NEOSE TECHNOLOGIES INC
S-8, 1999-10-13
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH
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     As filed with the Securities and Exchange Commission on October 13, 1999
                                                      Registration No. 333-*****
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

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

                            NEOSE TECHNOLOGIES, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


              Delaware                                 13-3549286
  -------------------------------         ------------------------------------
  (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
   Incorporation or Organization)


              102 Witmer Road
           Horsham, Pennsylvania                         19044
  ----------------------------------------             ----------
  (Address of Principal Executive Offices)             (Zip Code)


                            NEOSE TECHNOLOGIES, INC.
                      1995 STOCK OPTION/STOCK ISSUANCE PLAN
                      -------------------------------------
                            (Full Title of the Plan)


                                P. SHERRILL NEFF
                      President and Chief Financial Officer
                                 102 Witmer Road
                           Horsham, Pennsylvania 19044
                     ---------------------------------------
                     (Name and Address of Agent for Service)


                                 (215) 441-5890
          -------------------------------------------------------------
          (Telephone Number, Including Area Code, of Agent for Service)

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

                                   Copies to:

                             DAVID R. KING, ESQUIRE
                           Morgan, Lewis & Bockius LLP
                               1701 Market Street
                             Philadelphia, PA 19103
                                 (215) 963-5000

<TABLE>
<CAPTION>

                                           CALCULATION OF REGISTRATION FEE
======================================================================================================================
                                                        Proposed maximum      Proposed maximum
         Title of securities           Amount to be      offering price           aggregate              Amount of
          to be registered              registered        per share (1)       offering price (1)      registration fee
- ----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>                 <C>                     <C>
Common Stock, $.01 par value....        495,000(2)           $14.38              $7,118,100              $1,978.83
======================================================================================================================
</TABLE>

(1)  Estimated pursuant to Rule 457(h) solely for the purpose of calculating the
     registration fee, based upon the average of the high and low sales prices
     of shares of Common Stock on October 11, 1999 as reported on the Nasdaq
     National Market.

(2)  In addition, pursuant to Rule 416 under the Securities Act of 1933, this
     registration statement also covers an indeterminate amount of interests to
     be offered or sold pursuant to the employee benefit plan described herein.

================================================================================

<PAGE>


This registration statement on Form S-8 relates to the registration of an
additional 495,000 shares of Common Stock, $.01 par value, of the registrant.
The shares are securities of the same class and relating to the same employee
benefit plan, the Neose Technologies, Inc. 1995 Stock Option/Stock Issuance
Plan, as amended and restated, as those shares registered in the registrant's
registration statements on Form S-8, previously filed with the Securities and
Exchange Commission on September 8, 1997 and February 15, 1996. The earlier
registration statements on Form S-8, Registration No. 333-35283 and Form S-8
Registration No. 333-01410, are hereby incorporated by reference.

Experts

The financial statements contained in the registrant's Annual Report on Form
10-K for the year ended December 31, 1998 incorporated by reference in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.


<PAGE>


                                     PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 8. Exhibits.

     The following exhibits are filed as part of this registration statement.

Exhibit
Number                                  Exhibit
- -------                                 -------

  5.1*       Opinion of Morgan, Lewis & Bockius LLP

 23.1*       Consent of Arthur Andersen LLP

 23.2*       Consent of Morgan, Lewis & Bockius LLP (included in its opinion
             filed as Exhibit 5.1 hereto)

 24.1*       Power of Attorney (included on signature page of this registration
             statement)

 99.1 *      Neose Technologies, Inc. 1995 Stock Option/Stock Issuance Plan,
             amended and restated as of June 15, 1999.

- ----------
*    Filed herewith


<PAGE>


                        SIGNATURES AND POWER OF ATTORNEY

     Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Horsham, Pennsylvania, on October 13, 1999.


                                      NEOSE TECHNOLOGIES, INC.

                                      By: /s/ P. Sherrill Neff
                                          -------------------------------------
                                          P. Sherrill Neff
                                          President and Chief Financial Officer

     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

     EACH PERSON IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS STEPHEN A.
ROTH AND P. SHERRILL NEFF AND EACH OF THEM ACTING ALONE, HIS TRUE AND LAWFUL
ATTORNEY-IN- FACT, WITH FULL POWER OF SUBSTITUTION, TO EXECUTE AND CAUSE TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE REQUIREMENTS
OF THE SECURITIES ACT OF 1933, AS AMENDED, ANY AND ALL AMENDMENTS AND
POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT, WITH EXHIBITS THERETO
AND OTHER DOCUMENTS IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND CONFIRMS
ALL THAT SAID ATTORNEY-IN-FACT OR HIS SUBSTITUTE OR SUBSTITUTES MAY DO OR CAUSE
TO BE DONE BY VIRTUE HEREOF.

<TABLE>
<CAPTION>

         Signature                           Capacity                           Date
         ---------                           --------                           ----
<S>                                <C>                                     <C>
/s/ Stephen A. Roth                Chief Executive Officer and             October 13, 1999
- -----------------------------      Chairman of the Board
Stephen A. Roth                    (Principal Executive Officer)


/s/ P. Sherrill Neff               President and Chief Financial           October 13, 1999
- -----------------------------      Officer (Principal Financial
P. Sherrill Neff                   and Accounting Officer) and
                                   Director


/s/ William F. Hamilton            Director                                October 13, 1999
- -----------------------------
William F. Hamilton


/s/ Douglas J. MacMaster, Jr.      Director                                October 13, 1999
- -----------------------------
Douglas J. MacMaster, Jr.


/s/ Mark H. Rachesky               Director                                October 13, 1999
- -----------------------------
Mark H. Rachesky


/s/ Lindsay A. Rosenwald           Director                                October 13, 1999
- -----------------------------
Lindsay A. Rosenwald


/s/ Lowell E. Sears                Director                                October 13, 1999
- -----------------------------
Lowell E. Sears


/s/ Jerry A. Weisbach              Director                                October 13, 1999
- -----------------------------
Jerry A. Weisbach
</TABLE>


<PAGE>


                            NEOSE TECHNOLOGIES, INC.
                       REGISTRATION STATEMENT ON FORM S-8

                                  EXHIBIT INDEX



Exhibit
Number                         Exhibit
- -------                        -------

  5.1*        Opinion of Morgan, Lewis & Bockius LLP

 23.1*        Consent of Arthur Andersen LLP

 23.2*        Consent of Morgan, Lewis & Bockius LLP (included in its opinion
              filed as Exhibit 5.1 hereto)

 24.1*        Power of Attorney (included on signature page of this registration
              statement)

 99.1*        Neose Technologies, Inc. 1995 Stock Option/Stock Issuance Plan,
              amended and restated as of June 15, 1999.

- ----------
*    Filed herewith.





