<PAGE>
EXHIBIT 4.1
APPLIED PROCESS SOLUTIONS INCORPORATED
AMENDED 1998 STOCK OPTION PLAN
I. PURPOSES AND SCOPE OF PLAN
--------------------------
Under this 1998 Stock Option Plan (the "Plan") of Applied Process Solutions
Incorporated (the "Company"), options shall be granted to employees of the
Company or any of its subsidiaries, consultants and others to purchase shares of
the Company's capital stock. The Plan is designed to enable the Company to
attract and retain the best available personnel, to provide additional incentive
to employees, consultants and others and to promote the success of the Company.
These objectives will be promoted through the granting to employees equity
instruments including (i) incentive stock options ("Incentive Options") which
are intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and (ii) options which are not intended to so qualify
("NQSOs"). Vesting of the options granted under the Plan shall be in accordance
with the criteria established by the Compensation Committee (the "Committee"),
or the Board of Directors of the Company (the "Board of Directors") if there is
no Committee, as provided in Article V, Section I of this Plan.
The options offered pursuant to this Plan are a matter of separate
inducement and are not in lieu of any salary or other compensation for services.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
-----------------------------------
The total number of shares of common stock of the Company reserved and
available for distribution pursuant to options granted hereunder shall not
exceed, in the aggregate, 1,000 shares of the authorized common stock, $1.00 par
value, per share, of the Company (the "Shares"), subject to adjustment described
below.
Shares which may be acquired under the Plan may be either authorized but
unissued Shares or Shares of issued stock held in the Company's treasury, or
both, at the discretion of the Company. Whenever any outstanding option or
portion thereof expires, is canceled, is forfeited or is otherwise terminated
for any reason without having been exercised or payment having been made in
respect of the entire option, the Shares allocable to the expired, canceled,
forfeited or otherwise terminated portion of the option may again be the subject
of options granted hereunder.
In the event of any stock dividend, stock split, combination or exchange of
Shares, recapitalization or other change in the capital structure of the
Company, corporate separation or division (including, but not limited to, split-
up, spin-off or distribution to Company shareholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its assets,
rights offering, merger, consolidation, reorganization or partial or complete
liquidation, or any other corporate transaction or event having an effect
similar to any of the foregoing, the aggregate number of Shares reserved for
issuance under the Plan, the number and option price of Shares subject to
outstanding options and any other characteristics or terms of the options as the
Committee shall deem necessary or appropriate to reflect equitably the effects
of such changes to
<PAGE>
the holders of options, shall be appropriately substituted for new shares or
adjusted, as determined by the Committee in its discretion. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive Option shall
comply with the rules of Section 424(a) of the Code, and (ii) in no event shall
any adjustment be made which would render any Incentive Option granted hereunder
other than an incentive stock option for purposes of Section 422 of the Code
without the consent of the grantee.
III. ADMINISTRATION
--------------
The Committee, or the Board of Directors if there is no Committee, will
have sole and exclusive authority to administer the Plan. The Committee shall
consist of no fewer than two (2) members of the Board of Directors, each of whom
shall be a "Non-Employee Director" within the meaning of Rule 16b-3 or any
successor rule or regulation ("Rule 16b-3") promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Committee shall
administer the Plan so as to comply at all times with Rule 16b-3. A majority of
the members of the Committee shall constitute a quorum, and the act of a
majority of the members of the Committee shall be the act of the Committee. Any
member of the Committee may be removed at any time, either with or without
cause, by resolution adopted by a majority of the Board of Directors, and any
vacancy on the Committee may at any time be filled by resolution adopted by a
majority of the Board of Directors.
Any or all powers and functions of the Committee may at any time and from
time to time be exercised by the Board of Directors, subject to compliance with
Rule 16b-3.
Subject to the express provisions of the Plan, the Board of Directors or
the Committee, as the case may be, shall have authority, in its discretion, to
(1) select employees of the Company, consultants, and others as recipients of
options; (ii) determine the number and type of options to be granted; (iii)
determine the terms and conditions, not inconsistent with the terms hereof, of
any options granted; (iv) adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; (v) interpret the terms and provisions of the Plan and any option
granted and any agreements relating thereto; and (vi) otherwise supervise the
administration of the Plan.
