<PAGE>


                                                                    Exhibit 10.4
1995 Stock Option Plan, As Amended


(Adopted by the Board of Directors on November 29, 1994, as amended through
December 4, 2002)


                                     PART I
                     DEFINITIONS AND ADMINISTRATIVE MATTERS
                     --------------------------------------

SECTION 1. Purpose; Definitions.
           --------------------

         The purpose of the Neoware Systems, Inc.1995 Stock Option Plan (the
"Plan") is to enable employees, officers, directors and independent contractors
of Neoware Systems, Inc. ("the Company") to (i) own shares of stock in the
Company, (ii) participate in the stockholder value which has been created, (iii)
have a mutuality of interest with other stockholders and (iv) enable the Company
to attract, retain and motivate employees, officers, directors and independent
contractors of particular merit.

         For the purposes of the Plan, the following terms shall be defined as
set forth below:

         (a) "Board" means the Board of Directors of the Company.

         (b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

         (c) "Committee" means the Committee designated by the Board to
administer the Plan.

         (d) "Company" means Neoware Systems, Inc., its Subsidiaries or any
successor organization.

         (e) "Disability" means permanent and total disability within the
meaning of Section 22(e)(3) of the Code.

         (f) "Disinterested Person" shall have the meaning set forth in the
Rules.

         (g) "Eligible Independent Contractor" means an independent contractor
hired by the Company who is neither an Employee of the Company nor a
Non-Employee Director.

         (h) "Employee" means any person, including a director, who is employed
by the Company and is compensated for such employment by a regular salary.

         (i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         (j) "Fair Market Value" means the per share value of the Stock as of
any given date, as determined by reference to the price of the last traded share
of Stock on the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System for such date
or the next preceding date that Stock was traded on such market, or, in the
event the Stock is listed on a stock exchange, the closing price per share of
Stock as reported on such exchange for such date.

         (k) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.

         (l) "Insider" means a Participant who is subject to Section 16 of the
Exchange Act.







                                       37
<PAGE>

         (m) "Non-Employee Director" means any member of the Board who is not an
Employee of the Company and is not compensated for employment by a regular
salary.

         (n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

         (o) "Participant" means an Employee, officer, Non-Employee Director or
Eligible Independent Contractor to whom an Option is granted pursuant to the
Plan.

         (p) "Plan" means the Neoware Systems, Inc. 1995 Stock Option Plan, as
hereinafter amended from time to time.

         (q) "Rules" means Rule 16(b)(3) and any successor provisions
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act.

         (r) "Securities Act" shall mean the Securities Act of 1933, as amended.

         (s) "Securities Broker" means the registered securities broker
acceptable to the Company who agrees to effect the cashless exercise of an
Option pursuant to Section 5(d) hereof.

         (t) "Stock" means the Common Stock of the Company, par value $.001 per
share.

         (u) "Stock Option" or "Option" means any option to purchase shares of
Stock (including Restricted Stock, if the Committee so determines) granted
pursuant to Section 5 below.

         (v) "Subsidiary" means any corporation owned, in whole or in part, by
the Company.

SECTION 2. Administration.
           --------------

         2.1 Except as provided in Section 2.2, the portion of the Plan with
respect to the grant of Options pursuant to Part II shall be administered by a
Committee of not less than three Directors who shall be Disinterested Persons
appointed by the Board and who shall serve at the pleasure of the Board;
provided further, however, that, notwithstanding the foregoing, Part II of the
Plan shall be administered by such number of Disinterested Persons as and to the
extent required by the Rules.

         The Committee shall have the authority to grant pursuant to the terms
of the Plan: Stock Options to Employees (including directors who are Employees)
and officers of the Company, and Eligible Independent Contractors. In
particular, the Committee shall, subject to the limitations and terms of the
Plan, have the authority:

             (i)      to select the officers, directors (who are Employees) and
                      other Employees of the Company, and the Eligible
                      Independent Contractors to whom Stock Options may from
                      time to time be granted hereunder;

             (ii)     to determine whether and to what extent incentive Stock
                      Options are to be granted hereunder;

             (iii)    to determine the number of shares to be covered by each
                      such award granted hereunder;

             (iv)     to determine the terms and conditions, not inconsistent
                      with the terms of the Plan, of any award granted
                      hereunder, including the option or exercise price and any
                      restrictions or limitations, based upon such factors as
                      the Committee shall determine, in its sole discretion;






                                       38
<PAGE>

             (v)      to determine whether and under what circumstances a Stock
                      Option may be exercised and settled in cash or Stock or
                      without a payment of cash;

             (vi)     to determine whether, to what extent and under what
                      circumstances Stock and other amounts payable with respect
                      to an award under this Plan shall be deferred either
                      automatically or at the election of the Participant; and

             (vii)    to amend the terms of any outstanding award (with the
                      consent of the Participant) to reflect terms not otherwise
                      inconsistent with the Plan, including amendments
                      concerning exercise price changes, vesting acceleration or
                      forfeiture waiver regarding any award or the extension of
                      a Participant's right with respect to awards granted under
                      the Plan, as a result of termination of employment or
                      service or otherwise, based on such factors as the
                      Committee shall determine, in its sole discretion.

