Document:

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                                                                   Exhibit 10.19

                              SKILLSOFT CORPORATION

                                 PREFERRED STOCK
                               PURCHASE AGREEMENT

     This Agreement is made as of January 8th, 1998 among SkillSoft Corporation,
a Delaware corporation, (the "Company") G-Fund L.L.C., a Delaware limited
liability company ("Gartner"), Warburg, Pincus Ventures, L.P., a Delaware
limited partnership, ("Warburg") and Warburg and Gartner ("Purchasers").

     In consideration of the mutual promises, conditions and covenants
hereinafter set forth, the parties hereto agree as follows:

                                    SECTION 1

                    AUTHORIZATION AND SALE OF PREFERRED STOCK

     1.1  AUTHORIZATION OF SERIES A, SERIES B AND SERIES C PREFERRED STOCK. On
or before the Series A Closing (as defined in Section 2.1 below), the Company
will authorize the sale and issuance of up to 4,000,000 shares (the "Series A
Shares") of its Series A Preferred Stock (the "Series A Preferred"), up to
2,857,143 shares (the "Series B Shares") of its Series B Preferred Stock (the
"Series B Preferred") and up to 3,174,603 shares (the "Series C Shares") of its
Series C Preferred Stock (the "Series C Preferred"), in each case in accordance
with the terms of this Agreement and with each such series having the rights,
preferences, privileges and restrictions as set forth in the Amended and
Restated Certificate of Incorporation (the "Restated Certificate") in the form
attached to this Agreement as EXHIBIT A.

     1.2  SALE OF SERIES A SHARES. Subject to the terms and conditions hereof
and at the Series A Closing (as defined in Section 2.1), the Company will issue
and sell to the Purchasers, and the Purchasers will buy from the Company,
4,000,000 shares of Series A Preferred, at a purchase price of $1.75 per share.

     1.3  SALE OF SERIES B SHARES. Subject to the terms and conditions herein,
the Company may elect to issue and sell to the Purchasers, and the Purchasers
will buy from the Company, up to an aggregate of 2,857,143 shares of Series B
Preferred at a price of $2.10 per Share, in the amounts for the aggregate prices
set forth opposite each Purchaser's name in the Schedule of Purchasers attached
hereto. The first Series B Closing must be for at least 1,430,000 shares of
Series B Preferred and any subsequent Series B Closing must be for the balance
of the Series B Shares unsold after the first Series B Closing (each such
closing a "Series B Closing"). The Company may elect to sell fewer than
2,857,143 shares of Series B Preferred to the Purchasers provided, however, any
shares sold must be sold in the increments described in the preceding sentence.
Warburg and Gartner will purchase 90% and 10%, respectively, of the shares to be
sold at each Series B Closing. In order to effect any sale of Series B Preferred
to the Purchasers, the Company must for each closing provide written notice to
the Purchasers of its intent to effect such sale at least 30 calendar days prior
to each proposed closing date (each such date a "Series B Closing Date") for
such sale and indicate in such notice the total number of shares to be issued
and sold

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(each such notice a "Series B Notice of Sale"). If the Company provides a Series
B Notice of Sale to the Purchasers, the obligations of Purchasers to purchase
the number of Series B Shares set forth in such notice at each Series B Closing
shall be subject to Warburg's current approval of the Company's operating
performance from the date hereof through each Series B Closing Date and its then
financial and business condition (the "Warburg Approval"), which Warburg
Approval shall not be unreasonably withheld. For the purposes of this Section
1.3, Warburg's ability to reasonably withhold Warburg's Approval shall include,
but not be limited to those situations where: (i) the Company's revenues or
expenses for the quarter preceding each proposed closing date are more than 10
percent below or above, respectively, the level proposed in the business plan
provided to Warburg and attached hereto as EXHIBIT B or as modified approved by
the Board of Directors of the Company (the "Business Plan"); or (ii) Warburg
reasonably believes that any currently proposed acquisition by the Company of
any business, products or technologies will materially affect the business,
financial condition or results of operations of the Company or prospects
therefor.

     1.4  SALE OF SERIES C SHARES. Subject to the terms and conditions herein,
the Company MAY elect to issue and sell to the Purchasers, and the Purchasers
WILL buy from the Company, up to an aggregate of 3,174,603 shares of Series C
Preferred at a price of $3.15 per Share, in the amounts and for the aggregate
prices set forth opposite each Purchaser's name in the Schedule of Purchasers.
Such shares may be sold in up to three separate closings (each such closing a
"Series C Closing"). Each Series C Closing must be for the lesser of 1,000,000
shares or the balance of the Series C Shares unsold after any previous Series C
Closing. The Company may elect to sell fewer than 3,174,603 shares of Series C
Preferred to the Purchasers provided, however, any shares sold must be sold in
the increments described in the preceding sentence. Warburg and Gartner will
purchase 90% and 10%, respectively, of the shares to be sold at each Series C
Closing. In order to effect any sale of Series C Preferred to the Purchasers,
the Company must for each closing provide notice to the Purchasers of its intent
to effect such sale at least 15 business days prior to each proposed closing
date (each such date a "Series C Closing Date") for such sale and indicate in
such notice the total number of shares to be issued and sold (each such notice a
"Series C Notice of Sale"). If the Company provides a Series C Notice of Sale to
the Purchasers, the obligations of Purchasers to purchase the number of Series C
Shares set forth in such notice at each Series C Closing shall be subject to the
Warburg Approval, which Warburg Approval shall not be unreasonably withheld. For
the purposes of this Section 1.4, Warburg's ability to reasonably withhold
Warburg's Approval shall include, but not be limited to, those situations where:
(i) the Company's revenues or expenses for the quarter preceding each proposed
closing date are more than 10 percent below or above, respectively, the level
proposed in the Business Plan; or (ii) if Warburg reasonably believes that any
then currently proposed acquisition by the Company of any business, products or
technologies will materially adversely affect the business, financial condition
or results of operations of the Company or prospects therefor.

     1.5  FINANCING PREFERENCE. Notwithstanding any other provision in this
Agreement, the Company may not seek any outside financing from third parties
through the sale of the Series B Preferred or Series C Preferred at a price
equal or greater than $2.10 or $3.15, respectively, or any other security of the
Company for which the consideration per share of such security is greater than
the conversion price per share of the most recent series of the Company's
preferred stock sold by the Company, until the Company has in good faith first
offered the entire tranche of Series B Shares and the Series C Shares to the
Purchasers pursuant to this Section 1, PROVIDED, HOWEVER,

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that after the Company has offered such shares to the Purchasers, each Purchaser
shall have 10 business days from the date such shares were offered to confirm to
the Company that it is its good faith intention to consummate, and that it has
no reason to believe that it will not consummate, the purchase in accordance
with the terms of this Agreement its entire pro rata portion of the shares
offered. Any Purchaser who fails to provide such confirmation within such 10-day
period shall forfeit its right to purchase shares under the terms of this
Agreement, and the Company shall be free to offer and sell to any third party
such Purchaser's shares unless the Purchasers agree that Warburg shall purchase
such Purchaser's entire pro rata portion.

                                    SECTION 2

                             CLOSING DATES; DELIVERY

     2.1. SERIES A CLOSING. The closing of the purchase and sale of the Series A
Preferred hereunder shall be held at the offices of Morrison & Foerster LLP, 755
Page Mill Road, Palo Alto, California at 2:00 p.m., local time, on January __,
1998 (the "Series A Closing") or at such other time and place upon which the
Company and the Purchasers shall agree. The date of the Series A Closing is
sometimes hereinafter referred to as the "Series A Closing Date," and the Series
A Closing Date, the Series B Closing Date and the Series C Closing Date are
sometimes hereinafter referred to together as the "Closing Dates." The Series A
Closings, Series B Closings and Series C Closings are sometimes hereinafter
referred to together as the "Closings" and individually as a "Closing."

     2.2. SERIES B CLOSINGS. Subject to Section 1.3 above, each Series B Closing
shall occur on the first business day following the thirtieth calendar day after
the Company provides a notice of sale as described in Section 1.3 hereof or at
such other time and place as the Company and the Purchasers mutually agree upon
in writing.

     2.3. SERIES C CLOSINGS. Subject to Section 1.4 above, each Series C Closing
shall occur on the first business day following the thirtieth calendar day after
the Company provides a notice of sale as described in Section 1.4 hereof or at
such other time and place as the Company and the Purchasers mutually agree upon
in writing.

     2.4. DELIVERY. At each Closing, the Company shall deliver to each Purchaser
a certificate or certificates, registered in such Purchaser's name representing
the number of Series A Preferred, Series B Preferred or Series C Preferred to be
purchased by such Purchaser, against payment of the purchase price therefor, by
check payable to the Company or wire transfer per the Company's instructions.

                                    SECTION 3

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except as set forth in the Schedule of Exceptions attached hereto as
EXHIBIT C ("Schedule of Exceptions"), which Schedule of Exceptions the Company
shall have the right to amend and restate in connection with each Closing
subsequent to the Series A Closing, the Company represents and warrants to each
Purchaser, as of the Series A Closing Date, each Series B Closing Date, and each
Series C Closing Date as applicable (subject to changes occurring

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in the normal and ordinary course of the Company's business that are not
materially adverse to the Company, its financial position or prospects) or as
otherwise contemplated herein or by the Business Plan, as follows:

     3.1  ORGANIZATION AND STANDING. The Company is a corporation duly organized
and existing under, and by virtue of, the laws of the State of Delaware and is
in good standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as currently conducted and as proposed to be conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a material adverse effect on its
business or properties. The Company has furnished copies of its Certificate of
Incorporation and By-Laws, as amended. Said copies are true, correct and
complete and contain all amendments through the Closing Dates, as applicable.

     3.2  CORPORATE POWER. The Company has now, or will have at the Closing
Dates, as applicable, all requisite legal and corporate power and authority to
execute and deliver this Agreement, the Stockholders Agreement, the Investor
Rights Agreement in substantially the form attached hereto as EXHIBIT D (the
"Rights Agreement"), to sell and issue the Series A Shares, Series B and Shares
and Series C Shares hereunder, to issue the Common Stock issuable upon
conversion of the Series A Shares and Series B Shares ("Conversion Shares"), and
to carry out and perform all of its obligations under the terms of this
Agreement and such other agreements and instruments.

     3.3  SUBSIDIARIES. The Company has no subsidiaries or affiliated companies
and does not otherwise control, directly or indirectly, or have any ownership
interest in any corporation, partnership, business trust, association or
business entity.