The determination of the Board of Directors or the Committee, as the case
may be, on matters referred to in this Article III shall be conclusive.
The Board of Directors or the Committee, as the case may be, may employ
such legal counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion received from any such
counsel or consultant and any computation received from any such consultant or
agent. Expenses incurred by the Board of Directors or the Committee in the
engagement of such counsel, consultant or agent shall be paid by the Company.
No member or former member of the Committee or of the Board of Directors shall
be liable for any action or determination made in good faith with respect to the
Plan or any option granted hereunder.
2
<PAGE>
The Company shall indemnify each member of the Committee for all costs and
expenses and, to the extent permitted by applicable law, any liability incurred
in connection with defending against, responding to, negotiation for the
settlement of, or otherwise dealing with any claim, cause of action or dispute
of any kind arising in connection with any actions in administering the Plan or
in authorizing or denying authorization to any transaction hereunder.
IV. ELIGIBILITY
-----------
Options may be granted only to employees of the Company and its
subsidiaries, consultants and others who are not members of the Committee;
provided, that no person shall be eligible for any award if the granting of such
award to such person would prevent the satisfaction by the Plan of the general
exemptive conditions of Rule 16b-3. The Plan shall not confer upon any
employee, consultant or other any right with respect to continuation of
employment or services by the Company, nor shall it interfere in any way with
his or her right or the Company's right to terminate his or her employment or
services at any time, with or without cause.
V. STOCK OPTIONS
-------------
1. General. Any options granted under the Plan shall be in such form as
-------
the Committee may from time to time approve and the provisions of the option
grants need not be the same with respect to each optionee. Options granted under
the Plan may be either Incentive Options or NQSOs. The Committee may grant to
any optionee Incentive Options, NQSOs or both types of options.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan, as the Committee deems appropriate.
Each option grant shall be evidenced by an agreement executed on behalf of the
Company by an officer designated by the Committee and accepted by the optionee.
Such agreement shall describe the options and state that such options are
subject to all the terms and provisions of the Plan and shall contain such other
terms and provisions, consistent with the Plan, as the Committee may approve.
2. Exercise Price and Payment. The price per Share under any option
--------------------------
granted hereunder shall be such amount as the Board of Directors or the
Committee, as the case may be, shall determine, provided, however, that such
price shall not be less than one hundred percent (100%) of the fair market value
of the Shares subject to such option, as determined below, at the date the
option is granted (110% in the case of an Incentive Option granted to any person
who, at the time the option is granted, owns stock of the Company or any
subsidiary or parent of the Company possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
subsidiary or parent of the Company (a "10% Shareholder")).
If the Shares are listed on a national securities exchange in the United
States on the date any option is granted, the fair market value per Share shall
be deemed to be the average of the high and low sale price on such national
securities exchange in the United States on the date upon which the option is
granted, but if the Shares are not traded on such date, or such national
3
<PAGE>
securities exchange is not open for business on such date, the fair market value
per Share shall be the average of the high and low sale price determined as of
the closest preceding date on which such exchange shall have been open for
business and the Shares were traded. If the Shares are listed on more than one
national securities exchange in the United States on the date any such option is
granted, the Board of Directors or the Committee, as the case may be, shall
determine which national securities exchange shall be used for the purpose of
determining the fair market value per Share. If the Shares are not listed on a
national securities exchange but are reported on the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq"), the fair market
value per share shall be deemed to be the average of the high bid and low sale
prices on the date upon which the option is granted as reported by Nasdaq or, if
the Shares are not traded on such date or Nasdaq is not open for business on
such date, the fair market value per Share shall be the average of the high and
low sale price determined as of the closest preceding date on which Nasdaq shall
have reported the Shares.
For purposes of this Plan, the determination by the Board of Directors or
the Committee, as the case may be, of the fair market value of a Share shall be
conclusive.
3. Term of Options and Limitations on the Right of Exercise. The term of
--------------------------------------------------------
each option Will be for such period as the Board of Directors or the Committee,
as the case may be, shall determine, provided that, except as otherwise provided
herein, in no event may any option granted hereunder be exercisable more than
ten (10) years from the date of grant of such option (five years in the case of
an Incentive Option granted to a 10% Shareholder). Each option shall become
exercisable in such installments and at such times as may be designated by the
Board of Directors or the Committee, as the case may be, and set forth in the
agreement related to the grant of options. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the option expires.
