Cicero Stock Option Plan








































CICERO,
INC.




2005
EMPLOYEE STOCK OPTION PLAN































TABLE
OF CONTENTS








	 	 	
       

      Page

       

	
       

      ARTICLE
      I.

       
	
       

      PURPOSE

       
	
       

      1

       

	
       

      ARTICLE
      II.

       
	
       

      DEFINITIONS

       
	
       

      1

       

	
       

      ARTICLE
      III.

       
	
       

      ADMINISTRATION

       
	
       

      3

       

	
       

      ARTICLE
      IV.

       
	
       

      SHARE
      AND OTHER LIMITATIONS

       
	
       

      5

       

	
       

      ARTICLE
      V.

       
	
       

      ELIGIBILITY

       
	
       

      6

       

	
       

      ARTICLE
      VI.

       
	
       

      STOCK
      OPTION GRANTS

       
	
       

      6

       

	
       

      ARTICLE
      VII.

       
	
       

      NON-TRANSFERABILITY

       
	
       

      9

       

	
       

      ARTICLE
      VIII.

       
	
       

      CHANGE
      IN CONTROL PROVISIONS

       
	
       

      9

       

	
       

      ARTICLE
      IX.

       
	
       

      TERMINATION
      OR AMENDMENT OF PLAN

       
	
       

      11

       

	
       

      ARTICLE
      X.

       
	
       

      UNFUNDED
      PLAN

       
	
       

      11

       

	
       

      ARTICLE
      XI.

       
	
       

      GENERAL
      PROVISIONS

       
	
       

      11

       

	
       

      ARTICLE
      XII.

       
	
       

      EFFECTIVE
      DATE OF PLAN

       
	
       

      13

       

	
       

      ARTICLE
      XIII.

       
	
       

      TERM
      OF PLAN

       
	
       

      13

       

	
       

      ARTICLE
      XIV.

       
	
       

      NAME
      OF PLAN

       
	
       

      13

       































CICERO,
INC.




2005
EMPLOYEE STOCK OPTION PLAN







ARTICLE
I




PURPOSE




The
purpose of this Cicero, Inc. 2005 Employee Stock Option Plan (the “Plan”) is to
enhance the profitability and value of Cicero, Inc. (the “Company”) for the
benefit of its shareholders by enabling the Company to offer certain employees
and Consultants (as defined herein) of the Company and its Subsidiaries (as
defined herein) and non-employee directors of the Company stock based incentives
in the Company, thereby creating a means to raise the level of stock ownership
by employees, Consultants and non-employee directors in order to attract, retain
and reward such individuals and strengthen the mutuality of interests between
such individuals and the Company’s shareholders.







ARTICLE
II




DEFINITIONS




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




2.1. “Board”
shall mean the Board of Directors of the Company.




2.2. “Cause”
shall mean, with respect to a Participant’s Termination of Relationship, unless
otherwise determined by the Committee at grant, willful misconduct in connection
with the Participant’s employment of consultancy or willful failure to perform
his or her employment of consultancy responsibilities in the best interests of
the Company (including, without limitation, breach by the Participant of any
provision of any employment, non-disclosure, non-competition or other similar
agreement between the Participant and the Company), as determined by the
Committee, which determination shall be final, conclusive and binding. With
respect to a Participant’s Termination of Directorship, Cause shall mean any act
or failure to act that constitutes “cause” for removal of a director under
applicable New Jersey law.




2.3. “Change
in Control” shall have the meaning set forth in Article VIII.




2.4. “Code”
shall mean the Internal Revenue Code of 1986, as amended. Any reference to any
section of the Code shall also be a reference to any successor
provision.




2.5. “Committee”
shall mean a committee of the Board appointed from time to time by the Board,
which Committee shall be intended to consist of three or more directors who are
non-employee directors as defined in Rule 16b-3 (as defined herein) and outside
directors as defined under Section 162(m) of the Code (as defined herein). If
for any reason the appointed Committee does not meet the requirements of Rule
16b-3 or Section 162(m) of the Code, such noncompliance with the requirements of
Rule 16b-3 or Section 162(m) of the Code shall not affect the validity of the
awards, grants, interpretations or other actions of the Committee.
Notwithstanding the forgoing, with respect to grants of Options to non-employee
directors and any action hereunder relating to Options held by non-employee
directors, the Committee shall mean the Board. If and to the extent that no
Committee exists which has the authority to administer the Plan, the functions
of the Committee shall be exercised by the Board.




2.6. “Common
Stock” means the Common Stock, par value $0.001 per share, of the
Company.




2.7. “Consultant”
means any advisor or consultant to the Company or its subsidiaries who is
eligible pursuant Article V to be granted Options under this Plan.




2.8. “Disability”
shall mean total and permanent disability, as defined in Section 22(e)(3) of the
Code.








1













2.9. “Effective
Date” shall mean the effective date of the Plan as defined in Article
XII.




2.10. “Eligible
Employee” shall mean the employees of the Company and its subsidiaries who are
eligible pursuant to Article V to be granted Options under this
Plan.




2.11. “Exchange
Act” shall mean the Securities Exchange Act of 1934.