     3.4  CAPITALIZATION. The authorized capital stock of the Company consists,
or will, upon the filing of the Restated Certificate, which will be filed prior
to the Series A Closing Date, consist of 30,000,000 shares of Common Stock,
$.001 par value per share, of which 24,000,000 shares will be designated "Class
A Common Stock" and 6,000,000 shares will be designated "Class B Common Stock,"
and 11,000,000 shares of Preferred Stock, $.001 par value per share, of which
4,000,000 shares will be designated "Series A Preferred", 2,857,143 shares will
be designated "Series B Preferred" and 3,174,603 shares will be designated
"Series C Preferred." Prior to the Series A Closing, 2,010,000 shares of Common
Stock were issued and outstanding and no shares of Preferred Stock will be
issued and outstanding. All outstanding shares have been duly authorized and
validly issued, are fully paid and nonassessable, were issued in compliance with
all federal and state securities laws, and were not issued in violation of any
preemptive rights. The Company has reserved 3,990,000 shares of its Common Stock
for issuance to employees, consultants, or directors under stock option plans,
stock purchase plans or arrangements approved by the Board of Directors. The
Series A Preferred, Series B Preferred and Series C Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Certificate. Except as set forth above, there are no other authorized or
outstanding subscription, warrant, option or other rights or rights or
commitments (including, without limitation, preemptive rights or rights of first
refusal) to purchase or acquire from the Company any shares of any class of
capital stock of the Company or securities convertible into or exchangeable for
such capital stock. The Company is under no duty to redeem or to repurchase any
shares of any class or series of stock.

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     3.5  AUTHORIZATION. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement, the Stockholders Agreement and the Rights
Agreement by the Company, the authorization, sale, issuance and delivery of the
Series A Shares, the Series B Shares or the Series C Shares, as the case may be,
and the Conversion Shares and the performance of all of the Company's
obligations hereunder and thereunder has been taken or will be taken prior to
the Closings, as applicable. Each of this Agreement, the Stockholders Agreement
and the Rights Agreement, when each is executed and delivered by the Company,
shall constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except this Agreement, the Stockholders Agreement and
the Rights Agreement may be limited by principles of public policy, and subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. The Series A Shares, Series B Shares and Series C
Shares, as the case may be, when issued in compliance with the provisions of
this Agreement, will be validly issued, fully paid and nonassessable, and will
have the rights, preferences, privileges and restrictions described in the
Restated Certificate. The Conversion Shares have been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement and the
Restated Certificate, as the case may be, will be validly issued, fully paid and
nonassessable. The issuance and delivery of the Series A Shares, Series B Shares
and Series C Shares, as the case may be, and the Conversion Shares, as
applicable, are not subject to any preemptive rights or any liens or
encumbrances; provided, however, that the Series A Shares, Series B Shares,
Series C Shares and the Conversion Shares, as applicable, may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or in the Rights Agreement or in the Stockholders Agreement attached
hereto as EXHIBIT E (the "Stockholders Agreement").

     3.6  FINANCIAL STATEMENTS. Prior to any Series B and Series C Closing, the
Company shall furnish to each Purchaser its unaudited balance sheet and the
related statements of operations, stockholders' equity and cash flows for the
most recently ended quarter (the "Financial Statements"). The Financial
Statements shall be prepared in accordance with generally accepted accounting
principles (except for the omission of footnotes) and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended. Except for liabilities and
obligations that are accrued or reserved against in the Financial Statements,
the Company will have no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except liabilities and
obligations which are incurred in the ordinary course of business subsequent to
the end of such quarter which have not been, either in any case or in the
aggregate, materially adverse.

     3.7  TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, lien, or encumbrance,
other than the lien of current taxes not yet due and payable. All leases
pursuant to which the Company leases real or personal property are valid and
effective in accordance with their respective terms, and there exists no
material default on the part of the Company under any thereof.

     3.8  COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
is not in breach or violation of any term of its Certificate of Incorporation or
By-Laws, of any term or provision of any mortgage, deed of trust, indebtedness,
indenture, contract, agreement, instrument,

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judgment or decree, or any order, statute, rule or regulation, in each case
where such breach or violation would have a material adverse effect on the
Company. No event or failure of performance has occurred that, with the passage
of time or the giving of notice, would constitute such a breach or violation by
the Company. The execution, delivery and performance of and compliance with this
Agreement, the Stockholders Agreement and the Rights Agreement and the issuance,
sale and delivery of the Series A Shares, Series B Shares, Series C Shares and
the Conversion Shares, do not conflict with, and will not result in a breach or
violation of the terms, conditions or provisions of, or constitute a default (or
an event that, with the giving of notice or passage of time, or both, could
result in a default) under, or result in the creation or imposition of any lien
pursuant to the terms of, the Company's Certificate of Incorporation or Bylaws,
or any statute, law, rule or regulation, any state or federal order, judgment or
decree, or any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company, or any of its properties, is subject.

     3.9  LITIGATION, ETC. There is no action, proceeding or investigation
pending or threatened against the Company or any of its properties or assets or
that questions the validity of this Agreement, the Stockholders Agreement or the
Rights Agreement or any action taken or to be taken in connection herewith. The
foregoing includes, without limitation, actions pending or threatened involving
the prior employment of any of the Company's employees, their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. No action, suit or proceeding has been
instituted or is threatened by the Company.

     3.10 REGISTRATION RIGHTS. Except as set forth in the Rights Agreement, the
Company is not under any contractual obligation to register (as defined in
Section 1 of the Rights Agreement) any of its currently outstanding securities
or any of its securities which hereafter may be issued.

     3.11 CERTAIN TRANSACTIONS. Neither the Company nor, to the Company's
knowledge, any of its officers or directors has any interest (other than as
holders of less than 1% of the voting securities of a publicly-traded company),
either directly or indirectly, in any entity that currently (i) provides any
services or designs, produces or sells any products or product lines that are
the same, similar to or competitive with any activity or business in which the
Company is engaged or proposes to engage; (ii) is a supplier, customer, or
creditor of the Company; or (iii) has any direct or indirect interest in any
asset or property, real or personal, tangible or intangible, of the Company or
any property, real or personal, tangible or intangible, that is necessary for
the Company's business as currently conducted or proposed to be conducted. No
employee, stockholder, officer or director of the Company, or their spouses or
children, is indebted to the Company in any amount in excess of $5,000, nor is
the Company indebted to any of them other than for payment of salary for
services rendered and reasonable expenses.

     3.12 INTANGIBLE PROPERTY. The Company has taken all appropriate security
measures to protect the secrecy, confidentiality and value of all trade secrets,
know-how, inventions, designs, masks, processes and technical data required to
conduct its business. The Company has not received any communication alleging
that the Company has violated any third party's patent, maskwork right, moral
right, trademark, trade secret, trade name or copyright. The Company owns

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and possesses or has sufficient license to (or is able to obtain on reasonable
terms and terms not materially adverse to the financial condition of the Company
sufficient license to) all patents, patent applications, licenses, trademarks,
service marks, trade names, inventions, processes and copyrights necessary for
the operation of its business as currently conducted or proposed to be
conducted. None of the Company's officers or employees has improperly used or is
making improper use of any confidential information or trade secrets of others,
including those of any former employer of such officer or employee. The Company
is not aware of any violation by a third party of any of its patents, licenses,
trademarks, trade names, service marks, copyrights, trade secrets or other
proprietary rights.

     3.13 EMPLOYEES. The Company does not have any collective bargaining
agreements with any of its employees, and no labor union organizing activity is
pending or threatened with respect to the Company. No employee is obligated
under any agreement or judgment that would conflict with such employee's
obligation to use his or her best efforts to promote the interests of the
Company or that would conflict with the Company's business as currently
conducted or proposed to be conducted. No employee is in violation of any term
of any employment agreement, proprietary information agreement, non-competition
agreement or any other agreement relating to such employee's relationship with
any previous employer. Neither the execution nor delivery of this Agreement, the
Stockholders Agreement or the Rights Agreement nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employee is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company. The Company is not a party to or bound by any
currently effective employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation agreement, except as included in the Schedule of
Exceptions. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company except as otherwise
provided in any employment contract listed in the Schedule of Exceptions.

     3.14 INSURANCE. The Company has fire, casualty and liability insurance
policies sufficient in amount to allow it to replace any of its tangible
properties that might be damaged or destroyed and adequate to protect the
Company and its financial condition against the risks involved in the business
of the Company.

     3.15 SECURITIES LAWS; GOVERNMENTAL CONSENT. Based in part on the accuracy
of the Purchaser' representations and warranties set forth in Section 4, the
offer, sale and issuance of the Shares as provided in this Agreement are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 as amended (the "Securities Act"), and have been
qualified (or are exempt from qualification) under all applicable state
securities qualification requirements. Except for the filing of (a) Restated
Certificate with the Secretary of State of the State of Delaware, and (b)
notices required or permitted to be filed after each Closing Date with certain
United States federal and state securities commissions, which notices the
Company will file

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on a timely basis, no consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of the
Company is required in connection with the valid execution, delivery and
performance of this Agreement, the Stockholders Agreement, or the Rights
Agreement, the offer, sale or issuance of the Series A Shares, the Series B
Shares and the Series C Shares (and the issuance of the Common Stock issuable
upon conversion of the Shares), or the consummation of any other transaction
contemplated hereby or by the Rights Agreement.

     3.16 CONTRACTS AND OTHER COMMITMENTS. The Company is not a party to any:

          (a)  agreement for the purchase of fixed assets that involves an
expenditure by the Company in excess of $10,000 or for the purchase of
materials, supplies or equipment in excess of that amount;

          (b)  lease or agreement under which the Company is lessee of or holds
or operates any property, real or personal, owned by any other person under
which payments to such person exceed $10,000 per year; or

          (c)  agreement or other commitment or arrangement with any person
continuing for a period of more than three months from each applicable Closing
Date which involves an expenditure or receipt by the Company in excess of
$10,000.

     3.17 DISCLOSURE. The Company has fully provided each Purchaser with all the
information that such Purchaser has requested for deciding whether to purchase
the Series A Shares, Series B Shares and Series C Shares. This Agreement with
the Exhibits hereto, when taken as a whole, does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein not misleading.

     3.18 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any
applicable statute, law, or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law, or regulation.

     3.19 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted rights
to manufacture, produce, assemble, license, market, or sell its products to any
other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.