                                                                     EXHIBIT 5.1

Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA  19103-2921



October 13, 1999

Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044

Re:  Neose Technologies, Inc. - Registration Statement on Form S-8 Relating to
     the Neose Technologies, Inc. 1995 Stock Option/Stock Issuance Plan
     -------------------------------------------------------------------------

Ladies and Gentlemen:

As counsel to Neose Technologies, Inc., a Delaware corporation (the "Company"),
we have assisted in the preparation of the subject Registration Statement on
Form S-8 (the "Registration Statement") to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
relating to 495,000 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), issuable under the Neose Technologies, Inc. 1995
Stock Option/Stock Issuance Plan, as amended and restated as of June 15, 1999
(the "Plan").

In rendering the opinion set forth below, we have reviewed the Registration
Statement and the exhibits thereto, including the plan, certain records of the
Company's corporate proceedings as reflected in its minute books and such
statutes, records and other documents as we have deemed relevant. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity with the
original of all documents submitted to us as copies thereof.

Based upon the foregoing, we are of the opinion that the Shares issuable under
the Plan will be, when issued in accordance with the terms of the Plan, validly
issued, fully paid and nonassessable.

The opinion set forth above is limited to the General Corporation Law of the
State of Delaware, as amended.

We hereby consent to the use of this opinion as Exhibit 5.1 to the Registration
Statement. In giving such opinion, we do not thereby admit that we are acting
within the category of persons whose consent is required under Section 7 of the
Act or the rules or regulations of the Securities and Exchange Commission
thereunder.

The opinion expressed herein is solely for your benefit and may be relied upon
only by you.


Very truly yours,

/s/ Morgan, Lewis & Bockius LLP





                                                                    EXHIBIT 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Neose Technologies, Inc.:


As independent public accountants, we hereby consent to the incorporation by
reference in this S-8 Registration Statement of our report dated January 22,
1999 included in Neose Technologies, Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our firm included in this
Registration Statement.


/s/ Arthur Andersen LLP


Philadelphia, Pa.
October 12, 1999




                                                                    EXHIBIT 99.1

                            NEOSE TECHNOLOGIES, INC.
                      1995 STOCK OPTION/STOCK ISSUANCE PLAN
                   (Amended and Restated as of June 15, 1999)


                                   ARTICLE ONE

                                     GENERAL

     I. PURPOSE OF THE PLAN

        A. This 1995 Stock Option/Stock Issuance Plan (the "Plan") is intended
to promote the interests of Neose Technologies, Inc., a Delaware corporation
(the "Corporation"), by providing eligible individuals with the opportunity to
obtain an equity interest, or otherwise increase their equity interest, in the
Corporation. This Plan shall serve as the successor equity incentive program to
the Corporation's 1992 Stock Option Plan and 1991 Stock Option Plan.

        B. The Discretionary Option Grant and Stock Issuance Programs of the
Plan became effective immediately upon the adoption of the Plan by the
Corporation's Board of Directors. Such date is hereby designated the "Plan
Effective Date." The Automatic Option Grant Program became effective upon the
execution and final pricing of the Underwriting Agreement for the initial public
offering of the Corporation's Common Stock. The execution date of such
Underwriting Agreement is hereby designated as the Automatic Option Program
Effective Date. The Director Fee Option Grant Program became effective on March
16, 1996.

     II. DEFINITIONS

        A. For the purposes of this Plan, the following definitions shall be in
effect:

           Board: the Corporation's Board of Directors.

           Change in Control: a change in ownership or control of the
Corporation effected through either of the following transactions:

           -- the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's shareholders which the Board
does not recommend such shareholders to accept, or

           -- a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members ceases,
by reason of one or more contested elections

                                       1

<PAGE>

for Board membership, to be comprised of individuals who either (a) have been
Board members continuously since the beginning of such period or (b) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (a) who were still in
office at the time such election or nomination was approved by the Board.

           Code: the Internal Revenue Code of 1986, as amended.

           Committee: the committee of two (2) or more Board members appointed
by the Board to administer and interpret the Plan. The Committee members shall
be "outside directors" as defined under Code Section 162(m) and related Treasury
Regulations and may be "non-employee" Board members as defined under Rule 16b-3
of the 1934 Act. However, notwithstanding anything in the Plan to the contrary,
the Board must ratify or approve any grants made under the Discretionary Option
Grant Program or Stock Issuance Program to any Board members or officers of the
Corporation. References in the Plan to the Committee shall be deemed to include
the Board, with respect to ratification or approval of grants made to Board
members and officers of the Corporation. In addition, the Board may appoint a
"Non-Section 16(b) Committee" solely for the purpose of making grants under the
Discretionary Option Grant Program to individuals who are not covered by Section
16 of the 1934 Act. Such Committee shall have no powers other than the power to
make grants to such individuals. Any reference to "Committee" herein shall also
encompass the Non-Section 16(b) Committee where appropriate.

           Common Stock: shares of the Corporation's common stock.

           Corporate Transaction: either of the following shareholder-approved
transactions to which the Corporation is a party:

              (i) a merger or consolidation in which securities possessing more
        than fifty percent (50%) of the total combined voting power of the
        Corporation's outstanding securities are transferred to a person or
        persons different from the persons holding those securities immediately
        prior to such transaction, or

              (ii) the sale, transfer or other disposition of all or
        substantially all of the Corporation's assets in complete liquidation or
        dissolution of the Corporation.

           Employee: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.

           Exercise Date: the date on which the Corporation shall have written
notice of the option exercise.

           Fair Market Value: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:

                                       2

<PAGE>

           -- If the Common Stock is at the time traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price per share on
the date in question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor system. If
there is no reported closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

           -- If the Common Stock is at the time listed or admitted to trading
on any national securities exchange, then the Fair Market Value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on such exchange
on the date in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.

           -- If the Common Stock is on the date in question neither listed nor
admitted to trading on any national securities exchange nor traded on the Nasdaq
National Market, then the Fair Market Value of the Common Stock on such date
shall be determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.

           Hostile Take-Over: a change in ownership of the Corporation effected
through the following transaction:

           -- the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's shareholder's which the Board
does not recommend such shareholders to accept, and

           -- the acceptance of more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer from holders other than the
officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.

           Incentive Option: a stock option which satisfies the requirements of
Code Section 422.

           Involuntary Termination: the termination of the Service of any
Optionee or Participant which occurs by reason of:

                                       3

<PAGE>

           -- such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or her
level of responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and any non-discretionary and
objective-standard incentive payment or bonus award) by more than ten percent
(10%) in the aggregate or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the individual's
consent.

           Misconduct: the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such individual of confidential information or trade secrets of the Corporation
or its parent or subsidiary corporations, any failure to perform specific lawful
direction of the Corporation's Board or officers of the Corporation, any refusal
or neglect to perform such individual's duties, any conviction of, or entering
of a plea of nolo contendre to, a crime which constitutes a felony or any other
Misconduct by such individual adversely affecting the business or affairs of the
Corporation. The foregoing definition shall not be deemed to be inclusive of all
the acts or omissions which the Corporation or any parent or subsidiary may
consider as grounds for the dismissal or discharge of any Optionee, Participant
or other individual in the Service of the Corporation.

