CYLINK CORPORATION

                        CYLINK/ARL 1997 STOCK OPTION PLAN

1. Establishment, Purpose, and Definitions.

         a. There is hereby adopted the  Cylink/ARL  1997 Stock Option Plan (the
"Plan") of Cylink Corporation (the "Company").

         b. The  purpose  of the Plan is to  provide  a means  whereby  eligible
individuals  (as  defined  in  paragraph  4,  below) can  acquire  shares of the
Company's  Common  Stock,  $.01 par  value  per share  (the  "Stock").  The Plan
provides  employees,  independent  contractors,  and  consultants of Algorithmic
Research  Ltd., a company  organized and existing under the laws of the State of
Israel ("ARL"),  and of its subsidiaries,  whether  currently  existing or which
become such after  adoption of the Plan,  but  excluding  any such person who is
also an executive  officer of the Company or member of the Board of Directors of
the Company,  an  opportunity  to purchase  shares of Stock  pursuant to options
which are not  described in Section 422 or 423 of the  Internal  Revenue Code of
1986, as amended (the "Code") (referred to as "nonqualified stock options").

         c.  The  term  "Affiliates"  as  used  in the  Plan  means  parent  and
subsidiary corporations of the Company, as defined in Sections 424(e) and (f) of
the Code (but substituting the "Company" for "employer corporation"),  including
parents or subsidiaries which become such after adoption of the Plan.

2. Administration of the Plan.

         a. The Plan  shall be  administered  by the Board of  Directors  of the
Company  (the  "Board").   The  Board  may  delegate  the   responsibility   for
administering  the Plan to a committee,  under such terms and  conditions as the
Board shall determine (the "Committee"). Members of the Committee shall serve at
the  pleasure of the Board.  The  Committee  shall  select one of its members as
chairman,  and shall hold meetings at such times and places as it may determine.
A majority of the Committee shall  constitute a quorum and acts of the Committee
at which a quorum is present,  or acts  reduced to or approved in writing by all
the members of the Committee,  shall be the valid acts of the Committee.  If the
Board does not delegate  administration of the Plan to the Committee,  then each
reference  in this Plan to "the  Committee"  shall be  construed to refer to the
Board.

         b. Subject to Section 1(b) above,  the Committee  shall determine which
eligible individuals (as defined in paragraph 4, below) shall be granted options
under the Plan,  the timing of such grants,  the terms  thereof  (including  any
restrictions  on the Stock),  and the number of shares of Stock  subject to such
options.

         c. The Committee may amend the terms of any outstanding  option granted
under this Plan, but any amendment  which would  adversely  affect an optionee's
rights under an  outstanding  option  shall not be made  without the  optionee's
written consent. The Committee may, with the


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optionee's  written consent,  cancel any outstanding  stock option or accept any
outstanding stock option in exchange for a new option.

         d.  The  Committee  shall  have  the sole  authority,  in its  absolute
discretion,  to adopt,  amend and rescind such rules and  regulations as, in its
opinion,  may be advisable for the  administration  of the Plan, to construe and
interpret the Plan, the rules and the regulations and the instruments evidencing
options  granted  under  the Plan and to make all  other  determinations  deemed
necessary  or  advisable  for the  administration  of the Plan.  All  decisions,
determinations,  and  interpretations  of the Committee  shall be binding on all
participants.

3. Stock Subject to the Plan.

         a. An aggregate of 410,000  shares of Stock shall be available  for the
grant of stock options and the issuance of Stock under the Plan. If an option is
surrendered  (except  surrender  for  shares of  Stock) or for any other  reason
ceases to be  exercisable  in whole or in part, the shares which were subject to
such option but as to which the option had not been exercised  shall continue to
be  available  under the Plan.  Any Stock which is retained by the Company  upon
exercise of an option in order to satisfy the exercise  price for such option or
any withholding  taxes due with respect to such option exercise shall be treated
as issued to the optionee and will thereafter not be available under the Plan.

         b. If there is any change in the Stock subject to either the Plan or an
option  agreement   pursuant  to  the  Plan,   through  merger,   consolidation,
reorganization, recapitalization,  reincorporation, stock split, stock dividend,
or  other  change  in  the  corporate  structure  of  the  Company,  appropriate
adjustments  shall be made by the  Committee  in order  to  preserve  but not to
increase the benefits to the individual,  including adjustments to the aggregate
number,  kind of  shares,  and price per share  subject to either the Plan or an
option agreement.