The Board of Directors or the Committee, as the case may be, shall have the
right to limit, restrict or prohibit, in whole or in part, from time to time,
conditionally or unconditionally, rights to exercise any option granted
hereunder.
To the extent that an option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
4. Exercise of Options. Options granted under the Plan shall be
-------------------
exercised by the optionee as to all or part of the Shares covered thereby by the
giving of written notice of the exercise thereof to the Secretary of the Company
at the principal business office of the Company, specifying the number of Shares
to be purchased, accompanied by payment therefor made to the Company for the
full purchase price of such Shares. The date of actual receipt by the Company of
such notice shall be deemed the date of exercise of the option with respect to
the Shares being purchased.
Upon the exercise of an option granted hereunder, the Company shall cause
the purchased Shares to be issued only when it shall have received the full
purchase price for the Shares in cash; provided, however, that in lieu of cash,
the holder of an option may, to the extent permitted
4
<PAGE>
by applicable law, exercise an option in whole or in part, by delivering to the
Company unrestricted Shares (in proper form for transfer and accompanied by all
requisite stock transfer tax stamps or cash in lieu thereof) owned by such
holder having a fair market value equal to the cash exercise price applicable to
that portion of the option being exercised. The fair market value of the Shares
so delivered shall be determined as of the date immediately preceding the date
on which the option is exercised, or as may be required in order to comply with
or to conform to the requirements of any applicable laws or regulations. For
purposes of this paragraph, the provisions of Section 2 hereof relating to the
fair market value of Shares shall apply in all respects.
Notwithstanding the foregoing, the Company, in its sole discretion, may
establish cashless exercise procedures whereby an option holder, subject to the
requirements of Rule 16b-3, Regulation T, federal income tax laws, and other
federal, state and local tax and securities laws, can exercise an option or a
portion thereof without making a direct payment of the option price to the
Company, including a program whereby option shares would be sold on behalf of
and at the request of an option holder by a designated broker and the exercise
price would be satisfied out of the sale proceeds and delivered to the Company.
If the Company so elects to establish a cashless exercise program, the Company
shall determine, in its sole discretion, and from time to time, such
administrative procedures and policies as it deems appropriate and such
procedures and policies shall be binding on any option holder wishing to utilize
the cashless exercise program.
5. Nontransferability of Options. An option granted hereunder shall not
-----------------------------
be transferable, whether by operation of law or otherwise, other than by will or
the laws of descent and distribution, and any option granted hereunder shall be
exercisable, during the lifetime of the holder, only by such holder.
The option of any person to acquire Shares and all his rights thereunder
shall terminate immediately if the holder: (a) attempts to or does sell, assign,
transfer, pledge, hypothecate or otherwise dispose of the option or any rights
thereunder to any other person except as permitted above; or (b) becomes
insolvent or bankrupt or becomes involved in any manner so that the option or
any rights thereunder becomes subject to being taken from him to satisfy his
debts or liabilities.
6. Termination of Employment. Upon termination of employment of any
-------------------------
option holder, any option previously granted to such option holder, unless
otherwise specified by the Board of Directors or the Committee, as the case may
be, shall, to the extent not theretofore exercised, terminate and become null
and void three (3) months from the date of termination of employment, provided
that:
(a) if the option holder shall die while in the employ of the Company
or any subsidiary of the Company, and at a time when such employee,
consultant or other was entitled to exercise an option as herein provided,
his estate or the legatees or distributees of his estate or of the option,
as the case may be, of such option holder, may, within one (1) year
following the date of death, but not beyond that time and in no event later
than
5
<PAGE>
the expiration date of the option, exercise such option, to the extent not
theretofore exercised, in respect of any or all of such number of Shares
which the option holder was entitled to purchase; and
(b) if the employment of any option holder to whom such option shall
have been granted shall terminate by reason of the option holder's
retirement on or after he reaches the age of 60 years in such manner as
would entitle him to receive full Social Security benefits if he were then
65 years of age, or disability (as described in Section 22(e)(3) of the
Code), and while such employee, consultant or other is entitled to exercise
such option as herein provided, such option holder shall have the right to
purchase under the option the number of Shares, if any, which he was
entitled to purchase at the time of such termination, at any time up to and
including three (3) months after the date of such termination of
employment, but not beyond that time and in no event shall an option be
exercised later than the expiration date of the option.