           1934 Act: the Securities Exchange Act of 1934, as amended.

           Non-Statutory Option: a stock option not intended to meet the
requirements of Code Section 422.

           Optionee: a person to whom an option is granted under the
Discretionary Option Grant Program, the Automatic Option Grant Program or the
Director Fee Option Grant Program.

           Participant: a person who is issued Common Stock under the Stock
Issuance Program.

           Permanent Disability: the inability of an individual to engage in any
substantial gainful activity, by reason of any medically determinable physical
or mental impairment which is expected to result in death or which has lasted or
can be expected to last for a period of not less than twelve (12) months.

           Plan Administrator: either the Board or the Committee, to the extent
the Committee is at the time responsible for the administration of the Plan in
accordance with Section IV of Article One.

           Predecessor Plans: the Corporation's 1992 Stock Option Plan and 1991
Stock Option Plan.

           Service: the performance of services on a periodic basis for the
Corporation (or any

                                       4

<PAGE>

parent or subsidiary corporation) in the capacity of an Employee, a non-employee
member of the board of directors or an independent consultant, except to the
extent otherwise specifically provided in the applicable stock option or stock
issuance agreement.

           Section 12(g) Registration Date: the date on which the initial
registration of the Common Stock under Section 12(g) of the 1934 Act became
effective.

           Take-Over Price: the greater of (a) the Fair Market Value per share
of Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over or (b) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the canceled option is an
Incentive Option, then the Take-Over Price shall not exceed the clause (a) price
per share.

           10% Shareholder: the owner of stock (as determined under Code Section
424(d)) possessing ten (10%) percent or more of the total combined voting power
of all classes of stock of the Corporation or any parent or subsidiary
corporation.

        B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:

              Any corporation (other than the Corporation) in an unbroken chain
        of corporations ending with the Corporation shall be considered to be a
        parent of the Corporation, provided each such corporation in the
        unbroken chain (other than the Corporation) owns, at the time of the
        determination, stock possessing fifty percent (50%) or more of the total
        combined voting power of all classes or stock in one of the other
        corporations in such chain.

              Each corporation (other than the Corporation) in an unbroken chain
        of corporations beginning with the Corporation shall be considered to be
        a subsidiary of the Corporation, provided each such corporation (other
        than the last corporation) in the unbroken chain owns, at the time of
        the determination, stock possessing fifty percent (50%) or more of the
        total combined voting power of all classes of stock in one of the other
        corporations in such chain.

     III. STRUCTURE OF THE PLAN

        A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Stock Issuance
Program specified in Article Three, the Automatic Option Grant Program specified
in Article Four and the Director Fee Option Grant Program specified in Article
Five. Under the Discretionary Option Grant Program, eligible individuals may at
the discretion of the Plan Administrator be granted options to purchase shares
of Common Stock in accordance with the provisions of Article Two at a price not
less than eighty-five percent (85%) of the Fair Market Value of such shares on
the grant date. Under the Stock Issuance

                                       5

<PAGE>

Program, eligible individuals may be issued shares of Common Stock directly,
either through the immediate purchase of the shares (at Fair Market Value or at
discounts of up to 15%) or as a bonus tied to the individual's performance of
services or the Corporation's attainment of prescribed milestones. Under the
Automatic Option Grant Program, each individual serving as a non-employee Board
member on the Automatic Option Grant Program Effective Date and each individual
who first joins the Board as a non-employee director at any time after such
Effective Date shall at periodic intervals receive option grants to purchase
shares of Common Stock in accordance with the provisions of Article Four, with
the first such grants to be made on such Effective Date. Under the Director Fee
Option Grant Program, each non-employee Board member may elect to apply all or a
portion of his or her annual retainer fee otherwise payable in cash to a special
below market option grant.

        B. Unless the context clearly indicates otherwise, the provisions of
Articles One and Six shall apply to all equity programs under the Plan and shall
accordingly govern the interests of all individuals under the Plan.

     IV. ADMINISTRATION OF THE PLAN

        A. The Discretionary Option Grant and Stock Issuance Programs shall be
administered solely and exclusively by the Committee, subject to such conditions
and limitations as the Board may decide, to the extent permissible under
applicable securities and tax laws requirements.

        B. Members of the Committee shall serve for such period of time as the
Board may determine and shall be subject to removal by the Board at any time.

        C. The Plan Administrator shall have full power and authority (subject
to the express provisions of the Plan) to establish rules and regulations for
the proper administration of the Discretionary Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding option grants or stock
issuances thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Discretionary Option Grant or Stock Issuance Program or any
outstanding option grant or share issuance thereunder.

        D. Administration of the Automatic Option Grant and Director Fee Option
Grant Programs shall be self-executing in accordance with the express terms and
conditions of those programs, and the Plan Administrator shall exercise no
discretionary functions with respect to option grants made pursuant to those
programs.

     V. OPTION GRANTS AND STOCK ISSUANCES

        A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two and the Stock Issuance Program under Article Three
shall be limited to the following:

                                       6

<PAGE>

              (i) officers and other employees of the Corporation (or any parent
        or subsidiary corporation);

              (ii) non-employee members of the Board or the non-employee members
        of the board of directors of any parent or subsidiary corporation; and

              (iii) consultants who provide valuable services to the Corporation
        (or any parent or subsidiary corporation); provided such services are
        not in connection with the offer or sale of securities in a
        capital-raising transaction.

        B. The Plan Administrator shall have full authority to determine, (i)
with respect to the option grants made under the Discretionary Option Grant
Program, which eligible individuals are to receive option grants, the time or
times when such grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding, and (ii) with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued to each Participant, the vesting
schedule (if any) to be applicable to the issued shares, and the consideration
to be paid by the Participant for such shares.

     VI. STOCK SUBJECT TO THE PLAN

        A. Shares of Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
2,270,722* shares, subject to adjustment from time to time in accordance with
the provisions of this Section VI. Such authorized share reserve is comprised of
(i) the number of shares which remained for issuance, as of the Plan Effective
Date, under the Predecessor Plans as last approved by the Corporation's
shareholders, including the shares subject to the outstanding options
incorporated into this Plan and any other shares which would have been available
for future option grant under the Predecessor Plans as last approved by the
shareholders, plus (ii) an additional increase of 333,333* shares authorized by
the Board on the Plan Effective Date, (iii) an additional increase of 600,000*
shares authorized by the Board on December 6, 1995, (iv) an additional increase
of 500,000 shares authorized by the Board on March 19, 1997, and (v) an
additional increase of 495,000 shares authorized by the Board on April 16, 1999.
As one or more outstanding options under the Plan are exercised, the number of
shares issued with respect to each such option shall



- ----------
* Reflects the 1-for-3 stock split that was effected immediately prior to the
  consummation of the initial public offering of the Common Stock.

                                        7

<PAGE>


reduce, on a share-for-share basis, the number of shares available for issuance
under this Plan.

        B. In no event shall the aggregate number of shares of Common Stock for
which any one individual participating in the Plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances for
any given year exceed fifty percent (50%) of the total number of shares for
which stock options, separately exercisable stock appreciation rights and direct
stock issuances may be granted over the term of the Plan.