         The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan, provided that the
Committee may delegate to the Chief Executive Officer of the Company, or such
other officer as may be designated by the Committee, the authority, subject to
guidelines prescribed by the Committee, to grant Options to Employees and
Eligible Independent Contractors who are not then subject to the provisions of
Section 16 of the Exchange Act, and to determine the number of shares to be
covered by any such Option, and the Committee may authorize any one or more of
such persons to execute and deliver documents on behalf of the Committee,
provided that no such delegation may be made that would cause grants of Options
to persons subject to Section 16 of the Exchange Act to fail to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act.
Determinations, interpretations or other actions made or taken by the Committee
pursuant to the provisions of the Plan shall be final and binding and conclusive
for all purposes and upon all persons.

         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 Stock Option
granted under it. Nothing herein shall be deemed to expand the personal
liability of a member of the Board or Committee beyond that which may arise
under any applicable standards set forth in the Company's by-laws and Delaware
law, nor shall anything herein limit any rights to indemnification or
advancement of expenses to which any member of the Board or the Committee may be
entitled under any by-law, agreement, vote of the stockholders or directors, or
otherwise.

         2.2 The portion of the Plan with respect to the grant of Options to
Non-Employee Directors pursuant to Part II shall be administered by the Board.
The Board shall have the same authority with respect to the grant of Options to
Non-Employee Directors under Part II to as is provided to the Committee pursuant
to Section 2.1.

         2.3 The portion of the Plan with respect to the grant of Options
pursuant to Part III shall be administered by the Board. Grants of Stock Options
under Part III of the Plan and the amount, price and timing of the awards to be
granted will be automatic, as described in Part III hereof. All questions of
interpretation of the Plan with respect to the grant of Options pursuant to Part
III will be determined by the Board, and such determination shall, unless
otherwise determined by the Board, be final and conclusive on all persons having
any interest hereunder.






                                       39
<PAGE>

SECTION 3. Stock Subject to the Plan.
           -------------------------

         3.1 The aggregate number of shares of Stock that may be issued or
transferred under the Plan is 3,000,000, subject to adjustment pursuant to
Section 14.1 below. Such shares may be authorized but unissued shares or
reacquired shares. If the number of shares of Stock issued under the Plan and
the number of shares of Stock subject to outstanding awards (taking into account
the share counting requirements established under the Rules) equals the maximum
number of shares of Stock authorized under the Plan, no further awards shall be
made unless the Plan is amended in accordance with the Rules or additional
shares of Stock become available for further awards under the Plan. If and to
the extent that Options granted under the Plan terminate, expire or are canceled
without having been exercised, such shares shall again be available for
subsequent awards under the Plan.

         3.2 In any fiscal year of the Company, the maximum number of shares of
Common Stock with respect to which Options may be granted to any Participant
shall not exceed 5% of the Common Stock outstanding, as adjusted for stock
splits, stock dividends or other similar changes affecting the Common Stock.

SECTION 4. Designation of Participants.
           ---------------------------

         4.1 Except as provided below, Participants under Part II of the Plan
shall be selected, from time to time, by the Committee from among those
Employees and Eligible Independent Contractors who, in the opinion of the
Committee, occupy responsible positions and who have the capacity to contribute
materially to the continued growth, development and long-term success of the
Company and its Subsidiaries. Participants under Part II may also be selected
from among those Non-Employee Directors who, in the opinion of the Board, have
the capacity to devote themselves to the Company's success.

         4.2 All Non-Employee Directors on the date of grant shall be eligible
to receive Options under Part III of the Plan.


                                     PART II
            GRANTS TO EMPLOYEES AND ELIGIBLE INDEPENDENT CONTRACTORS
            --------------------------------------------------------

SECTION 5. Stock Options.
           -------------

         Any Stock Option granted under Part II of the Plan shall be in such
form as the Committee or the Board may from time to time approve. Stock Options
granted under Part II of the Plan may be of two types: (i) Incentive Stock
Options and (ii) Non-Qualified Stock Options.

