IONICS INC
EXHIBIT 10.5 2003 NON-EMP.
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<TYPE>EX-10
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<FILENAME>exhibit10-5.htm
<DESCRIPTION>EXHIBIT 10.5 2003 NON-EMP.
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Exhibit 10.5 </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>IONICS, INCORPORATED </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>2003 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN </FONT></H1>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Purpose. </I>This Non-Qualified Stock Option Plan, to be known as the 2003
          Non-Employee Directors Stock Option Plan (hereinafter, the &#147;Plan&#148;) is
          intended to promote the interests of IONICS, INCORPORATED (hereinafter, the
          &#147;Company&#148;) by providing an inducement to obtain and retain the
          services of qualified persons who are not employees or officers of the Company
          or of any entity whose controlling stock or other ownership interest is owned
          directly or indirectly by the Company (each such entity, a
          &#147;Subsidiary&#148;)to serve as members of the Board of Directors of the
          Company (the &#147;Board&#148;). </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Available Shares. </I>The total number of shares of Common Stock, par value
          $1.00 per share, of the Company (the &#147;Common Stock&#148;) for which options
          may be granted under the Plan (hereinafter called &#147;Options&#148; and each
          singly an &#147;Option&#148;) shall not exceed 200,000 shares, subject to
          adjustment in accordance with Section 10 of the Plan. Shares issued under the
          Plan may consist in whole or in part of authorized but unissued shares or
          treasury shares. If any Options granted under the Plan are surrendered before
          exercise or lapse without exercise, in whole or in part, the shares reserved
          therefor shall again be available for the grant of Options under the Plan. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Administration. </I>The Plan shall be administered by the Board or, to the
          extent permitted by applicable law, by a committee appointed by the Board (the
          Committee&#148;). In the event the Board fails to appoint or refrains from
          appointing a Committee, the Board shall have all power and authority to
          administer the Plan. In such event, the word &#147;Committee&#148; wherever used
          herein shall be deemed to mean the Board. The Committee shall, subject to the
          provisions of the Plan, have the power to construe the Plan, to determine all
          questions hereunder, and to adopt, amend and repeal such rules and regulations
          for the administration of the Plan as it may deem desirable. No member of the
          Board or the Committee shall be liable for any action or determination made in
          good faith with respect to the Plan or any Option granted under it. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Eligibility: Automatic Grant of Options. </I>Only persons who hold office as
          members of the Board and who are not otherwise employees of the Company or of
          any Subsidiary (each a &#147;Non-Employee Director&#148;) may be granted an
          Option under this Plan. The term &#147;Optionee&#148; as used in this Plan means
          a Non-Employee Director to whom an Option has been granted under the Plan.
          Subject to the availability of shares of Common Stock under the Plan, each
          Non-Employee Director who is either elected to the Board at the 2003 annual
          meeting of stockholders of the Company (the &#147;2003 Annual Meeting&#148;)or
          who continues as a member of the Board following the 2003 Annual Meeting, shall
          automatically be granted, without further action by the Committee, an initial
          Option to acquire 4,000 shares of Common Stock under the Plan immediately
          following the 2003 Annual Meeting, and an additional Option to acquire 2,000
          shares of Common Stock immediately upon completion of each next successive year
          in office. Subject to availability of shares of Common Stock under the Plan,
          each Non-Employee Director who is initially elected as a member of the Board
          after the 2003 Annual Meeting, shall be automatically granted, without further
          action by the Committee, an Option to acquire 2,000 shares of Common Stock under
          the Plan immediately after the annual meeting of the stockholders of the Company
          at which he or she is first elected a member of the Board, and an additional
          Option to acquire 2,000 shares of Common Stock immediately upon completion of
          each next successive year in office. A Non-Employee Director who assumes office
          at a time other than at the time of the Company&#146;s annual meeting of
          stockholders shall be treated for purposes of the preceding sentence as having
          been first elected as a member of the Board at the Company&#146;s annual meeting
          of stockholders next following his or her assumption of office. For purposes of
          the Plan, a Non-Employee Director shall be considered to have completed a
          &#147;year in office&#148; on the date of each annual meeting of stockholders of
          the Company while he or she continues in office; provided, however, that if the
          interval between any two such annual meetings is greater than 395 days, a
          Non-Employee Director shall be considered to have completed a &#147;year in
          office&#148; for purposes of the Plan on the 395th day after the preceding
          year&#146;s annual meeting of stockholders of the Company, rather than on the
          date of the second of the two such annual meetings. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Options to be granted under this Section 4 shall be the only Options to be granted at any
time to a Non-Employee Director under the Plan. The number of shares of Common Stock
covered by Options granted under this Section 4 shall be subject to adjustment in
accordance with the provisions of Section 10 of the Plan. Notwithstanding anything to the
contrary set forth herein, if this Plan is not approved by the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by proxy and
voting on such matter at a meeting within twelve (12) months of the date it is approved by
the Board, then the Plan and the Options granted pursuant to this Section 4 shall