     3.20 SECTION 83(b) ELECTIONS. To the best of the Company's knowledge, all
elections and notices required by Section 83(b) of the Internal Revenue Code and
any analogous provisions of applicable state tax laws have been timely filed by
all individuals who have purchased shares of the Company's Common Stock.

     3.21 QUALIFIED SMALL BUSINESS STOCK. So long as the shares of Series A,
Series B or Series C Preferred Stock are held by a Purchaser (or a transferee)
in whose hands the Series A or Series B Shares are eligible to qualify as
"qualified small business stock" ("Small Business Stock"), within the meaning of
Section 1202(c) of the Internal Revenue Code of 1986, as amended (the "Code")),
(i) the Company will use its best efforts not to cause it to lose its status as
a "qualified small business" (provided it has such status), as defined in
Section 1202(d) of the Code;

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and (ii) the Company agrees not to repurchase any stock of the Company if such
repurchase would cause the shares of Series A, Series B or Series C Preferred
Stock not to be treated as Small Business Stock. Notwithstanding anything to the
contrary in this Section 3.20, the Company shall not be obligated to take any
action or refrain from taking any action which the Company has determined, in
good faith, is not in its best commercial interests.

     3.22 PERMITS. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as presently planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.

     3.23 NO FINANCIAL STATEMENT AND NEWLY INCORPORATED. The Company was
incorporated on October 15, 1997 (the "Inception Date"). Since the Inception
Date, the Company has not engaged in active operations and the Company does not
have any material assets or liabilities, except as disclosed on the Schedule of
Exceptions. Except as disclosed on the Schedule the Exceptions, the Company has
not entered into any agreements (written or verbal) with any third parties,
including employees and consultants. The Company has not prepared any financial
statements for the interim period from the Inception Date to the date of this
Agreement .

     3.24 CHANGES. Since the Inception Date, there has not been, except as duly
approved by the Board of Directors:

          (a)  any damage, destruction or loss, whether or not covered by
insurance. materially and adversely affecting the business, properties,
prospects, assets, liabilities or financial condition of the Company (as such
business is presently conducted and as it is presently proposed to be
conducted);

          (b)  any waiver or compromise by the Company of a material right or of
material debt owed to it;

          (c)  any sale, assignment, or transfer by the Company of any patents,
trademarks, copyrights, trade secrets, or other intangible assets;

          (d)  except as disclosed on the Schedule of Exceptions, any
resignation or termination of employment of any key officer of the Company,
including but not limited to Charles E. Moran, and the Company, to the best of
its knowledge, does not know of the impending resignation or termination of
employment of any such officer;

          (e)  any material mortgage, pledge, transfer of a security interest
in, or lien, created by the Company with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;

          (f)  any material loans or guarantees made by the Company to or for
the benefit of its employees, stockholders, officers, or directors, or any
members of their immediate families, other than travel advances and other
advances made in the ordinary course of its business;

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          (g)  any declaration, setting aside, or payment of any dividend or
other distribution of the Company's capital stock, or any material direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company;

          (h)  any material adverse change in the business, property, assets,
liabilities, financial condition or results of operations of the Company, except
as disclosed on the Schedule of Exceptions;

          (i)  any change or changes that are individually or in the aggregate
material and not in the ordinary course of business in the contingent
obligations of the Company by way of guarantee, endorsement, indemnity, warranty
or otherwise;

          (j)  except as disclosed on the Schedule of Exceptions, any material
change in the compensation arrangement of any of the Company's employees,
officers or directors; or

          (k)  any other event or condition of any character that has materially
and adversely affected the business, properties, prospects, or financial
condition of the Company (as such business is presently conducted and as it is
presently proposed to be conducted).

     3.25 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each employee and
officer of the Company has executed a Proprietary Information and Inventions
Agreement substantially in the form or forms which are attached as Exhibit E and
have been delivered to the special counsels to the Purchasers. Each consultant
to the Company has executed a Consulting Agreement containing confidentiality
and assignment of inventions provisions similar to those included in the
Proprietary Information and Inventions Agreement.

     3.26 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has timely filed all
tax returns and reports (federal, state and local) as required by law. These
returns and reports are true and correct in all material respects. The Company
has paid all taxes and other assessments due, except those contested by it in
good faith. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended ("Code"), to be treated as an S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation or amortization) that would
have a material effect on the business, properties, prospects or financial
condition of the Company. The Company has never had any tax deficiency proposed
or assessed against it and has not executed any waiver of any statute of
limitation son the assessment or collection of any tax or governmental charge.
None of the Company's federal income tax returns and none of its state income of
franchise tax or sales or use tax returns has ever been audited by governmental
authorities.

                                    SECTION 4

           REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS

          Each Purchaser hereby represents and warrants severally and not
jointly, and Warburg with respect to Section 4.8 hereby covenants to the Company
with respect to the purchase of the Series A Shares, Series B Shares and Series
C Shares as follows:

                                       10
<PAGE>   11

     4.1  INVESTMENT EXPERIENCE. It is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Series A
Shares, Series B Shares, Series C Shares and the underlying Common Stock.

     4.2  INVESTMENT INTENT. It is acquiring the Series A Shares, Series B
Shares, Series C Shares and the underlying Common Stock for investment only for
its own account, and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Series A Shares, Series B Shares
and Series C Shares to be purchased and the underlying Common Stock have not
been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent of the Purchaser as expressed herein.

     4.3  RULE 144. It acknowledges that the Series A Shares, Series B Shares,
Series C Shares and the underlying Common Stock must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after the security was last
held by the Company or an affiliate of the Company, the sale being effected
through a "broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month period not
exceeding specified limitations.

     4.4  NO PUBLIC MARKET. It understands that no public market now exists for
any of the securities issued by the Company, and that the Company has made no
assurances that a public market will ever exist for the Company's securities.

     4.5  ACCESS TO DATA. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management and the
opportunity to review the Company's facilities. It has also had an opportunity
to ask questions of officers of the Company.

     4.6  AUTHORIZATION. Each of this Agreement, the Rights Agreement and the
Stockholders Agreement when executed and delivered by the Purchaser will
constitute a valid and legally binding obligation of the Purchaser, enforceable
in accordance with its terms, except as the indemnification provisions of
Section 5.6 of the Rights Agreement may be limited by principles of public
policy, and subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.

     4.7  LEGEND.

          (a)  Each certificate representing (i) the Series A Shares, Series B
and Series C Shares purchased hereunder, (ii) the Conversion Shares and (iii)
any other securities issued in respect of the Series A Shares, Series B Shares
or Series C Shares upon any stock split, stock

                                       11
<PAGE>   12

dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of counsel for the Company) shall be stamped or otherwise
imprinted with a legend substantially in the following form:

          "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
          FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
          OR DISTRIBUTION THEREOF. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN
          THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN
          OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
          OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
          REQUIREMENTS OF SAID ACT."

          (b)  Such certificates shall also bear any legend required by the
applicable laws of any state.

          4.8  VOTING LIMITATIONS. Notwithstanding any provision of the Restated
Certificate, Warburg covenants that it shall only vote such number of shares of
Series A Preferred Stock, Series B Preferred, Series C Preferred Stock and Class
A Common Stock issuable upon conversion of the Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock as would equal up to 49.9% of the
Voting Shares (as defined in the Restated Certificate) then issued and
outstanding and shall abstain from voting any additional shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Class A
Common Stock issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock that it would otherwise be entitled
to vote under the Restated Certificate in excess of such 49.9% of the Voting
Shares.

                                       12
<PAGE>   13

                                    SECTION 5

                              CONDITIONS TO CLOSING

     5.1  CONDITIONS TO BOTH THE PURCHASERS' AND THE COMPANY'S OBLIGATIONS. The
obligations of each Purchaser to purchase and of the Company to issue and sell
the Series A Shares, Series B Shares and Series C Shares are subject to the
fulfillment, on or prior to each Closing Date, of all of the following
conditions, any of which may be waived in whole or in part by mutual agreement
of the Purchasers and the Company:

          (a)  The Company shall have obtained all consents, permits and waivers
necessary or appropriate on the part of the Company for consummation of the
transactions contemplated by this Agreement, the Rights Agreement and the
Stockholders Agreement. Except for the notices required to be filed after each
Closing Date with certain federal and state securities commissions, which
notices the Company will file on a timely basis, the Company shall have obtained
all approvals of any federal or state governmental authority or regulatory body
that are required on the part of the Company in connection with the lawful sale
and issuance of the Series A Shares, Series B Shares, Series C Shares and the
Common Stock issuable upon conversion of the Series A Shares, Series B Shares
and Series C Shares.

          (b)  At each Closing, the purchase of the Series A Shares, Series B
Shares and Series C Shares by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers or the Company is
subject.

          (c)  The Restated Certificate shall have been filed with the Secretary
of State of the State of Delaware.

          (d)  The Company and the Purchasers shall have entered into the Rights
Agreement.

          (e)  The Purchasers, the Company and the Existing Stockholders (as
defined in the Stockholder Agreement) shall have entered into the Stockholder
Agreement.

     5.2  ADDITIONAL CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT THE SERIES A
CLOSING. In addition to the conditions set forth in Section 5.1 hereof, the
Purchasers' obligation to purchase the Series A Shares is subject to the
fulfillment, on or prior to the Series A Closing Date, of all of the following
conditions (except as otherwise provided below), any of which may be waived in
whole or in part by the Purchasers:

          (a)  The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the Series A Closing Date with the same force and effect as if they had been
made on and as of the same date.

          (b)  The Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Series A
Closing Date.

                                       13
<PAGE>   14

          (c)  The Purchasers shall have received from Morrison & Foerster LLP,
counsel to the Company, an opinion letter addressed to them, dated the Series A
Closing Date and in substantially the form attached hereto as EXHIBIT F.

          (d)  The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the Series A Closing Date,
certifying to the fulfillment of the conditions specified in Sections 5.1(a),
5.2(a) and 5.2(b).

     5.3  ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY AT THE SERIES A
CLOSING. In addition to the conditions set forth in Section 5.1 hereof, the
Company's obligation to issue and sell the Series A Shares to the Purchasers is
subject to the fulfillment to the Company's satisfaction, on or prior to the
Series A Closing Date, of the conditions, which may be waived in whole or in
part by the Company:

          (a)  The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Series A Closing Date with the same force and effect as if they
had been made on and as of the same date.

          (b)  The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by them on or prior to
the Series A Closing Date.

