any required state and federal withholding taxes.

                                      -10-

<PAGE>

                                  ARTICLE IV

                                 MISCELLANEOUS

SECTION 1.  NO RIGHT TO A GRANT.

      Neither the adoption of the Plan by the Company nor any action of the
Board shall be deemed to give a Participant any right to be granted an Option or
any of the rights hereunder except as may be evidenced by an Option Agreement.

SECTION 2.  NO EMPLOYMENT RIGHTS CONFERRED.

      Nothing in the Plan or in any Option Agreement which relates to the Plan
shall confer upon any Participant any right to continue in the employ as an
employee or consultant of the Company, or interfere in any way with the right of
the Company to terminate his employment or consulting arrangement at any time.

SECTION 3.  RULE 16B-3.

      It is intended that the Plan and any grant of Options made to a person
subject to Section 16 of the Exchange Act meet all of the requirements of Rule
16b-3 promulgated thereunder. If any provision of the Plan or any such grant
would disqualify the Plan or such grant under, or would otherwise not comply
with, Rule 16b-3, such provision or grant shall be construed or deemed amended
to conform to Rule 16b-3.

SECTION 4.  GOVERNING LAW.

      This Plan shall be construed in accordance with the laws of the state of
Texas.

                                      -11-

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