4. Eligible Individuals.

         Individuals  who shall be eligible to have  granted to them the options
provided for by the Plan shall be such  employees,  independent  contractors and
consultants of ARL and of its subsidiaries, but excluding executive officers and
directors of the Company,  whether currently existing or which become such after
adoption of the Plan as the Committee,  in its discretion,  shall designate from
time to time.  If an eligible  individual  is granted an option under this Plan,
and later is  transferred  to the Company or an Affiliate  of the Company,  such
individual  shall continue to be eligible to  participate  under the Plan to the
extent of such previously granted options.

                                       2.

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5. The Option Price.

         The  purchase  price of the Stock  covered by each  nonqualified  stock
option  shall be the  price as  established  by the Board or the  Committee,  as
applicable.  The exercise  price of an option shall be subject to  adjustment to
the extent provided in paragraph 3(b), above.

6. Terms and Conditions of Options.

         a. Each  option  granted  pursuant to the Plan will be  evidenced  by a
written  stock option  agreement  executed by the Company and the person to whom
such option is granted.

         b. The Committee  shall determine the term of each option granted under
the Plan;  provided,  however,  that the terms of all options  granted under the
Plan shall not be for more than ten (10) years.

         c. An optionee's  stock option  agreement may contain such other terms,
provisions and conditions  consistent with this Plan as may be determined by the
Committee.

7. Use of Proceeds.

         Cash proceeds  realized from the issuance of Stock under the Plan shall
constitute general funds of the Company.

8. Amendment, Suspension, or Termination of the Plan.

         a. The Board may at any time amend, suspend or terminate the Plan as it
deems  advisable;  provided  that  such  amendment,  suspension  or  termination
complies with all applicable requirements of state and federal law.

         b. No option may be granted  under the Plan  during any  suspension  or
after the  termination of the Plan, and no amendment,  suspension or termination
of the Plan shall without the affected individual's consent, alter or impair any
rights or obligations under any option previously granted under the Plan.

9. Assignability.

         Unless otherwise  provided in a specific option agreement,  each option
granted  pursuant  to  this  Plan  shall,  during  an  optionee's  lifetime,  be
exercisable  only by  such  optionee,  and  neither  the  option  nor any  right
hereunder  shall  be  transferable  by  such  optionee  by  operation  of law or
otherwise other than by will or the laws of descent and distribution.

                                       3.

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10. Payment Upon Exercise of Options.

         Payment of the purchase  price of Stock to be received upon exercise of
any option granted under this Plan shall be made in cash or in such other manner
as the Committee may approve.

                                       4.

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                               CYLINK CORPORATION

                 CYLINK/ARL 1997 NONQUALIFIED STOCK OPTION PLAN

                       NONQUALIFIED STOCK OPTION AGREEMENT

         THIS  NONQUALIFIED  STOCK OPTION AGREEMENT  ("Agreement") is made as of
September 8, 1997,  between CYLINK  CORPORATION,  a California  corporation (the
"Company"), and A ("Optionee").