In no event shall any person be entitled to exercise any option after the
expiration of the period of exercisability of such option as specified therein.
Except as otherwise determined by the Board of Directors or the Committee,
as the case may be, and other than as set forth above, if an option holder
voluntarily terminates his or her employment, or is discharged, any option
granted hereunder shall be canceled and the option holder shall have no further
rights to exercise any such option and all of the option holder's rights
thereunder shall terminate as of the effective date of such termination of
employment.
If an option granted hereunder shall be exercised by the legal
representative of a deceased option holder or former option holder or by a
person who acquired an option granted hereunder by bequest or inheritance or by
reason of the death of any option holder or former option holder, written notice
of such exercise shall be accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such legal representative or
other person to exercise such option.
For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code.
A termination of employment shall not be deemed to occur by reason of (1)
the transfer of an employee from employment by the Company to employment by a
subsidiary of the Company or (ii) the transfer of an employee from employment by
a subsidiary of the Company to employment by the Company or by another
subsidiary of the Company.
7. Maximum Allotment of Incentive Options. If the aggregate fair market
--------------------------------------
value of Shares with respect to which Incentive Options are exercisable for the
first time by an employee, consultant or other during any calendar year (under a
stock option plans of the Company and any parent or any subsidiary of the
Company) exceeds $100,000, any options which otherwise qualify as Incentive
Options, to the extent of the excess, will be treated as NQSOs.
6
<PAGE>
VI. PURCHASE FOR INVESTMENT
-----------------------
Except as hereafter provided, the Company may require the recipient of
Shares pursuant to an option granted hereunder, upon receipt thereof, to execute
and deliver to the Company a written statement, in form satisfactory to the
Company, in which such holder represents and warrants that such holder is
purchasing or acquiring the Shares acquired thereunder for such holder's own
account, for investment only and not with a view to the resale or distribution
thereof, and agrees that any subsequent offer for sale or sale or distribution
of any of such Shares shall be made only pursuant to either (a) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Act"), which Registration Statement has become effective and is current
with regard to the Shares being offered or sold, or (b) a specific exemption
from the registration requirements of the Act, but in claiming such exemption
the holder shall, prior to any offer for sale or sale of such Shares, obtain a
prior favorable written opinion, in form and substance satisfactory to the
Company, from counsel for or approved by the Company, as to the applicability of
such exemption thereto. The foregoing restriction shad] not apply to (1)
issuances by the Company so long as the Shares being issued are registered under
the Act and a prospectus in respect thereof is current or (ii) reofferings of
Shares by affiliates of the Company (as defined in Rule 405 or any successor
rule or regulation promulgated under the Act) if the Shares being reoffered are
registered under the Act and a prospectus in respect thereof is current.
VII. ISSUANCE OF CERTIFICATES, LEGENDS, PAYMENT OF EXPENSES
------------------------------------------------------
The Company may endorse such legend or legends upon the certificates for
Shares issued pursuant to a grant hereunder and may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares as, in its
discretion, it determines to be necessary or appropriate to (1) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Act, (ii) implement the provisions of the Plan and any agreement between the
Company and the optionee with respect to such Shares, or (iii) permit the
Company to determine the occurrence of a disqualifying disposition, as described
in Section 421(b) of the Code, of Shares transferred upon exercise of an
Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares upon exercise of an option, as well as all fees
and expenses necessarily incurred by the Company in connection with such
issuance or transfer, except fees and expenses which may be necessitated by the
filing or amending of a Registration Statement under the Act, which fees and
expenses shall be bome by the recipient of the Shares unless such Registration
Statement has been filed by the Company for its own corporate purposes (and the
Company so states) in which event the recipient of the Shares shall bear only
such fees and expenses as are attributable solely to the inclusion of the Shares
he or she receives in the Registration Statement, provided that the Company
shall have no obligation to include any Shares in any Registration Statement.
All Shares issued as provided herein shall be fully paid and non-assessable
to the extent permitted by law.