         The Committee shall have the authority to grant Incentive Stock
Options, Non-Qualified Stock Options or both types of Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option, it
shall constitute a Non-Qualified Stock Option. The Board shall have the
authority to grant Non-Qualified Stock Options to Non-Employee Directors under
Part II.

         Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the Participant(s) affected, to disqualify any Incentive
Stock Option under Section 422.

         Options granted hereunder 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 or the Board shall
deem appropriate:





                                       40
<PAGE>

         5.1 Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee or the Board at the time of
grant; provided, however, that the option price per share for any Stock Option
shall be not less than 100% of the Fair Market Value of the Stock on the date of
grant.

             Any Incentive Stock Option granted to any Participant who, at the
time the Option is granted, owns more than 10% of the voting power of all
classes of stock of the Company or of a Parent or Subsidiary corporation (within
the meaning of Section 424 of the Code), shall have an exercise price no less
than 110% of Fair Market Value per share on the date of the grant.

         5.2 Option Term. The term of each Stock Option shall be fixed by the
Committee or the Board, but no Stock Option shall be exercisable more than ten
years after the date the Stock Option is granted. However, any Incentive Stock
Option granted to any Participant who, at the time the Option is granted, owns
more than 10% of the voting power of all classes of stock of the Company or of a
Parent or Subsidiary corporation may not have a term of more than five years. No
Option may be exercised by any person after expiration of the term of the
Option.

         5.3 Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee or the Board at or after grant. If the Committee or the Board
provides, in its discretion, that any Stock Option is exercisable only in
installments, the Committee or the Board may waive such installment exercise
provisions at any time at or after grant in whole or in part, based on such
factors as the Committee or the Board shall determine, in its sole discretion.

         5.4 Method of Exercise. Subject to whatever installment exercise
provisions apply under Section 5.3, Stock Options may be exercised in whole or
in part at any time and from time to time during the Option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price, either by cash, check, or such other instrument as the Committee or the
Board may accept. As determined by the Committee or the Board, in its sole
discretion, at or after grant, payment in full or in part may also be made in
the form of unrestricted Stock already owned by the Participant (based upon the
Fair Market Value of a share of Stock on the business date preceding tender if
received prior to the close of the stock market and at the Fair Market Value on
the date of tender if received after the stock market closes); provided,
however, that, (i) in the case of an Incentive Stock Option, the right to make a
payment in the form of unrestricted Stock already owned by the Participant may
be authorized only at the time the Option is granted and (ii) the Company may
require that the Stock has been owned by the Participant for a minimum period of
time specified by the Committee or the Board. In addition, if such unrestricted
Stock was acquired through exercise of an Incentive Stock Option, such Stock
shall have been held by the Participant for a period of not less than the
holding period described in Section 422(a)(1) of the Code on the date of
exercise, or if such Stock was acquired through exercise of a Non-Qualified
Stock Option or of an option under a similar plan of the Company, such Stock
shall have been held by the Participant for a period of more than one year on
the date of exercise, and further provided that the Participant shall not have
tendered Stock in payment of the exercise price of any other Option under the
Plan or any other stock option plan of the Company within six calendar months of
the date of exercise.

             To the extent permitted under the applicable laws and regulations,
at the request of the Participant, and with the consent of the Committee or the
Board, the Company shall permit payment to be made by means of a "cashless
exercise" of an Option. Payment by means of a cashless exercise shall be
effected by the Participant delivering to the Securities Broker irrevocable
instructions to sell a sufficient number of shares of Stock to cover the cost
and expenses associated therewith and to deliver such amount to the Company.






                                       41
<PAGE>

             No shares of Stock shall be issued until full payment therefor has
been made. A Participant shall not have any right to dividends or other rights
of a stockholder with respect to shares subject to the Option until such time as
Stock is issued in the name of the Participant following exercise of the Option
in accordance with the Plan.

         5.5 Stock Option Agreement. Each Option granted under this Plan shall
be evidenced by an appropriate Stock Option agreement, which agreement shall
expressly specify whether such Option is an Incentive Stock Option or a
Non-Qualified Stock Option and shall be executed by the Company and the
Participant. The agreement shall contain such terms and provisions, not
inconsistent with the Plan, as shall be determined by the Committee or the
Board. Such terms and provisions may vary between Participants or as to the same
Participant to whom more than one Option may be granted.