terminate and become void, and no further Options shall be granted under the Plan. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Option Price. </I>The purchase price of the Common Stock covered by an Option
          granted pursuant to the Plan shall be 100%of the fair market value of such
          shares on the day the Option is granted. The option price will be subject to
          adjustment in accordance with the provisions of Section 10 of the Plan. For
          purposes of the Plan, if, at the time an option is granted under the Plan, the
          Company&#146;s Common Stock is publicly traded, &#147;fair market value&#148;
          shall mean the last price for the Common Stock on the New York Stock Exchange
          (or any other national securities exchange on which such shares are then traded)
          on the trading day next preceding the date of grant of an Option. If the Common
          Stock is not publicly traded at the time an option is granted under the Plan,
          &#147;fair market value&#148; shall be deemed to be the fair value of the Common
          Stock as determined by the Committee after taking into consideration all factors
          which it deems appropriate. </FONT></P>

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               <TD ALIGN=RIGHT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. </FONT></TD>
               <TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               <I>Period of Option. </I>Unless sooner terminated in accordance with the
               provisions of Section 8 of the Plan, an Option granted hereunder shall expire on
               the date which is ten (10) years after the date of grant of the Option. </FONT></P></TD>
               </TR>
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               <BR>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. Vesting of Shares and
Non-Transferability of Options. </FONT></P>

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               <TD ALIGN=RIGHT WIDTH=3%></TD>
               <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               All Options granted under the Plan shall not be exercisable for a period of six
               (6) months after their date of grant, but shall be immediately exercisable in
               full thereafter. </FONT></P></TD>
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               <TD ALIGN=RIGHT WIDTH=3%></TD>
               <TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               Except as otherwise provided in this Section, no Option granted under the Plan
               shall be sold, assigned, transferred, pledged or otherwise encumbered, either
               voluntarily or by operation of law, other than by will or the laws of descent
               and distribution, and an Option may be exercised during the lifetime of an
               Optionee only by such person. The Committee may, in its discretion, authorize
               all or a portion of the Options granted or to be granted to an Optionee to be on
               terms which permit transfer by such Optionee to (i) the spouse, children or
               grandchildren of the Optionee (&#147;Immediate Family Members&#148;), (ii) a
               trust or trusts for the exclusive benefit of the Optionee or such Immediate
               Family Members, or (iii) a partnership, limited liability company, corporation
               or other entity in which the Optionee or such Immediate Family Members are the
               only partners, members or stockholders, provided that (y) the Option agreement
               pursuant to which such Options are granted must be approved by the Committee,
               and must expressly provide for transferability in a manner consistent with this
               Section, and (z) subsequent transfer of transferred Options shall be prohibited
               other than by will or the laws of descent and distribution. Any transfer of any
               Option in accordance with this Section shall be made in compliance with the
               provisions of the Securities Act of 1933, as amended (the &#147;Securities
               Act&#148;). </FONT></P></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
transfer, any such Options shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer, provided that for purposes of Section 4
hereof, the term &#147;Optionee&#148; shall be deemed to refer to the transferee. The
provisions regarding duration of Options in Sections 6 and 8 and the exercisability of
Options in Section 7 hereof shall continue to apply with respect to the original Optionee
as to all Options granted to such Optionee, whether or not transferred pursuant to this
Section. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Termination of Option Rights.</I> </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Except as otherwise specified in the Option agreement, in the event an Optionee
          ceases to be a member of the Board for any reason, including death or permanent
          disability, any then unexercised portion of Options granted to such Optionee
          shall, to the extent not then exercisable, immediately terminate and become
          void; any portion of an Option which is then exercisable but has not been
          exercised at the time the Optionee so ceases to be a member of the Board may be
          exercised, to the extent it is then exercisable, by the Optionee (or by the
          Optionee&#146;s personal representative, heir or legatee, in the event of death
          or disability) at any time prior to the earlier of the scheduled expiration date
          of the Option or twenty-four (24) months from the date the Optionee ceases to be
          a member of the Board. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          No portion of an Option may be exercised after the removal date or resignation
          date if the Optionee is removed or resigns from the Board for any one of the
          following reasons:(i) disloyalty, gross negligence, dishonesty or breach of
          Fiduciary duty to the Company; or (ii) the commission of an act of embezzlement,
          fraud or deliberate disregard of the rules or policies of the Company which
          results in loss, damage or injury to the Company, whether directly or
          indirectly; or (iii) the unauthorized disclosure of any trade secret or
          confidential information of the Company; or (iv) the commission of an act which
          constitutes unfair competition with the Company or which induces any customer of
