<PAGE>

                                                                    EXHIBIT 10.3


                               NASSDA CORPORATION
                             2001 STOCK OPTION PLAN

     1.    Purposes of the Plan. The purposes of this Stock Option Plan are to
           --------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant.

     2.    Definitions.  As used herein, the following definitions shall apply:
           -----------

           (a)    "Administrator" means the Board or any of its Committees
                   --------------
appointed in accordance with Section 4 hereof.

           (b)    "Applicable Laws" means the requirements relating to the
                   ----------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.


           (c)    "Board" means the Board of Directors of the Company.
                   -----

           (d)    "Code" means the Internal Revenue Code of 1986, as amended.
                   ----

           (e)    "Committee"  means a committee of Directors appointed by the
                   ---------
 Board in accordance with Section 4 hereof.

           (f)    "Common Stock" means the Common Stock of the Company.
                   ------------

           (g)    "Company" means NASSDA Corporation, a Delaware corporation.
                   -------

           (h)    "Consultant" means any person who is engaged by the Company
                   ----------
or any Parent or Subsidiary to render consulting or advisory services to such
entity and who is compensated for such services, including a Director.

           (i)    "Director" means a member of the Board of Directors of the
                   ---------
Company.


           (j)    "Employee" means any person, including Officers and Directors,
                   --------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181/st/

<PAGE>


day of such leave any Incentive Stock Option held by the Optionee shall cease to
be treated as an Incentive Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.

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


          (l) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:


              (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

              (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (m) "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code.

          (n) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.


          (o) "Officer" means a person who is an officer of the Company within
               -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.


          (p) "Option" means a stock option granted pursuant to the Plan.
               ------

          (q) "Option Agreement" means a written or electronic agreement between
               ----------------
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

          (r) "Option Exchange Program" means a program whereby outstanding
               -----------------------
Options are exchanged for Options with a lower exercise price.


          (s) "Optioned Stock" means the Common Stock subject to an Option.
               --------------

          (t) "Optionee" means the holder of an outstanding Option granted under
               --------
the Plan.

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         (u) "Parent" means a "parent corporation," whether now or hereafter
              ------
existing, as defined in Section 424(e) of the Code.

         (v) "Plan" means this 2001 Stock Option Plan.
              ----

         (w) "Service Provider" means an Employee, Director or Consultant.
              ----------------

         (x) "Share" means a share of the Common Stock, as adjusted in
              -----
accordance with Section 12 below.

         (y) "Subsidiary" means a "subsidiary corporation," whether now or
              ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.  Stock Subject to the Plan. Subject to the provisions of Section 12 of
         -------------------------
the Plan, the maximum aggregate number of Shares (as adjusted for the August
2001 four-for-three stock split) which may be subject to option and sold under
the Plan is 3,999,999 Shares (post-split), together with an annual increase in
the number of shares of Common Stock reserved for issuance hereunder on the
first day of the Company's fiscal year, beginning with October 1, 2002, equal to
the lesser of (i) 3,999,999 Shares (post-split), (ii) six percent (6.0%) of the
outstanding Shares of the Company as of the last day of the prior fiscal year or
(iii) such amount as determined by the Board of Directors. The Shares may be
authorized but unissued, or reacquired Common Stock.

         If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, upon exercise of an Option, shall
not be returned to the Plan and shall not become available for future
distribution under the Plan.


     4.  Administration of the Plan.
         --------------------------

         (a) Procedure.
             ---------

             (i) Multiple Administrative Bodies. The Plan may be administered by
                 ------------------------------
different Committees with respect to different groups of Employees and
Consultants.

             (ii) Section 162(m). To the extent that the Administrator
                  -------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

             (iii) Rule 16b-3. To the extent desirable to qualify transactions
                   ----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.


                                       -3-

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              (iv) Other Administration. Other than as provided above, the Plan
                   --------------------
shall be administered by (A) the Board or (B) a Committee, which Committee shall
be constituted to satisfy Applicable Laws.


         (b)  Powers of the Administrator. Subject to the provisions of the Plan
              ---------------------------
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:

              (i)    to determine the Fair Market Value;

              (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;

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

              (iv)   to approve forms of agreement for use under the Plan;

              (v)    to determine the terms and conditions, of any Option
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

              (vi)   to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;

              (vii)  to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;

              (viii) to initiate an Option Exchange Program;

              (ix)   to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

              (x)    to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

                                       -4-

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             (xi)  to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

             (xii) to make all other determinations deemed necessary or
advisable for administering the Plan.