2.12. “Fair
Market Value” for purposes of this Plan, unless otherwise required by an
applicable provision of the Code or any regulations issued thereunder, shall
mean, as of any date, the last sales price reported for the Common Stock on the
applicable date (i) as reported by the principal national securities exchange in
the United States on which it is then traded, or (ii) if not traded on any such
national securities exchange, as quoted on an automated quotation system
sponsored by the National Association of Securities Dealers. If the Common Stock
is not readily tradable on a national securities exchange or any system
sponsored by the National Association of Securities Dealers, its Fair Market
Value shall be set in good faith by the Committee. For purposes of the grant of
any Option, the applicable date shall be the date for which the last sales price
is available at the time of the grant.




2.13. “Good
Reason” shall mean, with respect to a Participant’s Termination of Relationship,
unless otherwise determined by the Committee at grant, a voluntary termination
due to “good reason,” as the Committee, in its sole discretion, decides to treat
as a Good Reason termination. Notwithstanding the foregoing, with respect to a
Participant’s Termination of Employment, Good Reason shall mean, in the case
where there is an employment agreement between the Company or a Subsidiary and
the Participant in effect at the time of the grant that defines “good reason”
(or words of like import), a termination that is or would be deemed “good
reason” (or words of like import) as defined under such employment agreement at
the time of grant.




2.14. “Incentive
Stock Option” shall mean any Stock Option awarded under this Plan intended to
be, and designated as, an “Incentive Stock Option” within the meaning of Section
422 of the Code.




2.15. “Non-Qualified
Stock Option” shall mean any Stock Option awarded under this Plan that is not an
Incentive Stock Option.




2.16. “Participant”
shall mean the following persons to whom an Option has been granted pursuant to
this Plan: (i) Eligible Employees of the Company or its Subsidiaries; (ii)
Consultants of the Company or its Subsidiaries; and (iii) non-employee directors
of the Company.




2.17. “Retirement”
with respect to a Participant’s Termination of Relationship shall mean a
Termination of Relationship without Cause from the Company and/or a Subsidiary
by a Participant who has attained (i) at least the age of sixty-five (65) or
(ii) such earlier date after age fifty-five (55) as approved by the Committee
with regard to such Participant. With respect to a Participant’s Termination of
Directorship, Retirement shall mean the failure to stand for reelection or the
failure to be reelected after a Participant has attained the age of sixty-five
(65).




2.18. “Rule
16b-3” shall mean Rule 16b-3 under Section 16(b) of the Exchange Act as then in
effect or any successor provision.




2.19. “Section
162(m) of the Code” shall mean the exception for performance based compensation
under Section 162(m) of the Code and any Treasury regulations
thereunder.




2.20. “”Stock
Options” or “Option” shall mean any option to purchase shares of Common Stock
granted to Eligible Employees, Consultants or non-employee directors pursuant to
Article VI.




2.21. “Subsidiary”
shall mean any corporation that is defined as a subsidiary corporation in
Section 424(f) of the Code.




2.22. “Ten
Percent Shareholder” shall meant a person owning Common Stock of the Company
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company as defined in Section 422 of the
Code.








2













2.23. “Termination
of Consultancy” shall mean (i) an individual is no longer acting as a Consultant
to the Company or a Subsidiary or (ii) when an entity which is retaining a
Participant as a Consultant ceases to be a Subsidiary, unless the Participant
thereupon is retained as a Consultant by the Company or another
Subsidiary.




2.24. “Termination
of Directorship” shall mean, with respect to a non-employee director, that the
non-employee director has ceased to be a director of the Company for any
reason.




2.25. “Termination
of Employment” shall mean (i) a termination of service (for reasons other than a
military or personal leave of absence granted by the Company) of a Participant
from the Company and its Subsidiaries or (ii) when an entity which is employing
a Participant ceases to be a Subsidiary, unless the Participant thereupon
becomes employed by the Company or another Subsidiary.




2.26. “Termination
of Relationship” shall mean a Termination of Employment or a Termination of
Consultancy, as applicable.




2.27. “Transfer”
or “Transferred” shall mean anticipate, alienate, attach, sell, assign, pledge,
encumber, charge or otherwise transfer.




2.28. “Withholding
Election” shall have the meaning set forth in Section 11.4.







ARTICLE
III




ADMINISTRATION







3.1. The
Committee. The
Plan shall be administered and interpreted by the Committee.




3.2. Awards. The
Committee shall have full authority to grant Stock Options, pursuant to the
terms of this Plan. In particular, the Committee shall have the
authority:




(a) to select
the Eligible Employees, Consultants and non-employee directors to whom Stock
Options may from time to time be granted hereunder;




(b) to
determine whether and to what extent Stock Options are to be granted hereunder
to one or more Eligible Employees, Consultants or non-employee
directors;




(c) to
determine, in accordance with the terms of the Plan, the number of shares of
Common Stock to be covered by each Stock Option granted to an Eligible Employee,
Consultant or non-employee director;




(d) to
determine the terms and conditions, not inconsistent with the terms of this
Plan, of any Stock Options granted hereunder to an Eligible Employee, Consultant
or non-employee director (including, but not limited to, the share price, any
restriction or limitation, any vesting schedule or acceleration thereof, or any
forfeiture restrictions or waiver thereof, and the share of Common Stock
relating thereto, based on such factors, if any, as the Committee shall
determine, in its sole discretion);