         5.6 Replacement Options. If an Option granted pursuant to the Plan may
be exercised by a Participant by means of a stock-for-stock swap method of
exercise as provided in 5.4 above, then the Committee or the Board may, in its
sole discretion and at the time of the original Option grant, authorize the
Participant to automatically receive a replacement Option pursuant to this part
of the Plan. This replacement Option shall cover a number of shares determined
by the Committee or the Board, but in no event more than the number of shares
equal to the difference between the number of shares of the original Option
exercised and the net shares received by the Participant from such exercise. The
per share exercise price of the replacement Option shall equal the then current
Fair Market Value of a share of Stock, and shall have a term extending to the
expiration date of the original Option.

             The Committee or the Board shall have the right, in its sole
discretion and at any time, to discontinue the automatic grant of replacement
Options if it determines the continuance of such grants to no longer be in the
best interest of the Company.

         5.7 Non-transferability of Options. No Stock Option shall be
transferable by the Participant other than by will, by the laws of descent and
distribution, pursuant to a qualified domestic relations order, or as permitted
under the Rules, and all Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant. Notwithstanding the foregoing,
the Committee or the Board may grant non-qualified Options that are
transferable, without payment of consideration, to immediate family members
(i.e., spouses, children and grandchildren) of the Participant or to trusts for,
or partnerships whose only partners are, such family members. The Committee or
the Board may also amend outstanding non-qualified Options to provide for such
transferability.

         5.8 Termination of Employment by Reason of Death. Unless otherwise
determined by the Committee at or after grant, if any Participant dies during
the Participant's period of employment by the Company, or during the periods
referred to in Sections 5.9, 5.10 or 5.11, any Stock Option held by such
Participant may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Committee may determine at or after grant, by the
legal representative of the estate or by the legatee of the Participant under
the will of the Participant, for a period of one year (or such shorter period as
the Committee may specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is shorter.

         5.9 Termination of Employment by Reason of Disability. Unless otherwise
determined by the Committee at or after grant, if a Participant's employment by
the Company terminates by reason of Disability, any Stock Option held by such
Participant may thereafter be exercised by the Participant, to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Committee may determine at or after grant, for a period of one year (or such
shorter period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.







                                       42
<PAGE>

         5.10 Termination of Employment Upon Retirement. Unless otherwise
determined by the Committee at or after grant, if an Participant's employment
terminates due to retirement (as hereinafter defined), any Stock Option held by
such Participant may thereafter be exercised by the Participant, to the extent
it was exercisable at the date of retirement, or on such accelerated basis as
the Committee may specify at grant, for a period of one-year (or such shorter
period as the Committee may specify at grant) from the date of such retirement
or until the expiration of the stated term of such Stock Option, whichever
period is shorter. For purposes of this Section 5.10, "Retirement" shall mean
any Employee retirement under the Company's retirement policy.

         5.11 Other Termination of Employment. Unless otherwise determined by
the Committee at or after grant, in the event of termination of employment
(voluntary or involuntary) for any reason other than death, Disability or
retirement, or if an Employee is terminated for cause, any Stock Option held by
such Participant may thereafter be exercised by the Participant, to the extent
it was exercisable at the time of such termination or on such accelerated basis
as the Committee may determine at or after grant, for a period of three months
(or such shorter period as the Committee may specify at grant) from the date of
such termination of employment or the expiration of the stated term of such
Stock Option, whichever period is shorter. If an Employee is terminated for
cause, any Stock Option held by such Participant shall terminate immediately.

         5.12 Incentive Stock Option Limitation. The aggregate Fair Market Value
(determined as of the time of grant) of the Stock with respect to which
Incentive Stock Options are exercisable for the first time by the Participant
during any calendar year under the Plan and/or any other stock option plan of
the Company shall not exceed $100,000.

         5.13 Termination of Eligible Independent Contractors Options. The
termination provisions of Options granted to Eligible Independent Contractors
shall be determined by the Committee in its sole discretion.


         5.14 Withholding and Use of Shares to Satisfy Tax Obligations. The
obligation of the Company to deliver Stock upon the exercise of any Option shall
be subject to applicable federal, state and local tax withholding requirements.