          (c)  The Purchasers shall have paid the consideration for the Series A
Shares to be sold to the Purchasers as set forth in Section 1.2 hereof.

     5.4  ADDITIONAL CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT THE SERIES B
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Purchasers' obligation to purchase the Series B Shares is subject to the
fulfillment, on or prior to each Series B Closing Date, of all of the following
conditions (except as otherwise provided below), any of which may be waived in
whole or in part by the Purchasers:

          (a)  The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the subject Series B Closing Date with the same force and effect as if they had
been made on and as of the same date, subject to changes occurring in the normal
and ordinary course of the Company's business that are not materially adverse to
the Company, its financial position or prospects or as otherwise contemplated
herein.

          (b)  The Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the subject
Series B Closing Date.

          (c)  The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the subject Series B Closing
Date, certifying to the fulfillment of the conditions specified in Sections
5.1(a), 5.4(a) and 5.4(b).

          (d)  The Purchasers shall have received from Morrison & Foerster LLP,
counsel to the Company, an opinion letter addressed to them, dated the Series B
Closing Date and in substantially the form attached hereto as EXHIBIT F.

                                       14
<PAGE>   15

     5.5  ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY AT SERIES B
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Company's obligation to issue and sell the Series B Shares to the Purchasers is
subject to the fulfillment to the Company's satisfaction, on or prior to each
Series B Closing Date, of the following conditions, which may be waived in whole
or in part by the Company:

          (a)  The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the subject Series B Closing Date with the same force and effect as
if they had been made on and as of the same date.

          (b)  The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by them on or prior to
the subject Series B Closing Date.

          (c)  The Purchasers shall have paid the consideration for the Series B
Shares to be sold to the Purchasers as set forth in the subject Series B Notice
of Sale.

     5.6  ADDITIONAL CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT THE SERIES C
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Purchasers' obligation to purchase the Series C Shares is subject to the
fulfillment, on or prior to each Series C Closing Date, of all of the following
conditions (except as otherwise provided below), any of which may be waived in
whole or in part by the Purchasers:

          (a)  The representations and warranties made by the Company in Section
3 hereof shall be true and correct when made, and shall be true and correct on
the subject Series C Closing Date with the same force and effect as if they had
been made on and as of the same date, subject to changes occurring in the normal
and ordinary course of the Company's business that are not materially adverse to
the Company, its financial position or prospects or as otherwise contemplated
herein.

          (b)  The Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the subject
Series C Closing Date.

          (c)  The Company shall have delivered to the Purchasers a certificate,
executed by the President of the Company and dated the subject Series C Closing
Date, certifying to the fulfillment of the conditions specified in Sections
5.1(a), 5.4(a) and 5.4(b).

          (d)  The Purchasers shall have received from Morrison & Foerster LLP,
counsel to the Company, an opinion letter addressed to them, dated the Series C
Closing Date and in substantially the form attached hereto as EXHIBIT F.

     5.7  ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY AT SERIES C
CLOSINGS. In addition to the conditions set forth in Section 5.1 hereof, the
Company's obligation to issue and sell the Series C Shares to the Purchasers is
subject to the fulfillment to the Company's satisfaction, on or prior to each
Series C Closing Date, of the following conditions, which may be waived in whole
or in part by the Company:

                                       15
<PAGE>   16

          (a)  The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the subject Series C Closing Date with the same force and effect as
if they had been made on and as of the same date.

          (b)  The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by them on or prior to
the subject Series C Closing Date.

          (c)  The Purchasers shall have paid the consideration for the Series C
Shares to be sold to the Purchasers as set forth in the subject Series C Notice
of Sale.

                                    SECTION 6

                                  MISCELLANEOUS

     6.1  GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Delaware as such laws are applied to agreements between
Delaware residents entered into and to be performed entirely within Delaware.

     6.2  SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchasers and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.

     6.3  SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successor and assigns of the parties hereto.

     6.4  ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any provision hereof may be amended, changed, waived,
discharged or terminated other than by a written instrument signed by the party
against who enforcement of any such amendment, change, waiver, discharge or
termination is sought. Any amendment or waiver effected in accordance with this
section shall be binding upon the holder of any securities purchased under this
Agreement at the time outstanding (including securities into which such
securities have been converted), each future holder of all such securities and
the Company.

     6.5  NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, electronic mail, express delivery
service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (a) if to Warburg, at 466 Lexington
Avenue, 11th Floor, New York, New York 10017, facsimile: (212) 878-9359,
Attention: Stewart Gross or at such other address as Warburg shall have
furnished the Company in writing, with a copy to Wilson, Sonsini, Goodrich &
Rosati Professional Corporation ("WSGR"), 650 Page Mill Road, Palo Alto, CA
94304; (b) if to Gartner, at 56 Topgallant Road, Stanford, Connecticut
06904-2212; (c) if to the Company, at 9 Chicadee Court, Bedford, New Hampshire
03110, or at

                                       16
<PAGE>   17

such other address as the Company shall have furnished to the Purchasers in
writing, with a copy to Michael C. Phillips, Esq., Morrison & Foerster LLP, 755
Page Mill Road, Palo Alto, California 94304, facsimile (650) 494-0792.

     6.6  SEVERABILITY. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

     6.7  FINDER'S FEES.

          (a)  The Company (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Purchasers
harmless of and from any liability for commission or compensation in the nature
of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, is responsible.

          (b)  Each Purchaser (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
of and from any liability for commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
Purchaser, or any of its employees or representatives, is responsible.

     6.8  TITLES AND SUBTITLES. The titles of the Restated Certificate and
Sections of this Agreement are for convenience of reference only and in no way
define, limit, extend, or describe the scope of this Agreement or the intent of
any of its provisions.

     6.9  COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

     6.10 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party upon any breach or
default of any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character of any breach or default under this Agreement, or any
waiver of any provisions or conditions of this Agreement must be in writing and
shall be effective only to the extent specifically set forth in writing, and
that all remedies, either under this Agreement, by law or otherwise, shall be
cumulative and not alternative.

     6.11 CONSENTS. Any permission, consent, or approval of any kind or
character under this Agreement shall be in writing or detrimentally relied upon
and proved by clear and convincing evidence (other than alleged reliance) and
shall be effective only to the extent specifically set forth in such writing or
proved.

                                       17

<PAGE>   18

     6.12 PAYMENT OF FEES AND EXPENSES. Each party shall be responsible for
paying its own fees, costs and expenses in connection with this Agreement and
the transactions herein contemplated; provided however, that if the Series A
Closing is effected, the Company agrees to pay the reasonable fees and expenses
of special counsel to the Warburg in an amount not to exceed $20,000.

     6.13 CONSTRUCTION OF AGREEMENT. No provision of this Agreement shall be
construed against either party as the drafter thereof.

     6.14 SECTION REFERENCES. Unless otherwise stated, any reference contained
herein to a Section or subsection refers to the provisions of this Agreement.

     6.15 VARIATIONS OF PRONOUNS. All pronouns and all variations thereof shall
be deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the context in which they are used may require.

     6.16 EXHIBITS. All Exhibits and attachments hereto shall be deemed to be a
part of this Agreement and are fully incorporated herein by this reference.

                                       18
<PAGE>   19

                             SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
                                                                                    Number             Aggregate
                                      Purchaser                                    of Shares         Consideration
                                      ---------                                    ---------         -------------

<S>                          <C>                                                   <C>               <C>
SERIES A                     Warburg, Pincus Ventures, L.P.                        3,600,000         $6,300,000.00
CLOSING                      G-Fund L.L.C.                                           400,000            700,000.00
                                                                                   ---------         -------------
                                                                     TOTAL         4,000,000         $7,000,000.00

SERIES B                     Warburg, Pincus Ventures, L.P.                        2,571,429         $5,400,000.90
CLOSING                      G-Fund L.L.C.                                           285,714            599,999.40
                                                                                   ---------         -------------
                                                                     TOTAL         2,857,143         $6,000,000.30

SERIES C                     Warburg, Pincus Ventures, L.P.                        2,857,143         $9,000,000.40
CLOSING                      G-Fund L.L.C.                                           317,460            999,999.00
                                                                                   ---------         -------------
                                                                     TOTAL         3,174,603         $9,999,999.40
</TABLE>

                                       19
<PAGE>   20

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.

"COMPANY"                                       "PURCHASERS"

SkillSoft Corporation,                          Warburg, Pincus Ventures, L.P.
a Delaware corporation
                                                By:  Warburg, Pincus & Co.
                                                Its: General Partner

By: /s/ Charles E. Moran                        By: /s/ Stewart Gross
    ----------------------------------              ----------------------------
Title: President and Chief Executive            Title: Partner
       Officer
       -------------------------------

                                                G-Fund L.L.C.
                                                a Delaware limited liability
                                                 company

                                                By: /s/ [illegible]
                                                    ----------------------------
                                                Title: Manager
                                                       -------------------------

                                       20<PAGE>   1
                                                                    EXHIBIT 10.1

                           BDS BUSINESS CENTER, INC.

                  STOCK OPTION AND PERFORMANCE INCENTIVE PLAN

                                   ARTICLE 1.

                           ESTABLISHMENT AND PURPOSE

         1.1 ESTABLISHMENT AND EFFECTIVE DATE. BDS Business Center, Inc., a
Connecticut corporation ("BDS" or the "Corporation"), hereby establishes a stock
incentive plan to be known as the "BDS Business Center, Inc. Stock Option and
Performance Incentive Plan" (the "Plan"). The Plan shall become effective as of
March 30, 1998, subject to the approval of the Corporation's stockholders. In
the event that such stockholder approval is not obtained, any awards made
hereunder shall be cancelled and all rights with respect to such awards shall
thereupon cease. Upon approval by the Board of Directors of the Corporation (the
"Board") awards may be made as provided herein.

         1.2 PURPOSE. The purpose of the Plan is to encourage and enable
selected employees, officers, directors and independent contractors
(subject to such requirements as may be prescribed by the Committee) of
the Corporation and its subsidiaries to acquire a proprietary interest in the
Corporation through the ownership of the Corporation's common stock, without
par value $1.65 per share ("Common Stock"), and other rights with respect
to the Common Stock. Such ownership will provide such persons with a more
direct stake in the future welfare of the Corporation and encourage them to
exert their best efforts for the Corporation and its subsidiaries. It is also
expected that the Plan will encourage qualified persons to seek and accept
employment with or provide services to the Corporation and its subsidiaries.