(e) to
determine whether and under what circumstances a Stock Option may be settled in
cash and/or Common Stock under Subsection 6.3(d);




(f) to
determine whether, to what extent and under what circumstances to provide loans
(which shall be on a recourse basis and shall bear a reasonable rate of
interest) to Eligible Employees, Consultants or non-employee directors in order
to exercise Options under the Plan; and




(g) to
determine whether to require Eligible Employees, Consultants, and non-employee
directors, as a condition of the granting of any Option, to not sell or
otherwise dispose of shares acquired pursuant to the
exercise of an Option for a period of time as determined by the Committee, in
its sole discretion, following the date of the acquisition of such
Option.








3


















3.3. Guidelines. Subject
to Article IX hereof, the Committee shall have the authority to:




(a) adopt,
alter and repeal such administrative rules, guidelines and practices governing
this Plan and perform all acts, including the delegation of its administrative
responsibilities, as it shall, from time to time, deem advisable;




(b) construe
and interpret the terms and provisions of this Plan and any Option granted under
this Plan (and any agreements relating thereto); and




(c) otherwise
supervise the administration of this Plan.




The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in this Plan or in any agreement relating thereto in the manner
and to the extent it shall deem necessary to carry this Plan into effect, but
only to the extent any such action would be permitted under the applicable
provisions of Rule 16b-3 (if any) and the applicable provisions of Section
162(m) of the Code (if any). The Committee may adopt special guidelines and
provisions for persons who are residing in, or subject to, the taxes of,
countries other than the United States to comply with applicable tax and
securities laws. If and solely to the extent applicable, this Plan is intended
to comply with Rule 16b-3 and Section 162(m) of the Code and shall be limited,
construed and interpreted in a manner so as to comply therewith.




3.4. Decisions
Final. Any
decision, interpretation or other action made or taken in good faith by or at
the direction of the Company, the Board or the Committee (or any of its members)
arising out of or in connection with the Plan shall be within the absolute
discretion of all and each of them, as the case may be, and shall be final,
conclusive and binding on the Company and all employees, directors, consultants
and Participants and their respective heirs, executors, administrators
successors and assigns.




3.5. Reliance
on Counsel. The
Company, the Board or the Committee may consult with legal counsel, who may be
counsel for the Company or other counsel, with respect to its obligations or
duties hereunder, or with respect to any action or proceeding or any question of
law, and shall not be liable with respect to any action taken or omitted by it
in good faith pursuant to the advice of such counsel.




3.6. Procedures. If the
Committee is appointed, the Board shall designate one of the member of the
Committee as chairman and the Committee shall hold meetings, subject to the
Bylaws of the Company, at such times and places as it shall deem advisable. A
majority of the Committee members shall constitute a quorum. All determinations
of the Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and singed by all Committee members in
accordance with the Bylaws of the Company shall be fully effective as if it had
been made by a vote at a meeting duly called and held. The Committee shall keep
minutes of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.




3.7. Designation
of Advisors - Liability.




(a) The
Committee may designate employees of the Company and professional advisors to
assist the Committee in the administration of the Plan and may grant authority
to employees to execute agreements or other documents on behalf of the
Committee.




b) The
Committee may employ such legal counsel, consultants and agents as it may deem
desirable for the administration of the Plan and may rely upon any opinion
received from any such counsel or consultant and any computation received from
such consultant or agent. Expenses incurred by the Committee or Board in the
engagement of any such counsel, consultant or agent shall be paid by the
Company. The Committee, its members and any person designated pursuant to
paragraph 3.7.1 above shall not be liable for any action or determination made
in good faith with respect to the Plan. To the maximum extent permitted by
applicable law, no officer or former officer of the Company or member or former
member of the Committee or the Board shall be liable of any action or
determination made in good faith with respect to the Plan or any Stock Option
granted under it. To
the maximum extent permitted by applicable law and the Certificate of
Incorporation and Bylaws of the Company and to the extent not covered by
insurance, each officer or former officer and member and former member of the
Committee or the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel reasonably
acceptable to the Company) or liability (including any sum paid in settlement of
a claim with the approval of the Company), and advanced amounts necessary to pay
the foregoing at the earliest time and to the fullest extent permitted, arising
out of any act or omission to act in connection with the Plan, except to the
extent arising out of such officer’s or former officer’s, member’s or former
member’s own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the officers, directors or members or former
officers, director or members may have under applicable law or under the
Certificate of Incorporation or Bylaws of the Company or Subsidiary.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Stock Options
granted to him or her under this Plan.








4





















ARTICLE
IV




SHARE AND
OTHER LIMITATIONS




4.1. Shares.




(a) General
Limitation. The
aggregate number of shares of Common Stock which may be issued under this Plan
with respect to which Stock Options may be granted shall not exceed 4,000,000
shares (subject to increase or decrease pursuant to Section 4.2) which may be
either authorized and unissued Common Stock or Common Stock held or acquired for
the treasury of the Company. If any Stock Option granted under this Plan
expires, terminates or is cancelled for any reason without having been exercised
in full or the Company repurchases any Stock Option pursuant to Section 6.3(f),
the number of shares of Common Stock underlying the repurchased Option, and/or
the number of shares of Common Stock underlying any unexercised Option shall
again be available for the purposes of Options under the Plan.