        C. Should one or more outstanding options under this Plan (including
options incorporated from the Predecessor Plans) expire or terminate for any
reason prior to exercise in full (including any option canceled in accordance
with the cancellation-regrant provisions of Section IV of Article Two of the
Plan), then the shares subject to the portion of each option not so exercised
shall be available for subsequent issuance under the Plan. Shares subject to any
stock appreciation rights exercised under the Plan and all share issuances under
the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an outstanding option under the Plan or the vesting of a direct
share issuance made under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the share issuance,
and not by the net number of shares of Common Stock actually issued to the
holder of such option or share issuance.

        D. Should any change be made to the Common Stock issuable under the Plan
by reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum amount and/or class of
securities for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances for any given year under the Plan, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made per
eligible non-employee Board member under the Automatic Option Grant Program,
(iv) the number and/or class of securities and price per share in effect under
each option outstanding under the Discretionary Option Grant, Automatic Option
Grant or Director Fee Option Grant Program and (v) the number and/or class of
securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plans. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

                                       8

<PAGE>

                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

     I. TERMS AND CONDITIONS OF OPTIONS

        Options granted pursuant to the Discretionary Option Grant Program shall
be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.

        A. Exercise Price.

           1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:

              (i) The exercise price per share of Common Stock subject to an
        Incentive Option shall in no event be less than one hundred percent
        (100%) of the Fair Market Value of such Common Stock on the grant date.

              (ii) The exercise price per share of Common Stock subject to a
        Non-Statutory Option shall in no event be less than eighty-five percent
        (85%) of the Fair Market Value of such Common Stock on the grant date.

              (iii) If any individual to whom an Incentive Option is granted is
        a 10% Shareholder, then the exercise price per share shall not be less
        than one hundred ten percent (110%) of the Fair Market Value per share
        of Common Stock on the grant date.

           2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Six, be
payable in one or more of the forms specified below:

              (i) cash or check made payable to the Corporation,

              (ii) in shares of Common Stock held by the Optionee for the
        requisite period necessary to avoid a charge to the Corporation's
        earnings for financial reporting purposes and valued at Fair Market
        Value on the Exercise Date, or

              (iii) to the extent the option is exercised for vested shares,
        through

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        a special sale and remittance procedure pursuant to which the Optionee
        shall concurrently provide irrevocable written instructions (a) to a
        Corporation-designated brokerage firm to effect the immediate sale of
        the purchased shares and remit to the Corporation, out of the sale
        proceeds available on the settlement date, sufficient funds to cover the
        aggregate exercise price payable for the purchased shares plus all
        applicable Federal, state and local income and employment taxes required
        to be withheld by the Corporation by reason of such purchase and (b) to
        the Corporation to deliver the certificates for the purchased shares
        directly to such brokerage firm in order to complete the sale
        transaction.

           3. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

        B. Term and Exercise of Options. Each option granted under this Plan
shall be exercisable at such time or times and during such period as is
determined by the Plan Administrator and set forth in the instrument evidencing
the grant. No such option, however, shall have a maximum term in excess of ten
(10) years measured from the grant date.

           1. During the lifetime of the Optionee, the option, together with any
related stock appreciation right, shall be exercisable only by the Optionee and
shall not be assignable or transferable by the Optionee, except for a transfer
of the option by will or by the laws of descent and distribution following the
Optionee's death or, with respect to options other than Incentive Options, if
permitted in any specific case by the Plan Administrator, pursuant to a domestic
relations order (as defined under the Code or Treasury Regulations).

           2. Notwithstanding the foregoing, the Plan Administrator may provide
that an Optionee may transfer Non-Statutory Options to family members or other
persons or entities according to such terms as the Plan Administrator may
determine; provided that the Optionee receives no consideration for the transfer
of an option and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.

        C. Termination of Service.

           1. Except to the extent otherwise provided pursuant to subsection C.2
below, the following provisions shall govern the exercise period applicable to
any options held by the Optionee at the time of cessation of Service or death:

              (i) Should the Optionee cease to remain in Service for any reason
        other than death, Permanent Disability or Misconduct, then the period
        during which each outstanding option held by such Optionee is to remain
        exercisable shall be limited to the three (3)-month period following the
        date of such cessation of Service.

              (ii) Should the Optionee's Service terminate by reason of
        Permanent Disability, then the period during which each outstanding
        option held by the Optionee is to

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        remain exercisable shall be limited to the twelve (12)-month period
        following the date of such cessation of Service.

              (iii) Should the Optionee die while holding one or more
        outstanding options, then the period during which each such option is to
        remain exercisable shall be limited to the twelve (12)-month period
        following the date of the Optionee's death. During such limited period,
        the option may be exercised by the personal representative of the
        Optionee's estate or by the person or persons to whom the option is
        transferred pursuant to the Optionee's will or in accordance with the
        laws of descent and distribution.

              (iv) Should the Optionee's Service be terminated for Misconduct,
        then all outstanding options held by the Optionee shall terminate
        immediately and cease to be outstanding.

              (v) Under no circumstances, however, shall any such option be
        exercisable after the specified expiration date of the option term.

              (vi) During the applicable post-Service exercise period, the
        option may not be exercised in the aggregate for more than the number of
        vested shares for which the option is exercisable on the date of the
        Optionee's cessation of Service. Upon the expiration of the applicable
        exercise period or (if earlier) upon the expiration of the option term,
        the option shall terminate and cease to be exercisable for any vested
        shares for which the option has not been exercised. However, the option
        shall, immediately upon the Optionee's cessation of Service, terminate
        and cease to be outstanding with respect to any option shares for which
        the option is not at that time exercisable or in which the Optionee is
        not otherwise at that time vested.

           2. The Plan Administrator shall have complete discretion, exercisable
        either at the time the option is granted or at any time while the option
        remains outstanding,

              -- to extend the period of time for which the option is to remain
        exercisable following the Optionee's cessation of Service or death from
        the limited period in effect under subsection C.1 of this Section I of
        Article Two to such greater period of time as the Plan Administrator
        shall deem appropriate; provided that in no event shall such option be
        exercisable after the specified expiration date of the option term;
        and/or

              -- to permit one or more options held by the Optionee under this
        Article Two to be exercised, during the limited post-Service exercise
        period applicable under this paragraph C, not only with respect to the
        number of vested shares of Common Stock for which each such option is
        exercisable at the time of the Optionee's cessation of Service but also
        with respect to one or more subsequent installments for which the option
        would otherwise have become exercisable had such cessation of Service
        not

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        occurred.

        D. Shareholder Rights. An Optionee shall have no shareholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.

        E. Unvested Shares. The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under the Plan. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the agreement evidencing
such repurchase right. All outstanding repurchase rights under the Plan shall
terminate automatically upon the occurrence of any Corporate Transaction, except
to the extent the repurchase rights are expressly assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.