          the Company to break a contract with the Company; or (v) the conduct of any
          activity on behalf of any organization or entity which is a competitor of the
          Company (unless such conduct is approved by a majority of the members of the
          Board). </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Exercise of Option. </I>Subject to the terms and conditions of the Plan and
          the Option agreements, an Option granted hereunder shall, to the extent then
          exercisable, be exercisable in whole or in part by giving written notice to the
          Company by mail, facsimile or hand delivery addressed to the Company, at its
          principal executive offices, attention General Counsel, stating the number of
          shares with respect to which the Option is being exercised, accompanied by
          payment in full for such shares. Payment may be (a) in United States dollars in
          cash or by check payable to the order of the Company, (b) in whole or in part in
          shares of the Common Stock of the Company already owned by the person or persons
          exercising the Option (such shares not having been acquired within the prior six
          months by the Optionee pursuant to an Option exercise) valued at fair market
          value determined in accordance with the provisions of Section 5, or (c)
          consistent with applicable law, except as otherwise explicitly provided in the
          applicable Option agreement, and only if the Common Stock is then publicly
          traded, delivery of an irrevocable and unconditional undertaking by a
          creditworthy broker to deliver promptly to the Company sufficient funds to pay
          the exercise price, or delivery by the Optionee to the Company of a copy of
          irrevocable and unconditional instructions to a creditworthy broker to deliver
          promptly to the Company cash or a check sufficient to pay the exercise price.
          There shall be no such exercise at any one time as to fewer than one hundred
          (100) shares or all of the remaining shares then purchasable by the person or
          persons exercising the Option if fewer than one hundred (100) shares. The
          Company&#146;s transfer agent shall, on behalf of the Company, prepare a
          certificate or certificates representing such shares acquired pursuant to
          exercise of the Option, shall register the Optionee as the owner of such shares
          on the books of the Company and shall cause the fully executed certificate(s)
          representing such shares to be delivered to the Optionee as soon as practicable
          after payment of the Option price in full. The holder of an Option shall not
          have any rights of a stockholder with respect to the shares covered by the
          Option, except to the extent that one or more certificates for such shares shall
          be delivered to him or her upon the due exercise of the Option. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;10.<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Adjustments Upon Changes in Capitalization and Other Events. </I>Upon the
          occurrence of any of the following events, an Optionee&#146;s rights with
          respect to Options granted to him or her hereunder shall be adjusted as
          hereinafter provided: </FONT></P>


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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Stock Dividends and Stock Splits. </I>If the shares of Common Stock shall be
          subdivided or combined into a greater or smaller number of shares or if the
          Company shall issue any shares of Common Stock as a stock dividend on its
          outstanding Common Stock, the number of shares of Common Stock deliverable upon
          the exercise of Options shall be appropriately increased or decreased
          proportionately, and appropriate adjustments shall be made in the purchase price
          per share to reflect such subdivision, combination or stock dividend. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Recapitalization Adjustments. </I>Immediately upon the consummation of an
          Acquisition (as defined herein), all outstanding Options under the Plan shall
          immediately become fully exercisable and shall remain the obligation of the
          Company or be assumed by the surviving or acquiring entity, and there shall
          automatically be substituted for the shares of Common Stock subject to the
          Options, the consideration payable with respect to the outstanding shares of
          Common Stock in connection with the Acquisition. In the event of a
          reorganization, recapitalization, merger, consolidation, or any other change in
          the corporate structure or shares of the Company, adjustments in the number and
          kind of shares authorized by the Plan and in the number and kind of shares
          covered by, and in the Option price of outstanding Options under the Plan
          necessary to maintain the proportionate interest of the Optionee and preserve,
          without exceeding, the value of such Option, shall be made. For purposes of this
          Section 10, an &#147;Acquisition&#148; shall mean: (x)any merger, consolidation
          or purchase of outstanding capital stock of the Company, or other form of
          business combination in which the Company is the target of such combination or
          after which the voting securities of the Company outstanding immediately prior
          thereto represent (either by remaining outstanding or by being converted into
          voting securities of the surviving or acquiring entity) less than 50%of the
          combined voting power of the voting securities of the Company or such surviving
          or acquiring entity outstanding immediately after such event (other than as a
          result of a financing transaction); or (y)any sale of all or substantially all
          of the capital stock or assets of the Company in a business combination (other
          than in a spin-off or similar transaction);or (z) any other acquisition of the
          business of the Company, as determined by the Committee. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Issuance of Securities. </I>Except as expressly provided herein, no issuance
          by the Company of shares of stock of any class, or securities convertible into
          shares of stock of any class, shall affect, and no adjustment by reason thereof
          shall be made with respect to, the number or price of shares subject to Options.