                                   WITNESSETH:

         WHEREAS,  the Company has adopted the Cylink/ARL 1997 Stock Option Plan
(the "Plan"), which Plan is incorporated in this Agreement by reference and made
a part hereof; and

         WHEREAS,  the  Company  regards  Optionee  as a  valuable  employee  or
director  of, or service  provider  to,  Algorithmic  Research  Ltd.,  a company
organized and existing under the laws of the state of Israel ("ARL"),  or one of
ARL's subsidiaries,  and has determined that it would be to the advantage and in
the interests of the Company and its  shareholders  to grant the option provided
for in this Agreement to Optionee;

         NOW,  THEREFORE,  in consideration of the mutual covenants  hereinafter
set forth, the parties to this Agreement hereby agree as follows:

1. Option Grant.

         The Company  hereby grants to Optionee the right and option to purchase
from the Company on the terms and conditions  hereinafter set forth,  all or any
part of an aggregate of <<B>> shares of the Company's  Common  Stock,  $0.01 par
value per share (the  "Stock").  This  option is not  intended  to  satisfy  the
requirements  of Section 422 of the Internal  Revenue  Code of 1986,  as amended
(the "Code"), and is not intended to qualify as an incentive stock option.

2. Option Price.

         The per share  purchase price of the Stock subject to this option shall
be U.S.$0.01.  The term "Option Price" as used in this  Agreement  refers to the
per share purchase price of the Stock subject to this option.

3. Option Period.

         This option  shall be  exercisable  only  during the Option  Period (as
defined below), and during such Option Period, the exercisability of this option
shall be subject to the vesting  provisions


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of paragraph 4 hereof.  The "Option  Period" shall commence on September 8, 1997
and shall terminate on September 8, 2007 (the "Termination Date").

4. Vesting of Right to Exercise Options.

         The Optionee shall have the right to exercise this option in accordance
with the following schedule:

                  Exercisable as of March 1, 1998:       C
                  Exercisable as of September 1, 1998:   D
                  Exercisable as of September 1, 1999:   E

         Any portion of this option that is not exercised  shall  accumulate and
may be exercised at any time during the Option  Period prior to the  Termination
Date. In no event shall the Company be required to issue fractional  shares.  In
lieu of any fractional  share  otherwise  required to be issued upon exercise of
this option,  the  fraction of a share shall be rounded up to the nearest  whole
share.

         Notwithstanding  anything to the contrary  contained in this Agreement,
the entire unvested portion of this option shall become immediately  exercisable
upon  the  first  to  occur  of any of the  following  events:  (a) the  date of
commencement  of a tender  or  exchange  offer  relating  to at least 50% of the
outstanding  shares of Stock;  (b) the date on which a Change in  Control of the
Company occurs; (c) the date on which a Change in Control of ARL occurs; (d) the
date of  execution  of any  binding  letter of intent,  contract,  agreement  or
understanding  contemplating  or  otherwise  relating  to an  event  of the type
referred to in clause "(b)" of this sentence;  (e) the date of occurrence of any
material breach or default by the Company with respect to any of its obligations
under  Article 5 of that certain  Option Grant  Agreement of even date  herewith
between the Company and  Optionee,  which  breach or default is not cured within
twenty (20) days after notice  thereof is given to the Company;  or (f) the date
on which Optionee shall die or become disabled.

         For  purposes of this  Agreement,  the  following  terms shall have the
following respective meanings:

                  A "Change in Control of the  Company"  shall be deemed to have
occurred  if: (a) any  person or entity  (other  than  Pittway  Corporation)  or
"group"  (within the meaning of Rule 13d-3 under the Securities  Exchange Act of
1934, as amended (the "Exchange  Act")) becomes the  "beneficial  owner" (within
the meaning of Rule 13d-3 under the Exchange  Act) of at least 50% of the voting
securities of the Company;  (b) a merger,  consolidation or similar  transaction
involving  the  Company or any  affiliate  of the Company is  effected,  and the
shareholders of the Company  immediately prior to such transaction own less than
60% of the voting  securities of the surviving  corporation in such transaction;
(c) assets  representing  more than 50% of the  aggregate  net book value of the
Company's assets (exclusive of its wireless communications division) are sold or
otherwise  transferred  to any person (or persons) or entity (or entities) (in a
single transaction or a series of transactions);  or (d) the individuals who, as
of the date of this Agreement, are members of

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the Board of  Directors  of the Company (the  "Incumbent  Board")  cease for any
reason  to  constitute  at least  two-thirds  of the Board of  Directors  of the
Company (provided,  however, that if the election, or nomination for election by
the  Company's  shareholders,  of any new  director was approved by a vote of at
least two-thirds of the Incumbent  Board,  such new director shall, for purposes
of this Agreement, be considered as a member of the Incumbent Board).