(b) Individual
Participant Limitations. The
maximum number of shares of Common Stock subject to any Option which may be
granted under this Plan to each Participant shall not exceed 500,000 shares
(subject to any increase or decrease pursuant to Section 4.2) during any fiscal
year of the Company.




4.2. Changes.




(a) The
existence of the Plan and the Options granted hereunder shall not affect in any
way the right or power of the Board or the shareholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, any merger or consolidation of
the Company or any Subsidiary, any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company or any Subsidiary, any sale or transfer of all or
part of the assets or business or any other corporate act of
proceeding.




(b) In the
event of any such change in the capital structure or business of the Company by
reason of any stock dividend or distribution, stock split or reverse stock
split, recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, distribution with respect to its outstanding
Common Stock or capital stock other than Common Stock, sale or transfer of all
or part of the assets or business, reclassification of its capital stock, or any
similar changes affecting the Company’s capital structure or business and the
Committee determines an adjustment is appropriate under the Plan, the number and
kind of shares or other property (including cash) to be issued upon exercise of
an outstanding Option and the purchase price thereof shall be appropriately
adjusted consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights granted
to, or available for, Participants under this Plan or as otherwise necessary to
reflect the change, and, any such adjustment determined by the Committee shall
be final, conclusive and binding on the Company and all Participants and
employees and their respective heirs, executors, administrators, successors and
assigns.








5













(c) Fractional
Shares of Common Stock resulting from any adjustment in Options pursuant to this
Article IV shall be aggregated until, and eliminated at, the time of exercise by
rounding down from fractions less than one-half (1/2) and rounding up for
fractions equal to or greater than one-half (1/2). No cash settlements shall be
made with respect to fractional shares eliminated by rounding. Notice of any
adjustment shall be given by the Committee to each Participant whose Option has
been adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.




(d) In the
event of a merger or consolidation in which the Company is not the surviving
entity or in the event of any transaction that results in the acquisition of all
or substantially all of the Company’s outstanding Common Stock by a single
person or entity or by a group of persons or entities acting in concert, or in
the event of the sale or transfer of all or substantially all of the Company’s
assets (all of the foregoing being referred to as “Acquisition Events”), then
the Committee may, in its sole discretion, terminate all outstanding Options of
Eligible Employees, Consultants and non-employee directors, effective as of the
date of the Acquisition Event, by delivering notice of termination to each such
Participant at least twenty (20) days prior to the date of consummation of the
Acquisition Event; provided, however, that during the period from the date on
which such notice of termination is delivered to the consummation of the
Acquisition Event, , each such Participant shall have the right to exercise in
full all of his or her Options that are outstanding (without regard to
exercisability otherwise contained in the Option Agreement) but contingent on
occurrence of the Acquisition Event, and provided that if the Acquisition Event
does not take place within the specified period after giving such notice for any
reason whatsoever, the notice and exercise shall be null and void.




If the
Acquisition Event occurs, to the extent the Committee does not terminate the
outstanding Options pursuant to this Section 4.2(d), then the provisions of
Section 4.2(b) shall apply.







ARTICLE
V




ELIGIBILITY




All
employees and Consultants of the Company and its subsidiaries and all
non-employee directors of the Company are eligible to be granted Stock Options
under this Plan. Eligibility under this Plan may be determined by the Committee
in its sole discretion.







ARTICLE
VI




STOCK
OPTION GRANTS




6.1. Options. Each
Stock Option granted hereunder shall be one of two types: (i) an Incentive Stock
Option intended to satisfy the requirements of Section 422 of the Code; or (ii)
a Non-Qualified Stock Option.




6.2. Grants. The
Committee shall have the authority to grant to any Eligible Employee one or more
Incentive Stock Options, Non-Qualified Stock Options or both types of Stock
Options. The Committee shall have the authority to grant to any Consultants one
or more Non-Qualified Stock Options. The Board shall have the authority to grant
to any non-employee director one or more Non-Qualified Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not qualify,
shall constitute a separate Non-Qualified Stock Option.




6.3. Terms
of Options. Options
granted under this Plan shall be subject to the following terms and conditions,
and shall be in such form and contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem
desirable:




(a) Option
Price. The
option price per share of Common Stock purchasable under an Incentive Stock
Option shall be determined by the Committee at the time of grant but shall not
be less than 100% of the Fair Market Value of the share of Common Stock at the
time of grant; provided, however, if an Incentive Stock 








6













Option is
granted to a Ten Percent Shareholder, the purchase price shall be no less than
110% of the Fair Market Value of the Common Stock. The purchase price of shares
of Common Stock subject to Non-Qualified Stock Options shall be determined by
the Committee.




(b) Option
Term. The
term of each Stock Option shall be fixed by the Committee, but no Stock Option
shall be exercisable more than ten (10) years after the date the Option is
granted; provided, however, that the term of an Incentive Stock Option granted
to a Ten Percent Shareholder may not exceed five (5) years.