             If the exercise of any Option is subject to the withholding
requirements of applicable federal tax laws, the Committee, in its discretion
(and subject to such withholding rules ("Withholding Rules") as shall be adopted
by the Committee), may permit the Participant to satisfy the federal withholding
tax, in whole or in part, by electing to have the Company withhold (or by
delivering to the Company) shares of Stock, which Stock shall be valued, for
this purpose, at their Fair Market Value on the date the amount of tax required
to be withheld is determined (the "Determination Date"). Such election must be
made in compliance with and subject to the Withholding Rules, and the Committee
may not withhold shares of Stock in excess of the number necessary to satisfy
the minimum federal income tax withholding requirements. If Stock acquired under
the exercise of an Incentive Stock Option is used to satisfy such withholding
requirement, such Stock must have been held by the Participant for a period of
not less than the holding period described in Section 422(a)(1) of the Code on
the Determination Date. If Stock acquired through the exercise of a
Non-Qualified Stock Option or of an option under a similar plan is delivered by
the Participant to the Company to satisfy such withholding requirement, such
Stock must have been held by the Participant for a period of more than one year
on the Determination Date. For Participants subject to Section 16 of the
Exchange Act, to the extent required by Section 16, the election to have Stock
withheld by the Corporation hereunder must be either (a) an irrevocable election
made six months before the Determination Date; or (b) an irrevocable election
where both the election and the Determination Date occur during one of the
ten-day periods beginning on the third business day following the date of
release of the Company's quarterly or annual summary financial data and ending
on the twelfth business day following such release.





                                       43
<PAGE>

         5.15 Issuance of Shares and Compliance with Securities Acts. Within a
reasonable time after exercise of an Option, the Company shall cause to be
delivered to the Participant a certificate for the Stock purchased pursuant to
the exercise of the Option. At the time of any exercise of any Option, the
Company may, if it shall deem it necessary and desirable for any reason
connected with any law or regulation of any governmental authority relative to
the regulation of securities, require the Participant to represent in writing to
the Company that it is his or her then intention to acquire the Stock for
investment and not with a view to distribution thereof and that such Participant
will not dispose of such Stock in any manner that would involve a violation of
applicable securities laws. In such event, no Stock shall be issued to such
holder unless and until the Company is satisfied with such representation.
Certificates for shares of Stock issued pursuant to the exercise may bear an
appropriate securities law legend.

         5.16 Termination of Non-Employee Directors Options. Section 11 of the
Plan shall apply to the termination of Options granted to Non-Employee Directors
under Part II.

         5.17 Buyout Provision. The Company may at any time offer to buy out,
for a payment in cash or stock, an Option previously granted based on such terms
and conditions as the Company shall establish and communicate to the Participant
at the time that such offer is made. This provision shall not in any way be
deemed to create any rights on the part of the Participants to receive buyout
offers or payments.

























                                       44
<PAGE>




                                    PART III
                        GRANTS TO NON-EMPLOYEE DIRECTORS
                        --------------------------------

SECTION 6. Grant of Options.
           ----------------

         Options to purchase 10,000 shares of Common Stock, subject to
adjustment as provided in Section 14.1 (the "Initial Options") and options to
purchase 5,000 shares, subject to adjustments as provided in Section 14.1, (the
"Annual Options"), shall be granted to Non-Employee Directors as follows:

                  (a)      Each Non-Employee Director on the 30th day after the
                           stockholders of the Company have approved the Plan
                           shall be granted an Initial Option.

                  (b)      Each Non-Employee Director who is not granted an
                           Initial Option pursuant to Section 6(a), shall be
                           granted an Initial Option on the first business day
                           immediately following the date that such person is
                           first elected or appointed to serve as a Non-Employee
                           Director.

                  (c)      Each year on January 1, each Non-Employee Director on
                           such date shall be granted an Annual Option.

SECTION 7. Types of Options.
           ----------------

         All options granted under Part III of the Plan shall be non-qualified
         Stock Options for purposes of the Code.

SECTION 8. Option Price.
           ------------

         The purchase price of each share of Stock issuable upon exercise of an
         Option will be equal to the Fair Market Value of the Stock on the date
         of grant.

SECTION 9. Option Term and Rights to Exercise.
           ----------------------------------

         9.1 Period of Option and Rights to Exercise. Except as set forth
         herein, each Non-Employee Director who receives options under this Plan
         must continue to hold office as a Non-Employee Director of the Company
         for six months from the date that the Initial Option is granted and six
         months from the date each Annual Option is granted before he can
         exercise any part thereof. Thereafter, subject to the provisions of the
         Plan, options will vest and be exercisable as follows:

                  (a)      Initial Options.

                           (i)      Each Initial Option will vest and be
                                    exercisable in full six months from the date
                                    of grant.

                           (ii)     The right to exercise an Initial Option will
                                    expire on the fifth anniversary of the date
                                    on which the option was granted.