     II. INCENTIVE OPTIONS

        Incentive Options may only be granted to individuals who are Employees,
and the terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Except as modified by the provisions
of this Section II, all the provisions of Articles One, Two and Six of the Plan
shall be applicable to all Incentive Options granted hereunder. Any Options
specifically designated as Non-Statutory shall not be subject to the terms and
conditions of this Section II.

        A. Dollar Limitation. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of the Common Stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted. Should the number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then that option
may nevertheless be exercised in that calendar year for the excess number of
shares as a Non-Statutory Option under the Federal tax laws.

        B. 10% Shareholder. If any individual to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the grant

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date.

     III. CORPORATE TRANSACTION/CHANGE IN CONTROL

        A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for such Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares as fully-vested shares.
However, an outstanding option under this Article Two shall not so accelerate if
and to the extent: (i) such option is, in connection with such Corporate
Transaction, either to be assumed by the successor corporation or parent thereof
or to be replaced with a comparable option to purchase shares of the capital
stock of the successor corporation or parent thereof, (ii) such option is to be
replaced with a cash incentive program of the successor corporation which
preserves the option spread existing at the time of such Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option, (iii) such option is to be replaced by another
incentive program which the Plan Administrator determines is reasonably
equivalent in value to the program contemplated by either clause (i) or (ii)
above, or (iv) the acceleration of such option is subject to other limitations
imposed by the Plan Administrator at the time of the option grant. However, upon
an Optionee's cessation of Service by reason of an Involuntary Termination
(other than for Misconduct) within eighteen (18) months after a Corporate
Transaction in which his or her outstanding options are assumed or replaced
pursuant to clause (i), (ii) or (iii) above, each such option under clause (i)
shall automatically accelerate and become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares as fully-vested shares,
the cash incentive program under clause (ii) shall become fully vested and the
benefits under a clause (iii) replacement program shall become fully vested. The
option as so accelerated shall remain exercisable until the earlier of (i) the
expiration of the option term or (ii) the expiration of a ninety (90)-day period
measured from the date of such Involuntary Termination. The determination of
option comparability under clause (i) or program comparability under clause
(iii) above shall be made by the Plan Administrator, and its determination shall
be final, binding and conclusive.

        B. Immediately following the consummation of a Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.

        C. Each outstanding option under this Article Two that is assumed in
connection with a Corporate Transaction shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would have been issued to the option holder in
consummation of such Corporate Transaction had such person exercised the option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share, provided the aggregate
exercise price payable for such securities shall remain the same. In addition,
the class and number of securities available for issuance

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<PAGE>

under the Plan on both an aggregate and participant basis following the
consummation of such Corporate Transaction shall be appropriately adjusted.

        D. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control. The Plan Administrator shall also
have full power and authority to condition any such option acceleration (and the
termination of any outstanding repurchase rights) upon the Optionee's cessation
of Service by reason of an Involuntary Termination (other than for Misconduct)
within a specified period following such Change in Control.

        E. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term or the surrender of such option in accordance with Section V of this
Article Two.

        F. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.

        G. The portion of any Incentive Option accelerated under this Section
III in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an incentive stock option under the Federal tax laws only to the
extent the dollar limitation of Section II of this Article Two is not exceeded.
To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a non-statutory option under the Federal tax
laws.

     IV. CANCELLATION AND REGRANT OF OPTIONS

        The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Optionees, the
cancellation of any, or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering the
same or different numbers of shares of Common Stock but with an exercise price
per share not less than (i) one hundred percent (100%) of the Fair Market Value
on the new grant date in the case of a grant of an Incentive Option, (ii) one
hundred ten percent (110%) of such Fair Market Value in the case of an Incentive
Option grant to a 10% Shareholder or (iii) eighty-five percent (85%) of such
Fair Market Value in the case of all other grants.

     V. STOCK APPRECIATION RIGHTS

        A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish,

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<PAGE>

to surrender all or part of an unexercised option under this Article Two in
exchange for a distribution from the Corporation in an amount equal to the
excess of (i) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (ii) the aggregate exercise price
payable for such vested shares.

        B. No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section V may be made in shares of Common Stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate.

        C. If the surrender of an option is rejected by the Plan Administrator,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time prior to the later of (i) five (5)
business days after the receipt of the rejection notice or (ii) the last day on
which the option is otherwise exercisable in accordance with the terms of the
instrument evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the date of the option grant.

        D. One or more officers of the Corporation subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over at a time when the Corporation's outstanding
Common Stock is registered under Section 12(g) of the 1934 Act, each such
officer holding one or more options with such a limited stock appreciation right
in effect for at least six (6) months shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the option is at
the time exercisable for fully vested shares of Common Stock. The officer shall
in return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the vested shares of Common
Stock at the time subject to each surrendered option (or surrendered portion of
such option) over (ii) the aggregate exercise price payable for such vested
shares. Such cash distribution shall be made within five (5) days following the
option surrender date. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option surrender
and cash distribution. Any unsurrendered portion of the option shall continue to
remain outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.

        E. The shares of Common Stock subject to any option surrendered for an
appreciation distribution pursuant to this Section V shall not be available for
subsequent issuance under the Plan.

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                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

     I. TERMS AND CONDITIONS OF STOCK ISSUANCES

        Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Three.


        A. Consideration.

           1. Shares of Common Stock may be issued under the Stock Issuance
Program for one or more of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

              (i) full payment in cash or check made payable to the
        Corporation's order;

              (ii) a promissory note payable to the Corporation's order in one
        or more installments; or

              (iii) past services rendered to the Corporation or any parent or
        subsidiary corporation.

           2. The shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one hundred
percent (100%) of the Fair Market Value of such shares at the time of issuance,
but in no event less than eighty-five percent (85%) of such Fair Market Value.

        B. Vesting Provisions.

           1. Shares of Common Stock issued under the Stock Issuance Program
may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance (as a bonus for past services) or may vest in
one or more installments over the Participant's period of Service or the
Corporation's attainment of performance milestones. The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program, namely:

              (i) the Service period to be completed by the Participant or the
        performance objectives to be achieved by the Corporation,

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<PAGE>

              (ii) the number of installments in which the shares are to vest,

              (iii) the interval or intervals (if any) which are to lapse
        between installments, and

              (iv) the effect which death, Permanent Disability or other event
        designated by the Plan Administrator is to have upon the vesting
        schedule, shall be determined by the Plan Administrator and incorporated
        into the Issuance Agreement executed by the Corporation and the
        Participant at the time such unvested shares are issued.

           2. The Participant shall have full shareholder rights with respect to
any shares of Common Stock issued to him or her under the Plan, whether or not
his or her interest in those shares is vested. Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares. Any new, additional or different shares of stock
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to his or her
unvested shares by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration or by reason of any Corporate Transaction, shall be issued subject
to (i) the same vesting requirements applicable to his or her unvested shares
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

           3. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock under the Stock Issuance Program,
then the Corporation shall have the right to require the Participant to
surrender those shares immediately to the Corporation for cancellation, and the
Participant shall cease to have any further shareholder rights with respect to
the surrendered shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money promissory note), the Corporation
shall repay to the Participant the cash consideration paid for the surrendered
shares and shall cancel the unpaid principal balance of any outstanding
purchase-money note of the Participant attributable to such surrendered shares.