                                   ARTICLE 2.

                                     AWARDS

         2.1 FORM OF AWARDS. Awards under the Plan may be granted in any one or
all of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) non-qualified stock options
("Non-Qualified Stock Options")(unless otherwise indicated, references in the
Plan to "Options" shall include both Incentive Stock Options and Non-qualified
Stock Options); (iii) stock appreciation rights ("Stock Appreciation Rights"),
as described in Article 6 hereof, which may be awarded either in tandem with
Options ("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock which are
restricted as provided in Article 9 hereof ("Restricted Shares"); (v) units
representing shares of Common Stock, as described in Article 10 hereof
("Performance Shares"); (vi) units which do not represent shares of Common Stock
but which may be paid in the form
<PAGE>   2
of Common Stock, as described in Article 11 hereof ("Performance Units"); (vii)
shares of Common Stock that are not subject to any conditions to vesting
("Unrestricted Shares"); and (viii) tax offset payments ("Tax Offset Payments"),
as described in Article 13 hereof.

     2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 600,000 subject to adjustment
pursuant to Article 14 hereof. In addition, Tax Offset Payments which may be
awarded under the Plan will not exceed the number of shares available for
issuance under the Plan. Shares of Common Stock issued pursuant to the Plan may
be either authorized but unissued shares or issued shares reacquired by the
Corporation. In the event that prior to the end of the period during which
Options may be granted under the Plan, any Option or any Nontandem Stock
Appreciation Rights under the Plan expires unexercised or is terminated,
surrendered or cancelled (other than in connection with the exercise of Stock
Appreciation Rights) without being exercised in whole or in part for any reason,
or any Restricted Shares, Performance Shares or Performance Units are forfeited,
or if such awards are settled in cash in lieu of shares of Common Stock, then
such shares or units shall be available for subsequent awards under the Plan,
upon such terms as the Committee may determine.

                                   ARTICLE 3.

                                 ADMINISTRATION

     3.1 Committee. Awards shall be determined, and the Plan may be administered
either by the Board, or by the Committee as appointed from time to time by the
Board, which Committee shall consist of no less than two (2) members of the
Board. Except as permitted by Rule 16b-3 of the Securities Exchange Act of 1934
as amended (the "Act"), and by Section 162(m) of the Code (or Regulations
promulgated thereunder), no member of the Board may serve on the Committee if
such member: (i) is or has been granted or awarded stock, stock options, stock
appreciation rights or any other equity security or derivative security of the
Corporation or any of its affiliates pursuant to the Plan or any other plan of
the Corporation or its affiliates either while serving on the Committee or
during the one year period prior to being appointed to the Committee; (ii) is an
employee or former employee of the Corporation; or (iii) receives remuneration
from the Corporation, either directly or indirectly, in any capacity other than
as a director.

     3.2 Powers of Committee. Subject to the express provisions of the Plan, the
Board or the Committee shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock covered by each Option,
the term of each Option, the number of shares of Common Stock to be covered by
each Option and any performance objectives or vesting standards applicable to
each Option; (ii) to designate Options as Incentive Stock Options or
Non-qualified Stock Options and to determine which Options, if any, shall be
accompanied by Tandem Stock Appreciation

<PAGE>   3
Rights, (iii) to grant Tandem Stock Appreciation Rights and Nontandem Stock
Appreciation Rights and to determine the terms and conditions of such rights;
(iv) to grant Restricted Shares and to determine the term of the restricted
period and other conditions and restrictions applicable to such shares; (v) to
grant Performance Shares and Performance Units and to determine the performance
objectives, performance periods and other conditions applicable to such shares
or units; (vi) to grant Unrestricted Shares; (vii) to determine the amount of,
and to make, Tax Offset Payments; and (viii) to determine the persons to whom,
and the time or times at which, Options, Stock Appreciation Rights, Restricted
Shares, Performance Shares, Performance Units and Unrestricted Shares shall be
granted.

          3.3 Delegation. The Board or the Committee may delegate to one or
more of its members or to any other person or persons such ministerial duties
as it may deem advisable; provided, however, that the Committee may not
delegate any of its responsibilities hereunder if such delegation would cause
the Plan to fail to comply with the "disinterested administration" rules under
Section 16 of the Act. The Committee may also employ attorneys, consultants,
accountants or other professional advisors and shall be entitled to rely upon
the advice, opinions or valuations of any such advisors.

          3.4 Interpretations. The Board or the Committee shall have sole
discretionary authority to interpret the terms of the Plan, to adopt and revise
rules, regulations and policies to administer the Plan and to make any other
factual determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees who have received awards under the Plan and
all other interested persons.

          3.5 Liability; Indemnification. No member of the Board or the
Committee, nor any person to whom ministerial duties have been delegated, shall
be personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Committee
shall be fully indemnified and protected by the Corporation with respect to any
liability he or she may incur with respect to any such action, interpretation
or determination, to the extent permitted by applicable law and to the extent
provided in the Corporation's Certificate of Incorporation and Bylaws, as
amended from time to time, or under any agreement between any such member and
the Corporation.

                                   ARTICLE 4.

                                  ELIGIBILITY

          Awards may be made to all employees, officers, directors and
independent contractors of the Corporation or any of its subsidiaries (subject
to such requirements as may be prescribed by the Committee). Awards may be made
to an officer, director or independent contractor of the Corporation, whether
or not such person is also an

<PAGE>   4
employee of the Corporation, provided that no award may be granted to a
director who is a member of the Committee. In determining the persons to whom
awards shall be granted and the number of shares to be covered by each award,
the Committee shall take into account the nature of the services rendered by
such persons, their present and potential contributions to the success of the
Corporation and its subsidiaries and such other factors as the Committee in its
sole discretion shall deem relevant.

     As used herein, the term "subsidiary" shall mean any present or future
corporation, partnership or joint venture in which the Corporation owns,
directly or indirectly, 40% or more of the economic interests. Notwithstanding
the foregoing, only employees of the Corporation and any present or future
corporation which is or may be a "subsidiary corporation" of the Corporation
(as such term is defined in Section 424(f) of the Code) shall be eligible to
receive Incentive Stock Options.

                                   ARTICLE 5.

                                 STOCK OPTIONS

     5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.

     5.2 Designation as Non-qualified Stock Option or Incentive Stock Option.
In connection with any grant of Options, the Committee shall designate in the
written agreement required pursuant to Article 16 hereof whether the Options
granted shall be Incentive Stock Options or Non-qualified Stock Options, or in
the case both are granted, the number of shares of each.

     5.3 Option Price. The purchase price per share under each Incentive Stock
Option shall be the Market Price (as hereinafter defined) of the Common Stock
on the date the Incentive Stock Option is granted. The purchase price per share
under each Non-qualified Stock Option shall be specified by the Committee. In
no case, however, shall the purchase price per share of either an Incentive
Stock Option or Non-qualified Stock Option be less than the par value of the
Common Stock ($.01). Notwithstanding the foregoing, to the extent required by
the Code, the purchase price per share under each Non-qualified Stock Option
granted to an employee who is treated as a "covered employee" (as defined in
Section 162(m)(3) of the Code) on the date such Non-Qualified Option is
exercised shall not be less than 100% of the Market Price of the Common Stock
on the date of grant. In the case of an Incentive Stock Option granted to an
employee owning (actually or constructively under Section 424(d) of the Code),
more than 10% of the total combined voting power of all classes of stock of the
Corporation or of a subsidiary (a "10% Stockholder"), the option price shall
not be less than 110% of the Market Price of the Common Stock on the date of
grant.
<PAGE>   5

     The "Market Price" of the Common Stock on any day shall be determined as
follows: (i) if the Common Stock is listed on a national securities exchange or
quoted through the NASDAQ National Market System, the Market Price on any day
shall be the average of the high and low reported Consolidated Trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the Consolidated Trading listing for such day;
(ii) if the  Common Stock is quoted on the NASDAQ inter-dealer quotation system,
the Market Price on any day shall be the average of the representative bid and
asked prices at the close of business for such day; (iii) if the Common Stock
is not listed on a national stock exchange or quoted on NASDAQ, the Market
Price on any day shall be the average of the high bid and low asked prices
reported by the National Quotation Bureau, ("NQB") Inc. for such day; or (iv)
if the Common Stock is not reported on by the NQB, the fair market value
thereof on such date as determined in good faith by the Corporation's Board of
Directors. In no event shall the Market Price of a share of Common Stock
subject to an Incentive Stock Option be less than the fair market value as
determined for purposes of Section 422(b)(4) of the Code.

     The Option price so determined shall also be applicable in connection with
the exercise of any Tandem Stock Appreciation Rights granted with respect to
such Option.

     5.4 Limitation on Amount of Incentive Stock Options. In the case of
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any
subsidiary) shall not exceed $100,000.

     5.5 Limitation on Time of Grant. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan
is approved by stockholders of the Corporation.

     5.6 Exercise and Payment. Options may be exercised in whole or in part.
Common Stock purchased upon the exercise of Options shall be paid for in full
at the time of purchase. Such payment shall be made in cash or, in the
discretion of the Committee, through delivery of shares of Common Stock or
surrender of Options (or a portion of an Option) held by the optionee (provided
that the then-Market Price of Common Stock exceeds the exercise price of such
Options) or a combination of the foregoing, to the extent permitted in
accordance with procedures to be established by the Committee. Any shares of
Common Stock so delivered shall be valued at their Market Price on the date of
exercise. Any Option (or portion of an Option) so surrendered shall be valued
at the product of (a) the difference between (i) the Market Price of one (1)
share of Common Stock on the date of exercise and (ii) the exercise price under
such Option, multiplied by (b) the number of shares of Common Stock covered by
<PAGE>   6
such Option (or the portion of such Option which is surrendered). Upon receipt
of notice of exercise and payment in accordance with procedures to be
established by the Committee, the Corporation or its agent shall deliver to the
person exercising the Option (or his or her designee) a certificate for such
shares.

          5.7 Term. The term of each Option granted hereunder shall be
determined by the Committee; provided, however, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.

          5.8 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable
upon exercise thereof until the date on which a recipient shall have exercised
his or her Option in accordance herewith. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.

          5.9 General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
issuable or transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue, transfer, or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.

          The Board or the Committee may, in connection with the granting of
any Option, require the person to whom the Option is to be granted to enter into
an agreement with the Corporation stating that as a condition precedent to each
exercise of the Option, in whole or in part, such person shall if then required
by the Corporation represent to the Corporation in writing that such exercise
is for investment only and not with a view to distribution, and also setting
forth such other terms and conditions as the Board or the Committee may
prescribe.