                           (iii)    Once an Initial Option has become
                                    exercisable, such option may be exercised in
                                    whole at any time or in part from time to
                                    time until the expiration of the option,
                                    whether or not any option granted previously
                                    to the Participant remains outstanding at
                                    the time of such exercise.






                                       45
<PAGE>

                  (b)      Annual Options.

                           (i)      Each Annual Option will vest and be
                                    exercisable on a cumulative basis as to
                                    2,500 shares beginning six months from the
                                    date of grant and 2,500 additional shares
                                    beginning on the first anniversary of the
                                    date of grant.

                           (ii)     The right to exercise an Annual Option will
                                    expire on the fifth anniversary of the date
                                    on which the Option was granted.

                           (iii)    Once each installment of an Annual Option
                                    has become exercisable, it may be exercised
                                    in whole at any time or in part from time to
                                    time until the expiration of the Option,
                                    whether or not an Option granted previously
                                    to the Participant remains outstanding at
                                    the time of such exercise.

SECTION 10. Payment of Option Price.
            -----------------------

         Payment or provision for payment of the purchase price shall be made as
follows: (i) in cash or check; (ii) by exchange of Stock valued at its Fair
Market Value on the date of exercise; (iii) by means of a cashless exercise
procedure by the delivery to the Company of an exercise notice and irrevocable
instructions to the Securities Broker to sell a sufficient number of shares of
Stock to pay the purchase price of the shares of Common Stock as to which such
exercise relates and to deliver promptly such amount to the Company; or (iv) by
any combination of the foregoing.

         Where payment of the purchase price is to be made with shares of Stock
acquired through exercise of a non-qualified Stock Option or of an option under
a similar plan of the Company, such Stock shall have been held by the
Participant for a period of more than one year on the date of exercise, and
further provided that the Participant shall not have tendered Stock in payment
of the exercise price of any other Option under the Plan or any other stock
option plan of the Company within six calendar months of the date of exercise.

SECTION 11. Termination of Service.
            ----------------------

         Upon cessation of service as a Non-Employee Director (for reasons other
than retirement or death), including cessation of service due to physical or
mental disability that prevents such person from rendering further services as a
Non-Employee Director, only those options exercisable at the date of cessation
of service shall be exercisable by the Non-Employee Director. Such options shall
be exercisable for a period of three months from cessation of service of the
Non-Employee Director or the expiration of the Option, whichever period is
shorter.

         Upon the retirement or death of a Non-Employee Director, options shall
be exercisable as follows:

                  (a)      Retirement. Upon retirement as a Non-Employee
                           Director after the Non-Employee Director has served
                           for at least six consecutive years as a director, all
                           Options shall continue to be exercisable during their
                           terms as if such person had remained a Non-Employee
                           Director.








                                       46
<PAGE>

                  (b)      Death. In the event of the death of a Non-Employee
                           Director while a member of the Board, or within the
                           period after termination of service referred to in
                           the first paragraph of Section 11, the Options
                           granted to him shall be exercisable, to the extent
                           then exercisable, for a period of one year from the
                           date of the Non-Employee Director's death, or until
                           the expiration of the Option, whichever period is
                           shorter.

SECTION 12. No Guaranteed Term of Office.
            ----------------------------

         Nothing in this Plan or any modification thereof, and no grant of an
option, or any term thereof, shall be deemed an agreement or condition
guaranteeing to any Non-Employee Director any particular term of office or
limiting the right of the Company, the Board or the stockholders to terminate
the term of office of any Non-Employee Director under the circumstances set
forth in the Company's Certificate of Incorporation or Bylaws, or as otherwise
provided by law.

SECTION 13. Other Restrictions.
            ------------------

         Sections 5.5, 5.7 and 5.15 of the Plan shall apply to options granted
pursuant to Part III of the Plan.


                                     PART IV
                                  MISCELLANEOUS
                                  -------------

SECTION 14. Adjustments Upon Changes in Capitalization, Merger or Change in
            Control.
            ---------------------------------------------------------------

         14.1 Changes in Capitalization. If any change is made to the Stock
(whether by reason of merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, combination of shares, or exchange of shares or any
other change in capital structure, where such changes are made without receipt
of consideration), then unless such event or change results in the termination
of all outstanding awards under the Plan, the Board or the Committee shall
preserve the value of the outstanding awards by adjusting the maximum number and
class of shares issuable under the Plan to reflect the effect of such event or
change in the Company's capital structure, and by making appropriate adjustments
to the number and class of shares subject to an outstanding award and/or the
option price of each outstanding Option, except that any fractional shares
resulting from such adjustments shall be eliminated by rounding any portion of a
share equal to .500 or greater up, and any portion of a share equal to less than
..500 down, in each case to the nearest whole number.