(c) 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 at grant. If the Committee
provides, n its sole discretion, that any Stock Option is exercisable subject to
certain limitations (including, without limitation, that it is exercisable only
in installments or within certain time periods), the Committee may waive such
limitations on the exercisability at any time at or after the grant date in
whole or in part (including, without limitation, that the Committee may waive
the installment exercise provisions or accelerate the time which Options may be
exercised), based on such factors, if any, as the Committee shall determine, in
its sole discretion.




       
(d) Method
of Exercise. Subject
to whatever installment exercise and waiting period provisions apply under
6.3(c) above, Stock Options may be exercised in whole or in part at any time
during the Option term, 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 in such form, or other
arrangement for the satisfaction of the purchase price, as the Committee may
accept. If and to the extent determined by the Committee in its sole discretion
at or after the grant, payment in full or in part may also be made in the form
of Common Stock withheld from the shares to be received on the exercise of the
Stock Option hereunder or Common Stock owned by the Participant (and for which
the Participant has good title, free and clear or all liens and encumbrances)
based on the Fair Market Value of the Common Stock on the payment date as
determined by the Committee. No shares of Common Stock shall be issued until
payment, as provided herein, therefore has been made or provided for and the
Participant shall have none of the rights of a holders of shares of Common Stock
until such shares of Common Stock have been issued.




         
(e) Incentive
Stock Option Limitations. To the
extent that the aggregate Fair Market value (determined as of the time of grant)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an Eligible Employee during any calendar year
under the Plan and/or other stock option plan of the Company or any Subsidiary
or parent corporation (within the meaning of Section 424(e) of the Code) exceeds
$100,000, such Options shall be treated as Options which are not Incentive Stock
Options.




Should
the foregoing provision not be necessary in order for the Stock Options to
qualify as Incentive Stock Options, or should any additional provisions be
required, the Committee may amend the Plan accordingly, without the necessity of
obtaining the approval of the shareholders of the Company.




(f) Buy
Out and Settlement Provisions. The
Committee may at any time on behalf of the Company offer to buy out an Option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the Participant at the time that such offer is
made.




(g) Form,
Modification, Extension and Renewal of Options. Subject
to the terms and conditions and within the limitations of the Plan, an Option
shall be evidenced by such form of agreement or grant as approved by the
Committee, and the Committee may modify, extend or renew outstanding Options
granted under the Plan (provided that the rights of a Participant are not
reduced without his consent), or accept the surrender of outstanding Options (up
to the extent not theretofore exercised) and authorize the granting of new
Options in substitution thereof (to the extent not theretofore
exercised).




(h) Other
Terms and Conditions. Options
may contain such other provisions, which shall not be inconsistent with any of
the foregoing terms of the Plan, as the Committee shall deem appropriate
including, without limitation, permitting “reloads” such that the same number of
Options are granted as the number of Options exercised, shares used to pay for
the exercise price of Options or shares used to pay withholding taxes
(“Reloads”). With respect to Reloads, the exercise price of the new Stock Option
shall be the Fair Market Value on the date of the 








7













Reload
and the term of the Stock Option shall be the same as the remaining term of the
Options that are exercised, if applicable, or such other exercise price and term
as determined by the Committee.




6.4. Termination
of Relationship. The
following rules apply with regard to Options upon the Termination of
Relationship of a Participant:




(a) Termination
by Reason of Death. If a
Participant’s Termination of Relationship is by reason of death, any Stock
Option held by such Participant, unless otherwise determined by the Committee at
grant or, if no rights of the Participant’s estate are reduced, thereafter, may
be exercised, to the extent exercisable at the Participant’s death, by the legal
representative of the estate, at any time within a period of one (1) year from
the date of such death, but in no event beyond the expiration of the stated term
of the Stock Option.




(b) Termination
by Reason of Disability. If a
Participant’s Termination of Relationship is by reason of Disability, any Stock
Option held by such Participant, unless otherwise determined by the Committee at
grant or, if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant’s termination, by the
Participant (or the legal representative of the Participant’s estate if the
Participant dies after termination) at any time within a period of one (1) year
from the date of such termination, but in no event beyond the expiration of the
stated term of such Stock Option.




(c) Termination
by Reason of Retirement. If a
Participant’s Termination of Relationship is by reason of Retirement, any Stock
Option held by such Participant, unless otherwise determined by the Committee at
grant, or, if no rights of the Participant are reduced, thereafter, shall be
fully vested and may thereafter be exercised by the Participant at any time
within a period of one (1) year from the date of such termination, but in no
event beyond the expiration of the stated term of such Stock Option; provided,
however, that, if the Participant dies within such exercise period, any
unexercised Stock Option held by such Participant shall thereafter be
exercisable, to the extent to which it was exercisable at the time of death, for
a period of one (1) year (or such other period as the Committee may specify at
grant or, if no rights of Participant’s estate are reduced, thereafter) from the
date of such death, but in no event beyond the expiration of the stated term of
such Stock Option.