        (c)  Effect of Administrator's Decision. All decisions, determinations
             ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.

     5. Eligibility.
        -----------

        (a)  Nonstatutory Stock Options may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.

        (b)  Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

        (c)  Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate such relationship at any time, with or
without cause.

        (d)  Upon the Company, or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act, or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants to options to
Service Providers:

             (i)   No Employee shall be granted in any fiscal year, Options to
purchase more than 3,999,999 Shares (post-split).

             (ii)  In connection with his or her initial employment, and
Employee may be granted Options to purchase up to an additional 2,000,000 Shares
(post-split) which shall not count against the amount set forth in subsection
(i) above.

             (iii) The foregoing limitations shall be adjusted appropriately in
connection with any change in the Company's capitalization as described in
Section 11.

             (iv)  If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the

                                       -5-

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cancelled Option will be counted against the limits set forth in
subsections (i)and (ii) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

     6. Term of Plan. The Plan shall become effective upon its adoption by the
        ------------
Board; provided, however, the Plan shall not become effective until the
       --------  -------
effective date of the Company's initial public offering pursuant to a
registration statement filed with the Securities and Exchange Commission. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.

     7. Term of Option. The term of each Option shall be stated in the Option
        --------------
Agreement; provided, however, that the term shall be no more than ten (10) years
           --------  -------
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.

     8. Option Exercise Price and Consideration.
        ---------------------------------------

        (a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:

          (i) In the case of an Incentive Stock Option

              (A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the exercise
price shall be no less than 110% of the Fair Market Value per Share on the date
of grant.

              (B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

          (ii)  In the case of a Nonstatutory Stock Option granted to a Service
Provider who, at the time of grant of such Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the exercise price shall be no less than
110% of the Fair Market Value per Share on the date of the grant.

          (iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a merger or other
corporate transaction.

       (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on

                                       -6-

<PAGE>



the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, (6)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, (7) any combination of
the foregoing methods of payment, or (8) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
In making (b) its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.


        9.     Exercise of Option.
               ------------------


               (a) Procedure for Exercise; Rights as a Stockholder. Any Option
                   -----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence.

               An Option may not be exercised for a fraction of a Share.

                   An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a Stockholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.

                   Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.


               (b) Termination of Relationship as a Service Provider. If an
                   -------------------------------------------------
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by


                                       -7-

<PAGE>



the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

        (c)    Disability of Optionee. If an Optionee ceases to be a Service
               ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

        (d)    Death of Optionee. If an Optionee dies while a Service Provider,
               -----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

        (e)    Buyout Provisions. The Administrator may at any time offer to buy
               -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

    10. Non-Transferability of Options. Options may not be sold, pledged,
        ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

    11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
        ----------------------------------------------------------------

        (a)    Changes in Capitalization. Subject to any required action by the
               -------------------------
Stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon


                                       -8-

<PAGE>


cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. 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 of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with
              --------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in



                                       -9-

<PAGE>



fair market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.

     12. Time of Granting Options and Stock Purchase Rights. The date of grant
         --------------------------------------------------
of an Option shall, for all purposes, be the date on which the Administrator
makes the determination granting such Option, or such other date as is
determined by the Administrator. Notice of the determination shall be given to
each Employee or Consultant to whom an Option is so granted within a reasonable
time after the date of such grant.


     13. Amendment and Termination of the Plan.
         -------------------------------------


         (a)  Amendment and Termination. The Board may at any time amend, alter,
              -------------------------
suspend or terminate the Plan.


         (b)  Stockholder Approval. The Board shall obtain stockholder approval
              --------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.


         (c)  Effect of Amendment or Termination. No amendment, alteration,
              ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

     14. Conditions Upon Issuance of Shares.
         ----------------------------------

         (a)  Legal Compliance. Shares shall not be issued pursuant to the
              ----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

         (b)  Investment Representations. As a condition to the exercise of an
              --------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

     15. Inability to Obtain Authority. The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.


                                       -10-

<PAGE>



     16. Reservation of Shares. The Company, during the term of this Plan, shall
         ---------------------
at all times reserve and keep available such numberof Shares as shall be
sufficient to satisfy the requirements of the Plan.


     17. Stockholder Approval. The Plan shall be subject to approval by the
         --------------------
stockholders of the Company within twelve (12) monthsafter the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under Applicable Laws.





                                       -11-