          5.10 Cancellation of Stock Appreciation Rights. Upon exercise of all
or a portion of an Option, the related Tandem Stock Appreciation Rights shall
be cancelled with respect to an equal number of shares of Common Stock as are
issuable upon exercise of such Option.
<PAGE>   7
                                   ARTICLE 6.

                           STOCK APPRECIATION RIGHTS

         6.1  Grants of Stock Appreciation Rights. Tandem Stock Appreciation
Rights may be awarded by the Committee in connection with any Option granted
under the Plan, either at the time the Option is granted or thereafter at any
time prior to the exercise, termination or expiration of the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. At
the time of grant of Nontandem Stock Appreciation Rights, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 6.4 below. The base price of any Nontandem Stock
Appreciation Rights shall be not less than 100% of the Market Price of a share
of Common Stock on the date of grant. Stock Appreciation Rights shall be
subject to such terms and conditions not inconsistent with the other provisions
of the Plan as the Committee shall determine.

         6.2  Limitations on Exercise.  Tandem Stock Appreciation Rights shall
be exercisable only to the extent that the related Option is exercisable and
shall be exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be cancelled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of Tandem Stock Appreciation Rights shall not be
available for subsequent awards under the Plan. Nontandem Stock Appreciation
Rights shall be exercisable during such period as the Committee shall determine.

         6.3  Surrender or Exchange of Tandem Stock Appreciation Rights.
Tandem Stock Appreciation Rights shall entitle the recipient to surrender to
the Corporation unexercised the related Option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of shares of
Common Stock having an aggregate Market Price equal to (A) the excess of (i) the
Market Price of one (1) share of Common Stock as of the date the Tandem Stock
Appreciation Rights are exercised over (ii) the option price per share
specified in such Option, multiplied by (B) the number of shares of Common Stock
subject to the Option, or portion thereof, which is surrendered. Cash shall be
delivered in lieu of any fractional shares.

         6.4  Exercise of Nontandem Stock Appreciation Rights.  The exercise of
Nontandem Stock Appreciation Rights shall entitle the recipient to receive from
the Corporation that number of shares of Common Stock having an aggregate
Market Price equal to (A) the excess of (i) the Market Price of one (1) share
of Common Stock as of the date on which the Nontandem Stock Appreciation Rights
are exercised over (ii) the base price of the shares covered by the Nontandem
Stock Appreciation Rights, multiplied by (B) the number of shares of Common

<PAGE>   8
Stock covered by the Nontandem Stock Appreciation Rights, or the portion
thereof being exercised. Cash shall be delivered in lieu of any fractional
shares.

     6.5 Settlement of Stock Appreciation Rights. As soon as is reasonably
practicable after the exercise of any Stock Appreciation Rights, the Corporation
shall (i) issue, in the name of the recipient, stock certificates representing
the total number of full shares of Common Stock to which the recipient is
entitled pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to
the Market Price, as of the date of exercise, of any resulting fractional
shares, and (ii) if the Committee causes the Corporation to elect to settle all
or part of its obligations arising out of the exercise of the Stock
Appreciation Rights in cash pursuant to Section 6.6 hereof, deliver to the
recipient an amount in cash equal to the Market Price, as of the date of
exercise, of the shares of Common Stock it would otherwise be obligated to
deliver.

     6.6 Cash Settlement. The Committee, in its discretion, may cause the
Corporation to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver
in an amount equal to the Market Price of such shares on the date of exercise.

                                   ARTICLE 7.

          NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS

     No Option or Stock Appreciation Rights may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option or Stock Appreciation Rights shall be subject to execution, attachment
or similar process. Any attempted assignment, transfer, pledge, hypothecation
or other disposition of an Option or Stock Appreciation Rights not specifically
permitted herein shall be null and void and without effect. An Option or Stock
Appreciation Rights granted to an individual may be exercised by the recipient
only during his or her lifetime, or following his or her death pursuant to
Section 8.4 hereof.

     Notwithstanding anything to the contrary in the preceding paragraph, the
Committee may, in its sole discretion, cause the written agreement relating to
any Non-qualified Stock Options or Stock Appreciation Rights granted hereunder
to provide that the recipient of such Non-qualified Stock Options or Stock
Appreciation Rights may transfer any of such Non-qualified Stock Options or
Stock Appreciation Rights other than by will or the laws of descent and
distribution in any manner authorized under applicable law; provided, however,
that in no event may the Committee permit any transfers which would cause this
Plan to fail to satisfy the applicable requirements of Rule 16b-3 under the
Act, or would cause any recipient of awards hereunder to fail to be entitled to
the benefits Rule 16b-3 or other exemptive rules under Section 16 of the Act or
be subject to liability thereunder.

                                   ARTICLE 8.

            EFFECT OF TERMINATION OF EMPLOYMENT, RELOCATION EVENT
<PAGE>   9

                 DISABILITY, RETIREMENT, DEATH OR SPECIAL EVENT

     8.1 General Rule. Except as expressly determined by the Committee in its
sole discretion, no Option or Stock Appreciation Rights shall be exercisable
after three months following the recipient's termination of employment with or,
in the case of a nonemployee recipient, cessation of providing services to the
Corporation or a subsidiary, unless such termination or cessation occurs by
reason of (i) a Relocation Event (as defined in Section 8.2), (ii) Retirement
(as defined in Section 8.3), (iii) death, or (iv) a Special Event (as defined
in Section 8.5), provided that, in the case of a Special Event, the Committee
shall have modified such Option or Stock Appreciation Rights to remain
exercisable as provided in Section 8.5.

     Options and Stock Appreciation Rights shall not be affected by any change
of duties so long as the recipient continues to be employed by or provide
services to either the Corporation or a subsidiary. The Committee may, in its
sole discretion, cause any Option or Stock Appreciation Rights to be forfeited
upon an award recipient's termination of employment or other arrangement for
the provision of services if the recipient was terminated for one (or more) of
the following reasons: (i) the conviction of, or plea of guilty or nolo
contendere to, the commission of a felony, (ii) the commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the recipient
resulting or intended to result, directly or indirectly, in gain or personal
enrichment at the expense of the Corporation or a subsidiary, (iv) any breach
of the recipient's fiduciary duties to the Corporation, or (v) a serious
violation by the recipient of a Corporation policy. It shall be within the sole
discretion of the Committee to determine whether the recipient's termination
was for one of the foregoing reasons, and the decision of the Committee shall
be final and conclusive.

     8.2 Relocation Event. Options and Stock Appreciation Rights granted to a
recipient shall remain outstanding after termination of such recipient's
employment with or, in the case of a nonemployee recipient, cessation of
providing services to the Corporation or a subsidiary, if such termination or
cessation solely occurs by reason of a "Relocation Event," which shall be
deemed to occur if (i) a husband and wife are both current employees, officers,
directors or independent contractors of or to the Corporation, (ii) the
Corporation transfers one spouse to a new location, (iii) the Corporation is
unable to offer the other spouse a position that is substantially comparable to
his or her current position, and (iv) as a result, the other spouse's
employment with or other arrangement for the provision of services to the
Corporation is terminated and the other spouse, as recipient, holds outstanding
Options or Stock Appreciation Rights.

     In case of a Relocation Event, the Options or Stock Appreciation Rights
held by a terminated recipient shall be exercisable for a period equal to the
lesser of (i) the period such Options or Stock Appreciation Rights would be
exercisable absent such termination, and (ii) the period such Options or Stock
Appreciation Rights would be exercisable if granted to the spouse continuing as
an employee, officer, director or independent contractor of the Corporation on
the date originally granted to the terminated spouse.
<PAGE>   10
     8.3 Disability or Retirement. Except as expressly provided otherwise in the
written agreement relating to any Option or Stock Appreciation Rights granted
under the Plan, in the event of the Disability or Retirement of an employee,
officer or director who is the recipient of Options or Stock Appreciation
Rights, the Options or Stock Appreciation Rights which are held by such
recipient on the date of such Disability or Retirement, whether or not otherwise
exercisable on such date, shall be exercisable at any time until the expiration
date of the Options or Stock Appreciation Rights; provided, however, that any
Incentive Stock Option of such recipient shall no longer be treated as an
Incentive Stock Option unless exercised within three (3) months of the date of
such Disability or Retirement (or within one (1) year in the case of an employee
who is "disabled" within the meaning of Section 22(e)(3) of the Code).

     "Disability" shall mean any termination of employment with or, in the case
of a nonemployee officer or director, status as an officer or director of the
Corporation or a subsidiary because of a long-term or total disability, as
determined by the Committee in its sole discretion. "Retirement" shall mean a
termination of employment with or, in the case of a nonemployee officer or
director, status as an officer or director of the Corporation or a subsidiary
either (i) on a voluntary basis by a recipient who is at least 60 years of age
and has at least 15 years of service with the Corporation or a subsidiary or
(ii) otherwise with the written consent of the Committee in its sole discretion.
The decision of the Committee shall be final and conclusive.

     8.4 Death. Except as expressly provided otherwise in the written agreement
relating to any Option or Stock Appreciation Rights granted under the Plan, in
the event of the death of a recipient of Options or Stock Appreciation Rights
while an employee, officer or director of the Corporation or any subsidiary,
Options or Stock Appreciation Rights which are held by such recipient at the
date of death, whether or not otherwise exercisable on the date of death, shall
be exercisable by the beneficiary designated by such recipient for such purpose
(the "Designated Beneficiary") or if no Designated Beneficiary shall be
appointed or if the Designated Beneficiary shall predecease such recipient, by
such recipient's personal representatives, heirs or legatees at any time within
three (3) years from the date of death (subject to the limitation in Section 5.7
hereon, at which time such Options or Stock Appreciation Rights shall terminate;
provided, however, that any Incentive Stock Option of such recipient shall no
longer be treated as an Incentive Stock Option unless exercised within three (3)
months of the date of the recipient's death.

     In the event of the death of a recipient of Options or Stock Appreciation
Rights following a termination of employment or, in the case of a nonemployee
officer or director, status as an officer or director due to Retirement,
Disability or a Special Event (as defined in Section 8.5 hereof), if such death
occurs before the Options or Stock Appreciation Rights are exercised, the
Options or Stock Appreciation Rights which are held by such recipient on the
date of termination shall be exercisable by such recipient's Designated
Beneficiary, or if no Designated Beneficiary shall be appointed or if the
Designated Beneficiary shall predecease such recipient, by such recipient's
personal representatives, heirs or legatees to the same extent such Options or
Stock Appreciation Rights were exercisable by the recipient following such
termination of employment.