          No adjustments shall be made for dividends paid in cash or in property other
          than securities of the Company. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Adjustments. </I>Upon the happening of any of the foregoing events, the class
          and aggregate number of shares set forth in Sections 2 and 4 of the Plan that
          are subject to Options which previously have been or subsequently may be granted
          under the Plan shall also be appropriately adjusted to reflect such events. The
          Committee shall determine the specific adjustments to be made under this Section
          10 and its determination shall be conclusive. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Restrictions on Issuance of Shares. </I>Notwithstanding the provisions of
          Sections 4 and 9 of the Plan, the Company shall have no obligation to deliver
          any certificate or certificates upon exercise of an Option until one of the
          following conditions shall be satisfied: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          The issuance of shares with respect to which the Option has been exercised is at
          the time of the issue of such shares effectively registered under applicable
          Federal and state securities laws as now in force or hereafter amended; or </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Counsel for the Company shall have given an opinion that the issuance of such
          shares is exempt from registration under Federal and state securities laws as
          now in force or hereafter amended; and the Company has complied with all
          applicable laws and regulations with respect thereto, including without
          limitation all regulations required by any stock exchange upon which the
          Company&#146;s outstanding Common Stock is then listed. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Legend on Certificates. </I>The certificates representing shares issued
          pursuant to the exercise of an Option granted hereunder shall carry such
          appropriate legend, and such written instructions shall be given to the
          Company&#146;s transfer agent, as may be deemed necessary or advisable by
          counsel to the Company in order to comply with the requirements of the
          Securities Act or any state securities laws. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Representation of Optionee. </I>If requested by the Company, the Optionee
          shall deliver to the Company written representations and warranties upon
          exercise of the Option that are necessary to show compliance with Federal and
          state securities laws, including representations and warranties to the effect
          that a purchase of shares under the Option is made for investment and not with a
          view to their distribution (as that term is used in the Securities Act). </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Option Agreement. </I>Each Option granted under the provisions of the Plan
          shall be evidenced by an Option Agreement, which shall be duly executed and
          delivered on behalf of the Company and by the Optionee to whom such Option is
          granted. The Option Agreement shall contain such terms, provisions and
          conditions not inconsistent with the Plan as may be determined by the Officer
          executing it. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Termination and Amendment of Plan. </I>Options may no longer be granted under
          the Plan after ten (10) years from the date the Plan is approved by the Board,
          and the Plan shall terminate when all Options granted or to be granted hereunder
          are no longer outstanding. The Board may at any time terminate the Plan or make
          such modification or amendment thereof as it deems advisable; provided, however,
          that the Board may not, without approval by the affirmative vote of the holders
          of a majority of the shares of Common Stock present in person or by proxy and
          voting on such matter at a meeting, (a) increase the maximum number of shares
          for which Options may be granted under the Plan (except by adjustment pursuant
          to Section 10), (b) materially modify the requirements as to eligibility to
          participate in the Plan, (c) materially increase benefits accruing to Option
          holders under the Plan, or (d) re-price outstanding Options under the Plan.
          Termination or any modification or amendment of the Plan shall not, without
          consent of a participant, affect his or her rights under an Option previously
          granted to him or her. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Withholding of Income Taxes. </I>Upon the exercise of an Option, the Company
          may require the Optionee to pay withholding taxes in respect of amounts
          considered to be compensation includible in the Optionee&#146;s gross income if
          required as a matter of law. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Compliance with Regulations. </I>It is the Company&#146;s intent that the
          Plan comply in all respects with Rule 16b-3 of the Securities and Exchange Act
          of 1934 (or any successor or amended provision thereof) and any applicable
          Securities and Exchange Commission interpretations thereof (&#147;Rule
          16b-3&#148;). If any provision of the Plan is deemed not to be in compliance
          with Rule 16b-3, the provision shall be null and void or amended by the Board to
          ensure proper compliance. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Governing Law. </I>The validity and construction of the Plan and the
          instruments evidencing Options shall be governed by the laws of the Commonwealth
          of Massachusetts, without giving effect to the principles of conflicts of law
          thereof. </FONT></P>


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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Adopted by the Board of
Directors on <BR>February 25, 2003 </FONT></P>

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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approved by the
stockholders on<BR> May 7, 2003 </FONT></P>
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