(d) Involuntary
Termination Without Cause or Termination for Good Reason. If a
Participant’s Termination of Relationship is by involuntary termination without
Cause or for Good Reason, any Stock Option held by such Participant, unless
otherwise determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, may be exercised, to the extent exercisable
at termination, by the Participant at any time within a period of ninety (90)
days from the date of such termination, but in no event beyond the expiration of
the stated term of such Stock Option.




(e) Termination
Without Good Reason. If a
Participant’s Termination of Relationship is voluntary but without Good Reason
and such Termination of Relationship occurs prior to, or more than ninety (90)
days after, the occurrence of an event which would be grounds for Termination of
Relationship by the Company for Cause (without regard to any notice or cure
period requirements), any Stock Option held by the Participant, unless otherwise
determined by the Committee at grant or, if no rights of the Participant are
reduced, thereafter, may be exercised, to the extent exercisable at termination,
by the Participant at any time within a period of thirty (30) days from the date
of such Termination of Relationship, but in no event beyond the expiration of
the stated term of such Stock Option.




(f) Other
Termination. Unless
otherwise determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, if a Participant’s Termination of
Relationship is for any reason other than death, Disability, Retirement, Good
Reason, involuntary termination without Cause or voluntary termination as
provided in Subsection 6.4(e) above, any Stock Option held by such Participant
shall thereupon terminate and expire as of the date of termination, provided
that (unless the Committee determines a different period upon grant or, if no
rights of the Participant are reduced, thereafter) in the event such termination
is for Cause or is a voluntary termination without Good Reason or voluntary
resignation within ninety (90) days after occurrence of an event which would be
grounds for Termination of Relationship by the Company for Cause (without regard
to any notice or cure period requirement), any Stock Option held by Participant
at the time of occurrence of the event which would be grounds for Termination of
Relationship for Cause shall be deemed to have terminated and expired upon
occurrence of the event which would be grounds for Termination of Relationship
by the Company for Cause.








8













6.5. Termination
of Directorship. The
following rules apply with regard to Options upon Termination of
Directorship:




(a) Death,
Disability or Otherwise Ceasing to be a Director Other than for
Cause. Except
as otherwise determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, upon the Termination of Directorship, on
account of Disability, death, Retirement, resignation, failure to stand for
reelection or failure to be reelected or otherwise other than as set forth in
6.5(b) below, all outstanding Options then exercisable and not exercised by the
Participant prior to such Termination of Directorship shall remain exercisable,
to the extent exercisable at the Termination of Directorship, by the Participant
or, in the case of death, by the Participant’s estate or by the person given
authority to exercise such Options by his or her will or by operation of law,
for a one (1) year period commencing on the date of the Termination of
Directorship, provided that such one (1) year period shall not extend beyond the
expiration of the stated term of such Options.




(b) Cause. Upon
removal, failure to stand for reelection or failure to be re-nominated for
Cause, or if the Company obtains or discovers information after Termination of
Directorship that such Participant had engaged in conduct that would have
justified a removal for Cause during such directorship, all outstanding Options
of such Participant shall immediately terminate and shall be null and
void.




(c) Cancellation
of Options. No
Options that were not exercisable during the period such person serves as a
director shall thereafter become exercisable upon a Termination of Directorship
for any reason or no reason whatsoever, and such Options shall terminate and
become null and void upon Termination of Directorship.







ARTICLE
VII




NON-TRANSFERABILITY




No Stock
Option shall be Transferable by the Participant otherwise than by will or by the
laws of descent and distribution. All Stock Options shall be exercisable, during
the Participant’s lifetime, only by the Participant. No Stock Option shall,
except as otherwise specifically provided by law or herein, be Transferable in
any manner, and any attempt to Transfer any such Option shall be void, and no
such Option shall in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be entitled
to such Option, nor shall it be subject to attachment or legal process for or
against such person.




ARTICLE
VIII




CHANGE IN
CONTROL PROVISIONS




8.1 Benefits. In the
event of a Change in Control of the Company (as defined below), except as
otherwise provided by the Committee upon the grant of an Option, the Participant
shall be entitled to the following benefits:




(a) Subject
to paragraph (b) below, all outstanding Options of the Participants granted
prior to the Change in Control shall be fully vested and immediately exercisable
in their entirety. The Committee, in its sole discretion, may provide for the
purchase of any such Stock Options by the Company for an amount of cash equal to
the excess of the Change in Control price (as defined below) of the shares of
Common Stock covered by the Stock Options, over the aggregate exercise price of
such Stock Options. For purposes of this Section 8.1, Change in Control price
shall mean the higher of (i) the highest price per share of Common Stock paid in
any transaction related to the Change in Control of the Company or (ii) the
highest Fair Market Value per share of Common Stock at any time during thr sixty
(60) day period preceding a Change in Control.