<PAGE>   11
     8.5 Special Event. In the case of a Special Event, any Options or Stock
Appreciation Rights held by a recipient whose relationship with the Company will
be terminated as a result of the Special Event, shall accelerate and become
fully-exercisable upon the occurrence of the Special Event.

     A "Special Event" shall mean (i) the entry into by the Corporation of a
definitive agreement for the sale or merger of the Corporation, or the sale or
other disposition of a subsidiary or division of the Corporation; (ii) the
closing or discontinuation of a specific operation of the Corporation or any
subsidiary; (iii) the elimination of job categories; or (iv) a limited program
of terminations in connection with a personnel reorganization or restructuring
of the Corporation or any subsidiary of the Corporation scheduled to be
completed on a date certain, provided, however, that only those recipients who
meet the terms and conditions as established by the Board or the Committee in
its discretion shall be eligible to receive accelerated vesting of Options and
Stock Appreciation Rights.

     8.6 Leave of Absence. In the case of an employee, officer or director on
an approved leave of absence, the Options and Stock Appreciation Rights of such
person shall not be affected unless such leave is longer than 13 weeks. The date
of exercisability of any Options or Stock Appreciation Rights of an employee,
officer or director which are unexercisable at the beginning of an approved
leave of absence lasting longer than 13 weeks shall be postponed for a period
equal to the length of such leave of absence. Notwithstanding the foregoing,
the Committee may, in its sole discretion, waive in writing any such
postponement of the date of exercisability of any Options or Stock Appreciation
Rights due to a leave of absence.

                                   ARTICLE 9.

                               RESTRICTED SHARES

     9.1 Grant of Restricted Shares. The Committee may from time to time cause
the Corporation to grant Restricted Shares under the Plan to employees,
officers, directors or independent contractors of the Corporation, subject to
such restrictions, conditions and other terms as the Committee may determine.

     9.2 Restrictions. At the time a grant of Restricted Shares is made, the
Committee shall establish a period of time (the "Restricted Period") applicable
to such Restricted Shares. Each grant of Restricted Shares may be subject to a
different Restricted Period. The Committee may, in its sole discretion, at the
time a grant is made, prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or
individual performance objectives, which shall be applicable to all or any
portion of the Restricted Shares. The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any other
restrictions applicable to all or a portion of such Restricted Shares. None of
the Restricted Shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Committee with respect
to such Restricted Shares.

<PAGE>   12
         9.3 RESTRICTED STOCK CERTIFICATES. The Corporation shall issue, in the
name of each person to whom Restricted Shares have been granted, stock
certificates representing the total number of Restricted Shares granted to the
recipient, as soon as reasonably practicable after the grant. The Corporation,
at the direction of the Committee, shall hold such certificates, properly
endorsed for transfer, for the recipient's benefit until such time as the
Restricted Shares are forfeited to the Corporation, or the restrictions lapse.

         9.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES. Holders of Restricted
Shares shall not have the right to vote such shares, or the right to receive any
cash dividends with respect to such shares, except as such rights are
specifically granted by the Committee. All distributions, if any, received by a
recipient with respect to Restricted Shares as a result of any stock split,
stock distribution, a combination of shares, or other similar transaction shall
be subject to the restrictions of this Article 9.

         9.5 FORFEITURE. Any Restricted Shares granted pursuant to the Plan
shall be forfeited if the recipient terminates employment with or, in the case
of a nonemployee recipient, the cessation of providing services to the
Corporation or its subsidiaries prior to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon such forfeiture, the Restricted Shares that are
forfeited shall be retained in the treasury of the Corporation and available for
subsequent awards under the Plan, unless the Committee directs that such
Restricted Shares be cancelled upon forfeiture. If the recipient's employment or
other arrangement for the provision of services terminates as a result of
Disability, Retirement or death, or a Relocation Event or Special Event, all
Restricted Shares of such recipient shall be forfeited, unless the Committee, in
its sole discretion, shall determine otherwise.

         9.6 DELIVERY OF RESTRICTED SHARES. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions prescribed
by the Committee, the restrictions applicable to the Restricted Shares shall
lapse and a stock certificate for the number of Restricted Shares with respect
to which the restrictions have lapsed shall be delivered, free of all such
restrictions, to the recipient or the recipient's beneficiary or estate, as the
case may be.

                                  ARTICLE 10.

                               PERFORMANCE SHARES

         10.1 AWARD OF PERFORMANCE SHARES. For each Performance Period (as
defined in Section 10.2), Performance Shares may be granted under the Plan to
such employees, officers, directors and independent contractors of the
Corporation and its subsidiaries as the Committee shall determine in its sole
discretion. Each Performance Share shall be deemed to be equivalent to one (1)
share of Common Stock. Performance Shares granted to such a recipient shall be
credited to an account (a "Performance Share Account") established and
maintained for such recipient.

         10.2 PERFORMANCE PERIOD. "Performance Period" shall mean such period of
time as shall be determined by the Committee in its sole discretion. Different
Performance Periods may be
<PAGE>   13
established for different recipients receiving Performance Shares. Performance
Periods may run consecutively or concurrently.

          10.3 RIGHT TO PAYMENT OF PERFORMANCE SHARES. With respect to each
award of Performance Shares under the Plan, the Committee shall specify
performance objectives (the "Performance Objectives") which must be satisfied
in order for the recipient to vest in the Performance Shares which have been
awarded to such recipient for the Performance Period. If the Performance
Objectives established for a recipient for the Performance Period are partially
but not fully met, the Committee may, nonetheless, in its sole discretion,
determine that all or a portion of the Performance Shares have vested. If the
Performance Objectives for a Performance Period are exceeded, the Committee
may, in its sole discretion, grant additional, fully vested Performance Shares
to the recipient. The Committee may also determine, in its sole discretion,
that Performance Shares awarded to a recipient shall become partially or fully
vested upon the recipient's Disability, Retirement or death, or upon a
Relocation Event or Special Event, or upon the termination of the recipient's
employment or other arrangement for the provision of services to the
Corporation prior to the end of the Performance Period.

          10.4 PAYMENT FOR PERFORMANCE SHARES. As soon as practicable following
the end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 10.3). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Shares shall be granted to the
recipient pursuant to Section 10.3. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the recipient an amount with respect
to each vested Performance Share equal to the Market Price of a share of Common
Stock on such payment date or, if the Committee shall so specify at the time of
grant, an amount equal to (i) the Market Price of a share of Common Stock on the
payment date less (ii) the Market Price of a share of Common Stock on the date
of grant of the Performance Share. Payment shall be made entirely in cash,
entirely in Common Stock (including Restricted Shares) or in such combination of
cash and Common Stock as the Committee shall determine in its sole discretion.

          10.5 VOTING AND DIVIDEND RIGHTS. Except as provided in Article 14
hereof, no recipient of Performance Shares shall be entitled to any voting
rights, to receive any cash dividends, or to have such recipient's Performance
Share Account credited or increased as a result of any cash dividends or other
distribution with respect to Common Stock. Notwithstanding the foregoing,
within sixty (60) days from the date of payment of a cash dividend by the
Corporation on its shares of Common Stock, the Committee, in its sole
discretion, may credit a recipient's Performance Share Account with additional
Performance Shares having an aggregate Market Price equal to the cash dividend
per share paid on the Common Stock multiplied by the number of Performance
Shares credited to such recipient's account at the time the cash dividend was
declared.

                                  ARTICLE 11.

<PAGE>   14
                               PERFORMANCE UNITS

        11.1 Award of Performance Units. For each Performance Period (as defined
in Section 10.2), Performance Units may be granted under the Plan to such
employees, officers, directors and independent contractors of the Corporation
and its subsidiaries as the Committee shall determine in its sole discretion.
The award agreement covering such Performance Units shall specify a value for
each Performance Unit or shall set forth a formula for determining the value of
each Performance Unit at the time of payment (the "Ending Value"). If necessary
to make the calculation of the amount to be paid to the recipient pursuant to
Section 11.3, the Committee shall also state in the award agreement the initial
value of each Performance Unit (the "Initial Value"). Performance Units granted
to a recipient shall be credited to an account (a "Performance Unit Account")
established and maintained for such recipient.

        11.2 Right to Payment of Performance Units. With respect to each award
of Performance Units under the Plan, the Committee shall specify Performance
Objectives which must be satisfied in order for the recipient to vest in the
Performance Units which have been awarded to such recipient for the Performance
Period. If the Performance Objectives established for a recipient for the
Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the recipient. The Committee may,
in its sole discretion, adjust the Performance Objectives or the Initial Value
or Ending Value of any Performance Units to reflect extraordinary events, such
as stock splits, recapitalizations, mergers, combinations, divestitures,
spin-offs and the like. The Committee may also determine, in its sole
discretion, that Performance Units awarded to a recipient shall become partially
or fully vested upon the recipient's termination of employment or other
arrangement for the provision of services to the Corporation due to Disability,
Retirement, death or otherwise, or upon a Relocation Event or Special Event.

        11.3 Payment for Performance Units. As soon as practicable following the
end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 11.2). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Units shall be granted to the recipient
pursuant to Section 11.2. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Corporation shall pay to the recipient an amount with respect
to each vested Performance Unit equal to the Ending Value of the Performance
Unit or, if the Committee shall so specify at the time of grant, an amount equal
to (i) the Ending Value of the Performance Unit less (ii) the Initial Value of
the Performance Unit. Payment shall be made entirely in cash, entirely in Common
Stock (including Restricted Shares) or in such combination of cash and Common
Stock as the Committee shall determine in its sole discretion.

<PAGE>   15
                                  ARTICLE 12.

                              UNRESTRICTED SHARES

        12.1 Award of Unrestricted Shares. The Committee may cause the
Corporation to grant Unrestricted Shares to employees, officers, directors or
independent contractors of the Corporation at such time or times, in such
amounts and for such reasons as the Committee, in its sole discretion, shall
determine. No payment shall be required for Unrestricted Shares.

        12.2 Delivery of Unrestricted Shares. The Corporation shall issue, in
the name of each person to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to the
recipient, and shall deliver such certificates to the recipient as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.

                                  ARTICLE 13.