                  A "Change in Control of ARL" shall be deemed to have  occurred
if: (a) a person or entity  (other than the  Company)  becomes  the  "beneficial
owner" (within the meaning of Rule 13d-3 under the Exchange Act) of at least 50%
of the voting  securities  of ARL  (other  than in  connection  with a Change in
Control of the Company);  (b) ARL ceases to own more than 50% of the outstanding
shares of ARL; or (c) assets  representing  more than 50% of the  aggregate  net
book value of ARL's assets are sold or otherwise  transferred  to any person (or
persons)  or  entity  (or  entities)  (in a single  transaction  or a series  of
transactions).

5. Method of Exercise.

         Optionee  may  exercise  this option with respect to all or any part of
the shares of Stock then subject to such exercise by giving the Company  written
notice of such  exercise,  specifying  the number of such  shares of Stock as to
which this option is exercised.  Such notice shall be  accompanied  by an amount
equal to the Option Price of such shares,  in the form of any one or combination
of the following: cash, a certified check, bank draft or postal or express money
order payable to the order of the Company in lawful money of the United  States.
As soon as practicable after receipt of the notice required in this paragraph 5,
the Company shall,  without  transfer or issue tax and without other  incidental
expense to Optionee,  issue in the name of Optionee,  and deliver to Optionee, a
certificate or certificates of such shares of Stock.

6. Corporate Transactions.

         (a) If there  should be any change in a class of stock  subject to this
option,  through  merger,   consolidation,   reorganization,   recapitalization,
reincorporation,  stock split,  stock  dividend or other change in the corporate
structure of the Company,  the Company  shall make  appropriate  adjustments  in
order to  preserve,  but not to increase,  the  benefits to Optionee,  including
adjustments  in the number of shares of such stock subject to this option and in
the per share  purchase  price  thereof.  Any  adjustment  made pursuant to this
paragraph  6 as a  consequence  of a change in the  corporate  structure  of the
Company  shall not entitle  Optionee to acquire a number of shares of such stock
of the  Company or shares of stock of any  successor  company  greater  than the
number of shares  Optionee would receive if, prior to such change,  Optionee had
actually  held a number of shares of such  stock  equal to the  number of shares
subject to this option.

         (b) For purposes of this paragraph 6, a "Corporate  Transaction"  shall
include  any of the  following  shareholder-approved  transactions  to which the
Company is a party:

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<PAGE>

                  (i) a merger or  consolidation in which the Company is not the
surviving entity,  except for a transaction the principal purpose of which is to
change the state of the Company's incorporation;

                  (ii)  the  sale,  transfer  or  other  disposition  of  all or
substantially  all of the assets of the Company in liquidation or dissolution of
the Company; or

                  (iii) any reverse merger in which the Company is the surviving
entity but in which  securities  possessing more than fifty percent (50%) of the
total  combined  voting  power  of  the  Company's  outstanding  securities  are
transferred to a holder or holders different from those who held such securities
immediately prior to such merger.

         In the event of any Corporate Transaction, this option shall be assumed
in full by the  successor  corporation  or its  parent  company,  or  substitute
options  shall be  issued  to  Optionee,  in either  case  having  substantially
equivalent  provisions as the option granted pursuant to this Agreement  (except
that (i) following such Corporate Transaction,  this option shall be exercisable
only for the  securities  or other  property  issued  or paid in such  Corporate
Transaction to holders of an equal number of shares of Stock as are then subject
to this option, and (ii) if such Corporate Transaction  constitutes a "Change in
Control of the Company" (as defined above), this option shall become immediately
exercisable on the date on which such Corporate Transaction occurs).