(b) Notwithstanding
anything to the contrary herein, unless the Committee provides otherwise at the
time an Option is granted to an Eligible Employee or Consultant hereunder or
thereafter, no acceleration of exercisability shall occur with respect to such
Option if the Committee reasonably determines in good faith, prior to the
occurrence of the Change in Control, that the Options shall be honored or
assumed, or new 








9













rights
substituted therefore (each such honored, assumed or substituted option
hereinafter called an “Alternative Option”), by such Participant’s employer (or
the parent of such employer), or in the case of a Consultant, by the entity (or
its parent or subsidiary) which retains the Consultant, immediately following
the Change in Control, provided that any such Alternative Option must meet the
following criteria:




(i) the
Alternative Option must be based on stock which is traded on an established
securities market, or which will be traded within thirty (30) days of the Change
in Control;




(ii) the
Alternative Option must provide such Participant with rights and entitlements
substantially equivalent to or better then the rights, terms and conditions
applicable under such Option, including, but not limited to, an identical or
better exercise schedule; and




(iii) the
Alternative Option must have economic value substantially equivalent to the
value of such Option (determined at the time of the Change in
Control).




For
purposes of Incentive Stock Options, any assumed or substituted Option shall
comply with the requirements of Treasury regulation §1.425-1 (and any amendment
thereto).




8.2 Change
in Control. A
Change in Control shall be deemed to have occurred:




(a) upon any
“person” as such term is used in Section 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding securities under
any employee benefit plan of the Company, any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership in Common Stock of the Company), becoming the
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding securities (including,
without limitation, securities owned at the time of any increase in
ownership);




(b) during
any period of two consecutive years, a change in the composition of the Board of
Directors of the Company such that the individuals who, as of the date hereof,
comprise the Board (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board, provided, however, for purposes of this
subsection, that any individual who becomes a member of an Incumbent Board
subsequent to the date hereof, whose election, or nomination for election by the
Company’s shareholders, was approved in advance or contemporaneously with such
election by a vote of at least a majority of those individuals who are members
of the Incumbent Board (or deemed to be such pursuant to this provision) shall
be considered as though such individual were a member of the Incumbent Board;
but, provided further, that any such individual whose assumption of office
occurs as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of the Company or actual or
threatened tender offer for shares of the Company or similar transaction or
other contest for corporate control (other than a tender offer by the Company)
shall not be so construed as a member of the Incumbent Board;




(c) upon a
merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more then fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or




(d) upon the
shareholders’ of the Company approval of a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets other than the sale of all or
substantially all of the assets of the Company to a person or persons who
beneficially own, directly or indirectly, at least fifty percent (50%) or more
of the combined voting power of the outstanding voting securities of the Company
at the time of the sale.








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ARTICLE
IX




TERMINATION
OR AMENDMENT OF PLAN




9.1 Termination
or Amendment.
Notwithstanding any other provisions of this Plan, the Board may at any time,
and from time to time, amend, in whole or in part, any or all of the provisions
of the Plan, or suspend or terminate it entirely, retroactively or otherwise;
provided, however, that, unless otherwise required by law or specifically
provided herein, the rights of a Participant with respect to the Options granted
prior to such amendment, suspension or termination, may not be impaired without
the consent of the Participant and, provided further, without the approval of
the shareholders of the Company, if and to the extent required by the applicable
provisions of Rule 16b-3 or under the applicable provisions of Section 162(m) of
the Code or, with regard to Incentive Stock Options, Section 422 of the Code, no
amendment may be made which would: (i) increase the maximum individual
Participant limitations under Section 4.1(b); (ii) change the classification of
employees eligible to receive Options under this Plan; (iii) extend the maximum
option period under Section 6.3; or (iv) require shareholder approval in order
for the Plan to continue to comply with the applicable provisions, if any, of
Section 162(m) of the Code or, with regards to Incentive Stock Options, Section
422 of the Code. In no event may the Plan be amended without the approval of the
shareholders of the Company in accordance with applicable law or other
requirements to increase the aggregate number of shares of Common Stock that may
be issued under the Plan or to make any other amendment that would require
shareholder approval under the rules of any exchange or system on which the
Company’s securities are listed or traded at the request of the
Company.




The
Committee may amend the terms of any Option theretofore granted, prospectively
or retroactively, but, subject to Article IV above or as otherwise specifically
provided herein, no such amendment or other action by the Committee shall impair
the rights of any holder without the holder’s consent.







ARTICLE
X




UNFUNDED
PLAN




10.1. Unfunded
Status if Plan. This
Plan is intended to constitute an “unfunded” plan for incentive compensation.
With respect to any payments as to which a Participant has a fixed and vested
interest but which are 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.





ARTICLE
XI




GENERAL  PROVISIONS



11.1. Legend. The
Committee may require each person receiving shares of Common Stock pursuant to
the exercise of a Stock Option under the Plan to represent to and agree with the
Company in writing that the Participant is acquiring the shares without a view
to distribution thereof. In addition to any legend required by this Plan, the
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on Transfer.




All
certificates for shares of Common Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirement of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed or any national securities association system upon whose
system the Common Stock is then quoted, any applicable federal or state
securities law, and any applicable corporate law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.








11
















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




11.3. No
Rights to Employment/Consultancy/Directorship. Neither
this Plan nor the grant of any Option hereunder shall give any Participant or
other individual any right with respect to continuance of employment or
consultancy by the Company or any Subsidiary, nor shall there be a limitation in
any way on the right of the Company or any Subsidiary by which an employee is
employed or if a consultant, retained, to terminate his employment or
consultancy at any time. Neither this Plan nor the grant of any Option hereunder
shall impose any obligation on the Company to retain any Participant as a
director, nor shall it impose on the part of any Participant any obligation to
remain as a director of the Company.