7
<PAGE>
VIII. WITHHOLDING TAXES
-----------------
The Company may require an employee, consultant or other exercising an NQSO
or disposing of Shares acquired pursuant to the exercise of an Incentive Option
in a disqualifying disposition (within the meaning of Section 421 (b) of the
Code) to reimburse the Company for any taxes required by any government to be
withheld or otherwise deducted and paid by the Company in respect of the
issuance or disposition of Shares. In lieu thereof, the Company shall have the
right to withhold the amount of such taxes from any other sums due or to become
due from the Company to the employee, consultant or other upon such terms and
conditions as the Board of Directors or the Committee, as the case may be, shall
prescribe. Notwithstanding the foregoing, the Committee may, by the adoption of
rules or otherwise, modify the provisions of this Article VII or impose such
other restrictions or limitations as may be necessary to ensure that the
withholding transactions described above will be exempt transactions under
Section 16(b) of the Exchange Act.
If an optionee makes a disposition, within the meaning of Section 424(c) of
the Code and regulations promulgated thereunder, of any Share or Shares issued
to such optionee pursuant to the exercise of an Incentive Option within the two-
year period commencing on the day after the date of the grant or within the one-
year period commencing on the day after the date of transfer of such Share or
Shares to the optionee pursuant to such exercise, the optionee shall, within ten
(10) days of such disposition, notify the Company thereof, by delivery of
written notice to the Company at its principal executive office.
IX. LISTING OF SHARES AND RELATED MATTERS
-------------------------------------
If at any time the Board of Directors or the Committee, as the case may be,
shall determine in its discretion that the listing, registration or
qualification of the Shares covered by the Plan upon any national securities
exchange or under any state or federal law or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the sale or purchase of Shares under the Plan, no Shares shall
be issued unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Board of Directors or the Committee, as
the case may be.
X. AMENDMENT OF THE PLAN
---------------------
The Board of Directors or the Committee, as the case may be, may, from time
to time, amend the Plan, provided that no amendment shall be made, without the
approval of the stockholders of the Company, that will (i) increase the total
number of Shares which may be issued under the Plan (other than an increase
resulting from an adjustment provided for in Article II), (ii) modify the
provisions of the Plan relating to eligibility, (iii) materially increase the
benefits accruing to participants under the Plan, or (iv) extend the maximum
period of the Plan. The Board of Directors or the Committee, as the case may
be, shall be authorized to amend the Plan and the awards granted hereunder to
permit the Incentive Options granted hereunder to qualify as incentive stock
options within the meaning of Section 422-of the Code. The rights and
obligations under any option or award granted before amendment of the Plan or
any unexercised
8
<PAGE>
portion of such option shall not be adversely affected by amendment of the Plan
or the option without the consent of the holder of the option.
XI. TERMINATION OR SUSPENSION OF THE PLAN
-------------------------------------
The Board of Directors or the Committee, as the case may be, may at any
time suspend or terminate the Plan. The Plan, unless sooner terminated by
action of the Board of Directors or the Committee, as the case may be, shall
terminate at the close of business on the tenth anniversary of the grant of an
option. An option may not be granted while the Plan is suspended or after it is
terminated. Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the consent of the person to whom the option was granted. The
power of the Board of Directors or the Committee, as the case may be, to
construe and administer any options granted prior to the termination or
suspension of the Plan under Article III nevertheless shall continue after such
termination or during such suspension.
XII. AMENDED AND RESTATED STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------------------------
Immediately upon the initial exercise of options by an option holder and
prior to the issuance by the Corporation of the option shares in respect hereof,
such option holder shall become a party to the Amended and Restated
Stockholders' and Registration Rights Agreement.
XIII. GOVERNING LAW
-------------
The Plan, such options as may be granted thereunder and all related matters
shall be by, and construed and enforced in accordance with, the laws of the
State of Delaware.
XIV. PARTIAL INVALIDITY
------------------
The invalidity or illegality of any provision herein shall not be deemed to
affect the validity of any other provision.
XV. EFFECTIVE DATE
--------------
The Plan shall become effective upon the adoption by the Board of
Directors, subject only to the approval by the affirmative vote of the holders
of a majority of the securities of the Company present, or represented, and
entitled to vote at a meeting of stockholders duly held. Grants made prior to
such stockholder approval shall be contingent on such approval.
9