7. Limitations on Transfer.

         This option shall, during Optionee's  lifetime,  be exercisable only by
Optionee,  and neither this option nor any right hereunder shall be transferable
by Optionee by operation  of law or otherwise  other than by will or the laws of
descent and  distribution.  In the event of any attempt by Optionee to alienate,
assign, pledge, hypothecate, or otherwise dispose of this option or of any right
hereunder, except as provided for in this Agreement, or in the event of the levy
of any  attachment,  execution,  or similar  process upon the rights or interest
hereby  conferred,  the Company at its  election  may  terminate  this option by
notice to Optionee and this option shall thereupon become null and void.

8. No Shareholder Rights.

         Neither Optionee nor any person entitled to exercise  Optionee's rights
in the event of his death  shall  have any of the rights of a  shareholder  with
respect to the shares of Stock  subject to this option except to the extent such
shares shall have been issued upon the exercise of this option.

                                       4

<PAGE>

9. No Effect On Terms Of Employment.

         SUBJECT  TO  THE  TERMS  OF  ANY  WRITTEN  EMPLOYMENT  CONTRACT  TO THE
CONTRARY,  ANY MEMBER OF THE CYLINK/ARL  GROUP WHICH EMPLOYS OPTIONEE SHALL HAVE
THE RIGHT TO TERMINATE OR CHANGE THE TERMS OF EMPLOYMENT OF OPTIONEE AT ANY TIME
AND FOR ANY REASON WHATSOEVER, WITH OR WITHOUT CAUSE.

10. Notice.

         Any notice required to be given under the terms of this Agreement shall
be  addressed  to the  Company  in care of its  Secretary  at the  Office of the
Company at 910 Hermosa Court,  Sunnyvale,  California 94086, USA, and any notice
to be given to Optionee  shall be addressed to Optionee at the address  given by
Optionee beneath Optionee's  signature to this Agreement,  or such other address
as either  party to this  Agreement  may  hereafter  designate in writing to the
other.  Any such  notice  shall be  deemed  to have  been  duly  given  (a) when
delivered in person,  (b) three  business days after  delivery to an "overnight"
courier, or (c) 24 hours after delivery by facsimile transmission (if receipt of
such  facsimile  is  evidenced  by a  transmission  report  or other  reasonable
evidence  of  the  successful  and  accurate  transmission  of  such  notice  or
communication).

11. Committee Decisions Conclusive.

         All  decisions  of the Board of Directors of the Company of a Committee
designated  by it upon  any  question  arising  under  the  Plan or  under  this
Agreement shall be conclusive.

12. Successors.

         This  Agreement  shall be binding  upon and inure to the benefit of any
successor or successors of the Company.  Where the context requires,  "Optionee"
as  used  in  this  Agreement  shall  include   Optionee's   spouse,   executor,
administrator  or other  legal  representative  or the person or persons to whom
Optionee's   rights  pass  by  will  or  the  applicable  laws  of  descent  and
distribution.

13. Governing Law; Venue.

         The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of California.  Any dispute  arising out of
or relating to this  Agreement  shall be resolved  through  binding  arbitration
under the Rules of Conciliation and Arbitration of the International  Chamber of
Commerce.  The  venue  for such  arbitration  proceedings  shall  be in  London,
England.  The resolution of a dispute by the arbitrator  shall be conclusive and
binding upon the parties hereto and judgment may be entered thereon in any court
having jurisdiction  thereof. The arbitrator shall have the authority to make an
award of actual  compensatory  damages  incurred by a party in connection with a
dispute, but shall have no right to grant special, punitive or

                                       5

<PAGE>

exemplary  damages or indirect or consequential  damages or to grant any form of
equitable relief (except that the arbitrator may, as part of his award,  require
the Company to perform its obligations under this Agreement).

         IN WITNESS  WHEREOF,  the  Company  and  Optionee  have  executed  this
Agreement as of the day and year first above written.


                                 THE COMPANY:

                                 CYLINK CORPORATION


                                 By ____________________________________________
                                 Its ___________________________________________


                                 OPTIONEE


                                 _______________________________________________
                                 A


                                 Address:


                                 _______________________________________________

                                 _______________________________________________

                                 _______________________________________________

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