           4. The Plan Administrator may in its discretion elect to waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.


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     II. CORPORATE TRANSACTION/CHANGE IN CONTROL

        A. All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a Corporate
Transaction, except to the extent the Corporation's outstanding repurchase
rights are expressly assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction. However, any assigned repurchase
rights covering the unvested shares held by a Participant under this Article
Three shall immediately terminate should there occur an Involuntary Termination
of that Participant's Service (other than for Misconduct) within eighteen (18)
months after such Corporate Transaction.

        B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the shares are issued under this Article Three or
at any time while those shares remain outstanding, to provide for the automatic
termination of the Corporation's repurchase rights with respect to those shares
should there occur a Change in Control. The Plan Administrator shall also have
full power and authority to condition the termination of those repurchase rights
upon the Participant's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within a specified period following such
Change in Control.

     III. SHARE ESCROW/TRANSFER RESTRICTIONS

        A. Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing such unvested shares. To the extent an escrow
arrangement is utilized, the unvested shares and any securities or other assets
distributed with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such (or the distributed securities or assets) vests.

        B. The Participant shall have no right to transfer any unvested shares
of Common Stock issued to him or her under the Stock Issuance Program. For
purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift or other disposition
of such shares, whether voluntary or involuntary. Upon any such attempted
transfer, the unvested shares shall immediately be canceled in accordance with
substantially the same procedure in effect under Section I.B.3 of this Article
Three, and neither the Participant nor the proposed transferee shall have any
rights with respect to such canceled shares. However, the Participant shall have
the right to make a gift of unvested shares acquired under the Stock Issuance
Program to his or her spouse or issue, including adopted children, or to a trust
established for such spouse or issue, provided the transferee of such shares
delivers to the Corporation a written agreement to be bound by all the
provisions of the Stock Issuance Program and the Issuance Agreement applicable
to the gifted shares.

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                                  ARTICLE FOUR

                         AUTOMATIC OPTION GRANT PROGRAM

     I. ELIGIBILITY

        The individuals eligible to receive automatic option grants pursuant to
the provisions of this Article Four program shall be limited to (i) those
individuals who are serving as non-employee Board members on the Automatic
Option Grant Program Effective Date, (ii) those individuals who are first
elected or appointed as non-employee Board members on or after such Effective
Date, whether through appointment by the Board or election by the Corporation's
shareholders, and (iii) those individuals who are re-elected to serve as
non-employee Board members at one or more Annual Shareholders Meetings held
after the Section 12(g) Registration Date. In no event, however, shall a
non-employee Board member be eligible to receive an automatic option grant
pursuant to clause (i) or (ii) above if such individual has at any time been in
the prior employ of the Corporation (or any parent or subsidiary corporation),
but such individual shall be eligible to receive one or more automatic option
grants pursuant to clause (iii). Each non-employee Board member eligible to
receive one or more automatic option grants pursuant to the foregoing criteria
shall be designated an "Eligible Director" for purposes of the Plan.

     II. TERMS AND CONDITIONS OF AUTOMATIC OPTION

        A. Grant Dates. Option grants shall be made under this Article Four on
the dates specified below:

           1. Initial Grant. Each Eligible Director who is first elected or
appointed as a non-employee Board member after the Automatic Option Grant
Program Effective Date shall automatically be granted, on the date of such
initial election or appointment (as the case may be), a Non-Statutory Option to
purchase 16,666 shares of Common Stock upon terms and conditions of this Article
Four.

           2. Annual Grant. On the date of each Annual Shareholders Meeting,
beginning with the first Annual Meeting held after the Section 12(g)
Registration Date, each individual who will continue to serve as an Eligible
Director shall automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual Meeting, a
Non-Statutory Option to purchase an additional 10,000 shares of Common Stock
upon the terms and conditions of this Article Four, provided he or she has
served as a non-employee Board member for at least six (6) months prior to the
date of such Annual Meeting.

           3. No Limitation. There shall be no limit on the number of shares for
which any one Eligible Director may be granted stock options under this Article
Four over his or her period of Board service.

        B. Exercise Price. The exercise price per share of Common Stock subject
to each automatic option grant made under this Article Four shall be equal to
one hundred percent (100%) of

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<PAGE>

the Fair Market Value per share of Common Stock, on the automatic grant date.

        C. Payment. The exercise price shall be payable in one of the
alternative forms specified below. To the extent the option is exercised for any
unvested shares, the Optionee must execute and deliver to the Corporation a
stock purchase agreement for those unvested shares which provides the
Corporation with the right to repurchase, at the exercise price paid per share,
any unvested shares held by the Optionee at the time of cessation of Board
service and which precludes the sale, transfer or other disposition of the
purchased shares at any time while those shares remain subject to the
Corporation's repurchase right.

              (i) full payment in cash or check drawn to the Corporation's
        order;

              (ii) full payment in shares of Common Stock held for the requisite
        period necessary to avoid a charge to the Corporation's earnings for
        financial reporting purposes and valued at Fair Market Value on the
        Exercise Date;

              (iii) full payment in a combination of shares of Common Stock held
        for the requisite period necessary to avoid a charge to the
        Corporation's earnings for financial reporting purposes and valued at
        Fair Market Value on the Exercise Date and cash or check drawn to the
        Corporation's order; or

              (iv) to the extent the option is exercised for vested shares, full
        payment through a sale and remittance procedure pursuant to which the
        Optionee shall provide irrevocable written instructions to (a) a
        Corporation designated brokerage firm to effect the immediate sale of
        the purchased shares and remit to the Corporation, out of the sale
        proceeds available on the settlement date, sufficient funds to cover the
        aggregate exercise price payable for the purchased shares and (b) the
        Corporation to deliver the certificates for the purchased shares
        directly to such brokerage firm in order to complete the sale
        transaction.

                    Except to the extent the sale and remittance procedure
specified above is used for the exercise of the option for vested shares,
payment of the exercise price for the purchased shares must accompany the
exercise notice.

        D. Option Term. Each automatic grant under this Article Four shall have
a maximum term of ten (10) years measured from the automatic grant date.

        E. Exercisability/Vesting. Each automatic grant shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares in accordance with the applicable schedule
below:

              Initial Grant. Each initial 16,666-share automatic grant shall
        vest, and the Corporation's repurchase right shall lapse, in a series of
        four successive and equal annual

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<PAGE>

        installments over the Optionee's period of continued service as a Board
        member, with the first such installment to vest upon Optionee's
        completion of one (1) year of Board service measured from the automatic
        grant date.

              Annual Grant. Each additional 10,000-share automatic grant shall
        vest, and the Corporation's repurchase right shall lapse, upon the
        Optionee's completion of one (1) year of Board service measured from the
        automatic grant date.