                              TAX OFFSET PAYMENTS

        The Committee shall have the authority at the time of any award under
the Plan or anytime thereafter to make Tax Offset Payments, in cash or
Unrestricted Shares, to assist recipients in paying income taxes incurred as a
result of their participation in the Plan. The Tax Offset Payments shall be
determined by multiplying a percentage established by the Committee by all or a
portion (as the Committee shall determine) of the taxable income recognized by a
recipient upon (i) the exercise of Non-qualified Stock Options or Stock
Appreciation Rights, (ii) the disposition of shares received upon exercise of
Incentive Stock Options, (iii) the lapse of restrictions on Restricted Shares,
(iv) the award of Unrestricted Shares, or (v) payments for Performance Shares or
Performance Units. The percentage shall be established, from time to time, by
the Committee at that rate which the Committee, in its sole discretion,
determines to be appropriate and in the best interests of the Corporation to
assist recipients in paying income taxes incurred as a result of the events
described in the preceding sentence.

                                  ARTICLE 14.

                   ADJUSTMENT UPON CHANGES IN CAPITALIZATION

        Notwithstanding any other provision of the Plan, the Committee may: (i)
at any time, make or provide for such adjustments to the Plan or to the number
and class of shares available thereunder or (ii) at the time of grant of any
Options, Stock Appreciation Rights, Restricted Shares or Performance Shares,
provide for such adjustments to such Options, Stock Appreciation Rights,
Restricted Shares or Performance Shares, in each case, as the Committee shall
deem appropriate to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, spin-offs, reorganizations, liquidations and the like.

<PAGE>   16
                                  ARTICLE 15.

                           AMENDMENT AND TERMINATION

         The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to persons eligible to receive awards under the Plan, or (iii)
materially modify the requirements as to eligibility for participation in the
Plan, shall be subject to the approval of the Corporation's stockholders, except
that any such increase or modification that may result from adjustments
authorized by Article 14 hereof shall not require such stockholder approval. If
the Plan is terminated, the terms of the Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such termination. No
suspension, termination, modification or amendment of the Plan may, without the
consent of the recipient to whom an award shall theretofore have been granted,
adversely affect the rights of such recipient under such award.

                                  ARTICLE 16.

                               WRITTEN AGREEMENT

         Each award of Options, Stock Appreciation Rights, Restricted Shares,
Performance Shares, Performance Units, Unrestricted Shares and Tax Offset
Payments shall be evidenced by a written agreement containing such restrictions,
terms and conditions, if any, as the Committee may require. In the event of any
conflict between a written agreement and the Plan, the terms of the Plan shall
govern.

                                  ARTICLE 17.

                            MISCELLANEOUS PROVISIONS

         17.1 TAX WITHHOLDING. The Corporation shall have the right to require
recipients or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan, including Tax
Offset Payments, amounts sufficient to satisfy all withholding tax requirements.
Whenever payments under the Plan are to be made to a recipient in cash, such
payments shall be net of any amounts sufficient to satisfy all Federal, state
and local withholding tax requirements. The Committee may, in its sole
discretion, permit a recipient to satisfy his or her tax withholding obligation
either by (i) surrendering shares of Common Stock owned by the recipient or (ii)
having the Corporation withhold from shares of Common Stock otherwise
<PAGE>   17
deliverable to the employee. Shares surrendered or withheld shall be valued at
their Market Price as of the date on which income is required to be recognized
for income tax purposes.

     17.2 Compliance With Section 16(b). In the case of recipients of awards
under the Plan who are or may be subject to Section 16 of the Act, it is the
intent of the Corporation that the Plan and any award granted hereunder satisfy
and be interpreted in a manner that satisfies the applicable requirements of
Rule 16b-3, so that such persons will be entitled to the benefits of Rule 16b-3
or other exemptive rules under Section 16 of the Act and will not be subjected
to liability thereunder. If any provision of the Plan or any award would
otherwise conflict with the intent expressed herein, that provision, to the
extent possible, shall be interpreted and deemed amended so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provision shall be deemed void as applicable to recipients who are
or may be subject to Section 16 of the Act.

     17.3 Successors. The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, at its discretion prior to the consummation of the
transaction and subject to Article 15 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.

     17.4 General Creditor Status. Recipients of awards under the Plan shall
have no right, title, or interest whatsoever in or to any investments which the
Corporation may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation and any recipient of an award under the
Plan or any beneficiary or legal representative of such a recipient. To the
extent that any person acquires a right to receive payments from the Corporation
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Corporation. All payments to be made hereunder shall be
paid from the general funds of the Corporation and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan.

     17.5 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 16 hereof, nor the grant of any
award, shall confer upon any person any right to continue in the employ of or be
retained in any capacity by the Corporation or a subsidiary or to be entitled to
any remuneration or benefits not set forth in the Plan or such written agreement
or interfere with or limit the right of the Corporation or a subsidiary to
modify the terms of or terminate at any time such person's employment or other
arrangement for the provision of services to the Corporation.

     17.6 Notices. Notices required or permitted to be made under the Plan shall
be sufficiently made if personally delivered to a recipient of an award under
the Plan or sent by

<PAGE>   18
regular mail addressed (a) to the recipient at the recipient's address as set
forth in the books and records of the Corporation or its subsidiaries, or (b) to
the Corporation or the Committee at the principal office of the Corporation
clearly marked "Attention: Stock Option Committee."

        17.7 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

        17.8 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Connecticut.

<PAGE>   19
                   AMENDMENTS TO THE BDS BUSINESS CENTER, INC.
                  STOCK OPTION AND PERFORMANCE INCENTIVE PLAN

     The BDS Business Center, Inc. Stock Option and Performance Incentive Plan
is hereby amended effective December 1, 1998 as follows:

1.   SECTION 1.2 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
     SECTION 1.2 IS SUBSTITUTED THEREFORE:

     "1.2 Purpose. The purpose of the plan is to encourage and enable selected
     employees, officers, directors and independent contractors (subject to such
     requirements as may be prescribed by the Board of Directors or Committee)
     of the Corporation and its subsidiaries to acquire a proprietary interest
     in the Corporation through the ownership of the Corporation's common stock,
     without par value ("Common Stock"), and other rights with respect to the
     Common Stock. Such ownership will provide such persons with a more direct
     stake in the future welfare of the Corporation and encourage them to exert
     their best efforts for the Corporation and its subsidiaries. It is also
     expected that the Plan will encourage qualified persons to seek and accept
     employment with or provide services to the Corporation and its
     subsidiaries."

2.   SECTION 2.2 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
     SECTION 2.2 IS SUBSTITUTED THEREFORE:

     "2.2 Maximum Shares Available. The maximum aggregate number of shares of
     Common Stock available for award under the Plan is 1,250,000 subject to
     adjustment pursuant to Article 14 hereof. In addition, Tax Offset Payments
     which may be awarded under the Plan will not exceed the number of shares
     available for the issuance under the Plan. Shares of Common Stock issued
     pursuant to the Plan may be either authorized but unissued shares or issued
     shares reacquired by the Corporation. In the event that prior to the end of
     the period during which Options may be granted under the Plan, any Option
     or any Nontandem Stock Appreciation Rights under the Plan expires
     unexercised or is terminated surrendered or cancelled (other than in
     connection with the exercise of Stock Appreciation Rights) without being
     exercised in whole or in part for any reason, or any Restricted Shares,
     Performance Shares or Performance Units are forfeited, or if such awards
     are settled in cash in lieu of share of Common Stock, then such shares or
     units shall be available for subsequent awards under the Plan, upon such
     terms as the Board or the Committee may determine."

3.   SECTION 3.1 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
     SECTION 3.1 IS SUBSTITUTED THEREFORE:

     "3.1 Committee. Awards shall be determined, and the Plan may be
     administered either by the Board, or by the Committee as appointed from
     time to time by the Board, which Committee shall consist of no less than
     two (2) members of the Board. Any references hereafter to the Committee
     shall apply to the Board if no Committee has been appointed by the Board.

<PAGE>   20
4.   SECTION 5.3 OF THE PLAN IS DELETED IN ITS ENTIRETY AND THE FOLLOWING NEW
     SECTION 5.3 IS SUBSTITUTED THEREFORE:

     "5.3 OPTION PRICE. The purchase price per share under each incentive Stock
     Option shall be the Market Price (as hereinafter defined) of the Common
     Stock on the date the Incentive Stock Option is granted. The purchase
     price per share under each Non-qualified Stock Option shall be specified by
     the Committee. In no case, however, shall the purchase price per share of
     either an Incentive Stock Option or Non-qualified Stock Option be less than
     ($.01). Notwithstanding the foregoing, to the extent required by the Code,
     the purchase price per share under each Non-qualified Stock Option granted
     to an employee who is treated as a "covered employee" (as defined in
     Section 162(m)(3) of the Code) on the date such Non-Qualified Option is
     exercised shall not be less than 100% of the Market Price of the Common
     Stock on the date of the grant. In the case of an Incentive Stock Option
     granted to an employee owning (actually or constructively under Section
     424(d) of the Code), more than 10% of the total combined voting power of
     all classes of stock of the Corporation or of a subsidiary (a "10%
     Stockholder"), the option price shall not be less than 110% of the Market
     Price of the Common Stock on the date of grant.

     The "Market Price" of the Common Stock on any day shall be determined as
     follows: (i) if the Common Stock is listed on a national securities
     exchange or quoted through the NASDAQ National Market System, the Market
     Price on any day shall be the average of the high and the low reported
     Consolidated Trading sales prices, or if no such sale is made on such day,
     the average of the closing bid and the asked prices reported on the
     Consolidated Trading listing for such day; (ii) if the Common Stock is
     quoted on the NASDAQ inter-dealer quotation system, the Market Price on any
     day shall be the of the representative bid and asked prices at the close of
     the business for such day; (iii) if the Common Stock is not listed on a
     national stock exchange or quoted on NASDAQ, the Market Price on any day
     shall be the average of the high bid and low asked prices reported by the
     National Quotation Bureau, ("NQB") Inc. for such day; or (iv) if the Common
     Stock is not reported on by the NQB, the fair market value thereof on such
     date as determined in good faith by the Corporation's Board of Directors.
     In no event shall the Market Price of a share of Common Stock subject to an
     Incentive Stock Option be less than the fair market value as determined for
     the purposes of Section 422(b)(4) of the Code.

     The Option price so determined shall also be applicable in connection with
     the exercise of any Tandem Stock Appreciation Rights granted with respect
     to such option."

                                      -2-

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