         14.2 Dissolution or Liquidation. In the event of a proposed dissolution
or liquidation of the Company, the Committee, or its designee, shall notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction. The Committee or the Board in its discretion may provide for a
Participant to have the right to exercise his or her Option during such period
prior to such transaction as the Committee in its sole discretion shall
determine as to all of the Stock covered thereby, including shares of Stock as
to which the Option would not otherwise be exercisable. To the extent it has not
been previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.

         14.3 Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of all or substantially all of the
assets of the Company, each outstanding Option shall either (a) be assumed or an
equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation or (b) the Committee or its designee
shall notify the Participant in writing or electronically that the Option may be
exercised, as to the extent then exercisable, during such period of time from
the date of such notice, as shall be determined by the Committee, and the Option
shall terminate upon the expiration of such period. The Committee may, in its
discretion, provide on a case by case basis that Options may be immediately
exercisable for the total remaining number of shares covered by the Option.







                                       47
<PAGE>

         14.4     Change in Control.

         A "Change in Control" for purposes of this Plan shall mean any one of
the events described below:

                  (a)      at any time during a period of two (2) consecutive
                           years, at least a majority of the Board shall not
                           consist of Continuing Directors. "Continuing
                           Directors" shall mean directors of the Company at the
                           beginning of such two-year period and directors who
                           subsequently became such and whose selection or
                           nomination for election by the Company's shareholders
                           was approved by a majority of the then Continuing
                           Directors; or

                  (b)      any person or "group" (as determined for purposes of
                           Regulation 13D-G promulgated by the Commission under
                           the Exchange Act or under any successor regulation),
                           but excluding any majority-owned subsidiary or any
                           employee benefit plan sponsored by the Company or any
                           subsidiary or any trust or investment manager for the
                           account of such a plan, shall have acquired
                           "beneficial ownership" (as determined for purposes of
                           such regulation) of the Company's securities
                           representing fifty percent (50%) or more of the
                           combined voting power of the Company's then
                           outstanding securities unless such acquisition is
                           approved in advance by a majority of the directors of
                           the Company who were in office immediately preceding
                           such acquisition and any individual selected to fill
                           any vacancy created by reason of the death or
                           disability of any such director; or

                  (c)      the Company becomes a party to a merger,
                           consolidation or share exchange in which either (i)
                           the Company will not be the surviving corporation or
                           (ii) the Company will be the surviving corporation
                           and any outstanding shares of Common Stock will be
                           converted into shares of any other company (other
                           than a reincorporation or the establishment of a
                           holding company involving no change in ownership of
                           the Company or other securities or cash or other
                           property (excluding payments made solely for
                           fractional shares); or

                  (d)      the Company's stockholders (i) approve any plan or
                           proposal for the disposition or other transfer of
                           all, or substantially all, of the assets of the
                           Company, whether by means of a merger,
                           reorganization, liquidation or dissolution or
                           otherwise or (ii) dispose of, or become obligated to
                           dispose of, 50% or more of the outstanding capital
                           stock of the Company by tender offer or otherwise.

                  At the time of grant of an Option, or if a Change in Control
has occurred after the grant, the Committee may, in its discretion, provide on a
case by case basis that upon a Change in Control Options may be immediately
exercisable for the total remaining number of Shares covered by the Option
and/or that the Options shall terminate, provided that the Participant shall
have the right to exercise such Option during such period prior to the Change in
Control as shall be determined by the Committee.







                                       48
<PAGE>

SECTION 15. Amendments and Termination.
            --------------------------

         The Board may amend, alter or discontinue the Plan at any time and from
time to time, but no amendment, alteration or discontinuation shall be made
which would impair the rights of a Participant under a Stock Option award
theretofore granted, without the Participant's consent, or which, without the
approval of the Company's stockholders, would require stockholder approval under
the Rules.

         Except for awards made pursuant to Part III, the Committee or the Board
may amend the terms of any Stock Option theretofore granted, prospectively or
retroactively, but no such amendment shall impair the rights of any holder
without the holder's consent. Except for awards made to Non-Employee Directors
pursuant to Part III, the Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher option prices. Subject to the above provisions, the Board shall
have broad authority to amend the Plan to take into account changes in
applicable tax laws, securities laws and accounting rules, as well as other
developments.