              Vesting of the option shares shall be subject to acceleration, as
provided in Section II.G.3 and Section III of this Article Four. In no event
shall any additional option shares vest after the Optionee's cessation of Board
service, except as otherwise provided in Section II.G.3 of this Article Four.

        F. Non-Transferability.

           1. During the lifetime of the Optionee, each automatic option grant,
together with the limited stock appreciation right pertaining to that option,
shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee, except for a transfer of the option by will or by
the laws of descent and distribution following Optionee's death or, with respect
to options other than Incentive Options, if permitted in any specific case by
the Plan Administrator, pursuant to a domestic relations order (as defined under
the Code or Treasury Regulations).

           2. Notwithstanding the foregoing, the Plan Administrator may provide
that an Optionee may transfer Non-Statutory Options to family members or other
persons or entities according to such terms as the Plan Administrator may
determine; provided that the Optionee receives no consideration for the transfer
of an option and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.

        G. Effect of Termination of Board Service.

           1. Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Four, then such individual shall have
a six (6)-month period following the date of such cessation of Board service in
which to exercise each such option for any or all of the shares of Common Stock
in which the Optionee is vested at the time of such cessation of Board service.
However, each such option shall immediately terminate and cease to be
outstanding at the time of such cessation of Board service, with respect to any
shares in which the Optionee is not otherwise at that time vested under that
option.

           2. Should the Optionee die within six (6) months after cessation of
Board service, then any automatic option grant held by the Optionee at the time
of death may subsequently be exercised. for any or all of the shares of Common
Stock in which the Optionee is vested at the time

                                       21

<PAGE>

of his or her cessation of Board service (less any option shares subsequently
purchased by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. The right to exercise such option shall lapse upon the expiration
of a twelve (12)-month period measured from the date of the Optionee's death.

           3. Should the Optionee die or become Permanently Disabled while
serving as a Board member, then the shares of Common Stock at the time subject
to each automatic option grant held by such Optionee under this Article Four
which are vested may be purchased by the Optionee (or the representative of the
Optionee's estate or the person or persons to whom the option is transferred
upon the Optionee's death) pursuant to the option for a twelve (12)-month
period following the date of the Optionee's cessation of Board service.

           4. In no event shall any automatic grant under this Article Four
remain exercisable after the expiration date of the ten (10)-year option term.
Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any option shares in which the Optionee was vested at the time
of his or her cessation of Board service but for which such option was not
subsequently exercised.

        H. Shareholder Rights. The holder of an automatic option grant under
this Article Four shall have none of the rights of a shareholder with respect to
any shares subject to such option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.

        I. Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the form of Automatic Stock Option
Agreement attached as Exhibit A to the Plan.

     III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

        A. In the event of any Corporate Transaction, the shares of Common Stock
at the time subject to each outstanding option under this Article Four but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for all or any portion of
those shares as fully-vested shares. Immediately following the consummation of
the Corporate Transaction, all automatic option grants under this Article Four
shall terminate and cease to be outstanding, except to the extent one or more of
those grants are assumed by the acquiring entity or its parent corporation.

        B. In connection with any Change in Control of the Corporation, the
shares of Common Stock at the time subject to each outstanding option under this
Article Four but not

                                       22

<PAGE>

otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the specified effective date for the Change in
Control, become fully exercisable for all of the shares of Common Stock at the
time subject to that option and may be exercised for all or any portion of those
shares as fully-vested shares. Each such option shall remain so exercisable for
all the option shares following the Change in Control, until the expiration or
sooner termination of the option term.

        C. Should a Hostile Take-Over occur at any time following the Section
12(g) Registration Date, then the Optionee shall have a thirty (30)-day period
in which to surrender to the Corporation each option held by him or her under
this Article Four for a period of at least six (6) months. The optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not those shares are
otherwise at the time fully vested) over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. The
shares of Common Stock subject to each option surrendered in connection with the
Hostile Take-Over shall not be available for subsequent issuance under the Plan.

        D. The automatic option grants outstanding under this Article Four shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.


                                  ARTICLE FIVE

                        DIRECTOR FEE OPTION GRANT PROGRAM

     I. OPTION GRANTS

        Each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board to the acquisition of a special option grant under this Director Fee
Option Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to first day of July in the calendar year immediately
preceding the calendar year for which the annual retainer fee which is the
subject of that election is otherwise payable. Each non-employee Board member
who files such a timely election shall automatically be granted an option under
this Director Fee Option Grant Program on the first trading day in January in
the calendar year for which the annual retainer fee which is the subject of that
election would otherwise be payable.

                                       23

<PAGE>

     II. OPTION TERMS

        Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.

        A. Exercise Price.

           1. The exercise price per share shall be thirty-three and one-third
percent (33-1/3%) of the Fair Market Value per share of Common Stock on the
option grant date.

           2. The exercise price shall become immediately due upon exercise of
the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedures specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

        B. Number of Option Shares: The number of shares of Common Stock subject
to the option shall be determined pursuant to the following formula (rounded
down to the nearest whole number):


                X = A / (B x 66-2/3%), where

                X is the number of option shares,

                A is the portion of the annual retainer fee subject
                to the non-employee Board member's election, and

                B is the Fair Market Value per share of Common Stock
                on the option grant date.

        C. Exercise and Term of Options. The option shall become exercisable in
a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Board service in the calendar
year for which the annual retainer fee which is the subject of his or her
election under this Article Five would otherwise be payable. Each option shall
have a maximum term of ten (10) years measured from the option grant date.

        D. Effect of Termination of Service. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Article Five, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable at
the time of such cessation of Board service, until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the Optionee under this Article Five at the time of
his or her cessation of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.

                                       24

<PAGE>

        E. Death or Permanent Disability. Should the Optionee's service as a
Board member cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Article Five shall immediately become
exercisable for all the shares of Common Stock at the time subject to that
option, and the option may, during the three (3)-year period following such
cessation of Board service, be exercised for any or all of those shares as
fully-vested shares.

        Should the Optionee die while holding one or more options under this
Article Five, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.

     III. CORPORATE TRANSACTION/CHANGE IN CONTROL

        A. In the event of any Corporate Transaction while the Optionee remains
a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the earlier of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Board service.

        B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. The
option shall remain so exercisable until the earlier or (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.

        C. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

                                       25

<PAGE>

     IV. REMAINING TERMS

        The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.


                                   ARTICLE SIX

                                  MISCELLANEOUS

     I. LOANS OR INSTALLMENT PAYMENTS

        A. The Plan Administrator may, in its discretion, assist any Optionee or
Participant (including an Optionee or Participant who is an officer of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant and Automatic Option Grant Programs or the
purchase of one or more shares issued to such Participant under the Stock
Issuance Program, including the satisfaction of any Federal, state and local
income and employment tax obligations arising therefrom, by:

              (i) authorizing the extension of a loan from the Corporation to
        such Optionee or Participant, or

              (ii) permitting the Optionee or Participant to pay the exercise
        price or purchase price for the purchased Common Stock in installments
        over a period of years.