11.4. Withholding
of Taxes. The
Company shall have the right, if necessary or desirable (as determined by the
Company), to deduct from any payment to be made to a Participant, or to
otherwise require, prior to the issuance or delivery of any shares of Common
Stock or the payment of any cash hereunder, payment by the Participant of, any
Federal, state or local taxes required by law to be withheld.




The
Committee may permit any such withholding obligation with regard to any
Participant to be satisfied by reducing the number of shares of Common Stock
otherwise deliverable or by delivering shares of Common Stock already owned. Any
fraction of a share of Common Stock required to satisfy such tax obligations
shall be disregarded and the amount due shall be paid instead of cash by the
Participant.




11.5. Listing
and Other Conditions.




(a) As long
as the Common Stock is listed on a national securities exchange or system
sponsored by a national securities association, the issue of any shares of
Common Stock pursuant to the exercise of an Option shall be conditioned upon
such shares being listed on such exchange or system. The Company shall have no
obligation to issue such shares unless and until such shares are so listed, and
the right to exercise any Option with respect to such shares shall be
conditioned upon such listing and shall be suspended until such listing has been
effected.




(b) If at any
time counsel to the Company shall be of the opinion that any sale or delivery of
shares of Common Stock pursuant to the exercise of an Option is or may in the
circumstances be unlawful or result in the imposition of excise taxes on the
Company under the statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make such sale or delivery, or to make
any application of to effect or to maintain any qualification or registration
under the Securities Act of 1933, as amended, or otherwise with respect to the
shares of Common Stock, and the right to exercise any Option shall be suspended
until, in the opinion of said counsel, such sale or delivery shall be lawful or
will not result in the imposition of excise taxes on the Company.




(c) Upon
termination of any period of suspension under this Section 11.5, any Option
affected by such suspension which shall not have expired or terminated shall be
reinstated as to all shares available before suspension and as to shares which
would otherwise have become available during the period of such suspension, but
no such suspension shall extend the term of any Option.




11.6. Governing
Law. This
Plan shall be governed and constructed in accordance with the laws of the State
of New Jersey (regardless of the law that might otherwise govern under
applicable New Jersey principals of conflicts of laws).




11.7. Construction.
Wherever any words are used in this Plan in the masculine gender they shall be
construed as though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein in the
singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply.








12













11.8. Other
Benefits. No
Stock Option granted under this Plan shall be deemed compensation for purposes
of computing benefits under any retirement plan of the Company or its
Subsidiaries nor affect any benefits under any other benefit plan now or
subsequently in effect under which the availability or amount of benefits is
related to the level of compensation.




11.9. Costs. The
Company shall bear all expenses included in the administering this Plan,
including expenses of issuing Common Stock pursuant to the exercise of any
Options hereunder.




11.10. No
Right to Same Benefits. The
provisions of Options need not be the same with respect to each Participant, and
such Options to individual Participants need not be the same in subsequent
years.




11.11. Death/Disability. The
Committee may in its discretion require the transferee of a Participant to
supply it with written notice of the Participant’s death or Disability and to
supply it with a copy of the will (in the case of a Participant’s death) or such
other evidence as the Committee deems necessary to establish the validity of the
transfer of an Option. The Committee may also require the agreement of the
transferee to be bound by all of the terms and conditions of the
Plan.




11.12. Section
16(b) of the Exchange Act. All
elections and transactions under the Plan by persons subject to Section 16 of
the Exchange Act involving shares of Common Stock are intended to comply with
any applicable exemptive condition under Rule 16b-3. To the extent applicable,
the Committee may establish and adopt written administrative guidelines,
designated to facilitate compliance with Section 16(b) of the Exchange Act, as
it may deem necessary or proper for the administration and operation of the Plan
and the transaction of business thereunder. For purposes of this paragraph, the
Company shall be deemed publicly held when and if the Company has a class of
common equity securities registered under Section 12 of the Exchange
Act.




11.13. Severability
of Provisions. If any
provision of the Plan shall be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and the Plan
shall be construed and enforced as if such provisions had not been
included.




11.14. Headings
and Captions. The
headings and captions herein are provided for reference and convenience only,
shall not be considered part of the Plan and shall not be employed in the
construction of the Plan.







ARTICLE
XII




EFFECTIVE
DATE OF PLAN




The Plan
shall take effect upon adoption by the Board, but the Plan (and any grants of
Options made prior to the shareholder approval mentioned herein) shall be
subject to the requisite approval of the shareholders of the Company. In the
absence of such approval, such Options shall be null and void.







ARTICLE
XIII




TERM OF
PLAN




No Stock
Option shall be granted pursuant to the Plan on or after the tenth anniversary
of the earlier of the date the Plan is adopted or the date of shareholder
approval, but Options granted prior to such tenth anniversary may extend beyond
that date.







ARTICLE
XIV




NAME OF
PLAN




This Plan
shall be known as the Cicero, Inc. 2005 Employee Stock Option Plan.









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