SECTION 16. Unfunded Status of Plan.
            -----------------------

         The Plan is intended to constitute an "unfunded" plan of incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Stock or payments in lieu of or with respect to awards hereunder;
provided, however, that, unless the Committee otherwise determines with the
consent of the affected Participant, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

SECTION 17. General Provisions.
            ------------------

         17.1 All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee or the Board may deem advisable under the rules,
regulations and other requirements of the Securities Act, the Exchange Act, any
stock exchange or over-the-counter market upon which the Stock is then listed,
and any applicable federal or state securities law, and the Committee or the
Board may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.

         17.2 Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, and such arrangements may be either
generally applicable or applicable only in specific cases.

         17.3 The adoption of the Plan shall not confer upon any Participant any
right to continued employment with the Company nor shall it interfere in any way
with the right of the Company to terminate its relationship with any of its
Employees, directors or Independent Contractors at any time.

         17.4 No later than the date as of which an amount first becomes
includable in the gross income of the Participant for federal income tax
purposes with respect to any award under the Plan, the Participant who is an
Employee of the Company shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any federal, state, or
local taxes of any kind required by law to be withheld with respect to such
amount. To the extent permitted by the Committee, in its sole discretion, the
minimum required withholding obligations may be settled with Stock, including
Stock that is part of the award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements and the Company shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the Participant.






                                       49
<PAGE>

         17.5 The Committee shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom any amounts
payable in the event of the Participant's death are to be paid.

         17.6 The Plan shall be governed by and subject to all applicable laws
and to the approvals by any governmental or regulatory agency as may be
required.

SECTION 18. Effective Date and Term of Plan.
            -------------------------------

         The Plan shall be effective as of the effective date of the merger of
Human Designed Systems, Inc. with and into ISAC Acquisition Co., a wholly-owned
subsidiary of the Company (the "Effective Date"), subject to the consent or
approval of the Company's stockholders as provided below. No Stock Option award
shall be granted pursuant to the Plan on or after ten years from the Effective
Date, but Stock Options granted prior to such tenth anniversary may be exercised
after such date. If the Plan is not approved by a majority of the votes cast at
a duly held meeting at which a quorum representing a majority of all outstanding
voting stock of the Company is, either in person or by proxy, present and voting
on the Plan, within 12 months after such effective date, any Incentive Stock
Options that have been granted shall automatically become Non-Qualified Stock
Options.

SECTION 19. Interpretation.
            --------------

          A determination of the Committee or the Board as to any question which
may arise with respect to the interpretation of the provisions of this Plan or
any Options shall be final and conclusive, and nothing in this Plan, or in any
regulation hereunder, shall be deemed to give any Participant, his legal
representatives, assigns or any other person any right to participate herein
except to such extent, if any, as the Committee or the Board may have determined
or approved pursuant to this Plan. The Committee or the Board may consult with
legal counsel who may be counsel to the Company and shall not incur any
liability for any action taken in good faith in reliance upon the advice of such
counsel.

SECTION 20. Governing Law.
            -------------

         With respect to any Incentive Stock Options granted pursuant to the
Plan and the agreements thereunder, the Plan, such agreements and any Incentive
Stock Options granted pursuant thereto shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of the State of
Delaware shall govern the operation of, and the rights of Participants under,
the Plan, the agreements and any Options granted thereunder.

SECTION 21. Compliance With The Rules.
            -------------------------

         21.1 Unless an Insider could otherwise transfer shares of Stock issued
hereunder without incurring liability under Section 16(b) of the Exchange Act,
at least six months must elapse from the date of grant of an Option to the date
of disposition of the Stock issued upon exercise of such Option.

         21.2 It is the intent of the Company that this Plan comply in all
respects with the Rules in connection with any grant of Options to, or other
transaction by, an Insider. Accordingly, if any provision of this Plan or any
agreement relating to an Option does not comply with the Rules as then
applicable to any such Insider, such provision will be construed or deemed
amended to the extent necessary to conform to such requirements with respect to
such person. In addition, neither the Committee nor the Board shall have
authority to make any amendment, alteration, suspension, discontinuation, or
termination of the Plan or any agreement hereunder, or take other action if such
authority would cause an Insider's transactions under the Plan not to be exempt
under the Rules.







                                       50
<PAGE>

         21.3 Certain restrictive provisions of the Plan have been implemented
to facilitate the Company's and Insiders' compliance with the Rules. The
Committee or the Board, in its discretion, may waive certain of these
restrictions, provided the waiver does not relate in any way to an Insider and,
provided further, such waiver or amendment is carried out in accordance with
Section 6 hereof.














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