        B. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate at the time such exercise price or purchase price
becomes due and payable. Loans or installment payments may be authorized with or
without security or collateral. In all events, the maximum credit available to
the Optionee or Participant may not exceed the option or purchase price of the
acquired shares (less the par value of such shares) plus any Federal, state and
local income and employment tax liability incurred by the Optionee or
Participant in connection with the acquisition of such shares.

        C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this Section I shall be subject to
forgiveness by the Corporation in whole or in part upon such terms and
conditions as the Plan Administrator may in its discretion deem appropriate.

     II. AMENDMENT OF THE PLAN AND AWARDS

        A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the

                                       26

<PAGE>

time outstanding under the Plan, nor adversely affect the rights of any
Participant with respect to Common Stock issued under the Stock Issuance Program
prior to such action, unless the Optionee or Participant consents to such
amendment. In addition, the Board may not, without the approval of the
Corporation's shareholders, amend the Plan to (i) increase the maximum number of
shares issuable under the Plan or the maximum amount of shares for which any one
individual participating in the Plan may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for any given
year under the Plan, except for permissible adjustments under Article One, (ii)
materially modify the eligibility requirements for Plan participation, or (iii)
otherwise materially increase the benefits accruing to Plan participants.

        B. (i) Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and (ii) shares of Common Stock may be
issued under the Stock Issuance Program, which are in both instances in excess
of the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under the Discretionary Option Grant or the Stock
Issuance Programs are held in escrow until shareholder approval is obtained for
a sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances are
made, then (i) any unexercised excess options shall terminate and cease to be
exercisable and (ii) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.

     III. TAX WITHHOLDING

        A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any stock options granted under Article Two or upon the issuance
of any shares under Article Three shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.

        B. The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III of Article Six and such supplemental rules as
the Plan Administrator may from time to time adopt (including the applicable
safe-harbor provisions of Rule 16b-3 of the Securities and Exchange Commission),
provide any or all holders of Non-Statutory Options or unvested shares under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Federal, state and local income and employment tax liabilities incurred
by such holders in connection with the exercise of their options or the vesting
of their shares (the "Taxes"). Such right may be provided to any such holder in
either or both of the following formats:

              -- The holder of the Non-Statutory Option or unvested shares may
        be provided with the election to have the Corporation withhold, from the
        shares of Common Stock otherwise issuable upon the exercise of such
        Non-Statutory Option or the vesting of such shares, a portion of those
        shares with an aggregate Fair Market Value equal to the percentage of
        the applicable Taxes (not to exceed one hundred percent (100%))
        designated

                                       27

<PAGE>

        by the holder.

              -- The Plan Administrator may, in its discretion, provide the
        holder of the Non-Statutory Option or the unvested shares with the
        election to deliver to the Corporation, at the time the Non-Statutory
        Option is exercised or the shares vest, one or more shares of Common
        Stock previously acquired by such individual (other than in connection
        with the option exercise or share vesting triggering the Taxes) with an
        aggregate Fair Market Value equal to the percentage of the Taxes
        incurred in connection with such option exercise or share vesting (not
        to exceed one hundred percent (100%)) designated by the holder.

     IV. EFFECTIVE DATE AND TERM OF PLAN

        A. The Discretionary Option Grant and Stock Issuance Programs of this
Plan became effective immediately upon adoption of the Plan by the Board on
March 23, 1995 (the "Plan Effective Date"). The Plan was approved by the
Corporation's shareholders on April 12, 1995. On December 9, 1995, the Board
approved an increase of 600,000 shares (which number reflects the 1-for-3
reverse stock split that was effected immediately prior to the consummation of
the initial public offering of the Common Stock) in the aggregate number of
shares issuable under the Plan; such increase was approved by the Corporation's
shareholders on December 19, 1995. The Automatic Option Grant Program of this
Plan became effective on the Automatic Option Grant Program Effective Date. The
Plan was amended by the Board on March 16, 1996 to implement the Director Fee
Option Grant Program, which amendment was approved by the Corporation's
shareholders at the 1996 Annual Stockholders Meeting. On March 19, 1997, the
Board approved an increase of 500,000 shares in the aggregate number of shares
issuable under the Plan, and on April 23, 1997, the Board approved a change in
the aggregate number of shares of Common Stock for which any one individual
participating in the Plan may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances, from a limitation of
250,000 shares over the term of the Plan, to an annual limitation not in excess
of 50% of the total number of shares for which stock options, separately
exercisable stock appreciation rights and direct stock issuances may be granted
over the term of the Plan. Both of such amendments became effective on April 23,
1997, and were approved by the Corporation's shareholders at the 1997 Annual
Stockholders Meeting. On April 16, 1999, the Board approved an increase of
495,000 shares in the aggregate number of shares issuable under the Plan and an
increase in the number of shares issuable to Eligible Directors under the annual
grant provisions of the Automatic Option Grant Program from 3,333 to 10,000
shares, subject to shareholder approval at the 1999 Annual Stockholders Meeting.

        B. Each stock option grant outstanding under the Predecessor Plans
immediately prior to the Plan Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such option
shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Common Stock thereunder.
However, the Plan Administrator shall have

                                       28

<PAGE>

complete discretion to extend, under such circumstances as it may deem
appropriate, one or more provisions of this Plan to any or all of the stock
options which are incorporated into this Plan from the Predecessor Plans but
which do not otherwise contain such provisions.

        C. No further option grants or stock issuances shall be made under the
Predecessor Plans from and after the Plan Effective Date.

        D. The Plan shall terminate upon the earlier of (i) February 28, 2005 or
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or stock appreciation
rights granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
option grants or share issuances.

     V. NO EMPLOYMENT/SERVICE RIGHTS

        Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.

     VI. USE OF PROCEEDS

        Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.

     VII. REGULATORY APPROVALS

        The implementation of the Plan, the granting of any option under the
Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.

     VIII. CHANGE OF CONTROL/CORPORATE TRANSACTION

        Notwithstanding any other provision of the Plan to the contrary, in the
event of a Corporate Transaction or a Change in Control, the Plan Administrator
shall not have the right to take any actions described in the Plan, nor shall
any provisions of the Plan be operative, if such

                                       29

<PAGE>

actions or provisions would make the Corporate Transaction or Change in Control
ineligible for pooling of interests accounting treatment or would make the
Corporate Transaction or Change in Control ineligible for desired tax treatment
if, in the absence of such actions or provisions, the Corporate Transaction or
Change in Control would qualify for such treatment and the Corporation intends
to use such treatment with respect to the Corporate Transaction or Change in
Control.

     IX. MISCELLANEOUS PROVISIONS

        A. The right to acquire Common Stock or other assets under the Plan may
not be assigned, encumbered or otherwise transferred by any Optionee or
Participant.

        B. The provisions of the Plan relating to the exercise of options and
the vesting of shares shall be governed by the laws of the Commonwealth of
Pennsylvania as such laws are applied to contracts entered into and performed in
such Commonwealth.

        C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.


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