<PAGE>
                                                                    EXHIBIT 10.3

                           PLATINUM technology, inc.


                         BROAD-BASED STOCK OPTION PLAN
<PAGE>

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                               TABLE OF CONTENTS

ARTICLE I                                                          Page
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ESTABLISHMENT.....................................................    1
     1.1   Purpose................................................    1

ARTICLE II
----------
DEFINITIONS.......................................................    1
     2.1   "Affiliate"............................................    1
     2.2   "Agreement"............................................    1
     2.3   "Beneficiary"..........................................    1
     2.4   "Board of Directors" or "Board"........................    2
     2.5   "Cause"................................................    2
     2.6   "Change in Control" and "Change in Control Price"......    2
     2.7   "Code" or "Internal Revenue Code"......................    2
     2.8   "Commission"...........................................    2
     2.9   "Committee"............................................    2
     2.10  "Common Stock".........................................    2
     2.11  "Company"..............................................    2
     2.12  "Covered Employee".....................................    3
     2.13  "Disability"...........................................    3
     2.14  "Effective Date".......................................    3
     2.15  "Exchange Act".........................................    3
     2.16  "Fair Market Value"....................................    3
     2.17  "Grant Date"...........................................    3
     2.18  "NASDAQ"...............................................    3
     2.19  "Option Period"........................................    3
     2.20  "Option Price".........................................    3
     2.21  "Participant"..........................................    3
     2.22  "Performance Option"...................................    4
     2.23  "Plan".................................................    4
     2.24  "Representative".......................................    4
     2.25  "Retirement"...........................................    4
     2.26  "Rule 16b-3"...........................................    4
     2.27  "Securities Act".......................................    4
     2.28  "Stock Option" or "Option".............................    4
     2.29  "Termination of Employment"............................    4

ARTICLE III
-----------
ADMINISTRATION....................................................    5    
     3.1   Committee Structure and Authority......................    5

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ARTICLE IV
----------

STOCK SUBJECT TO PLAN.............................................    7

  4.1      Number of Shares.......................................    7
  4.2      Release of Shares......................................    7
  4.3      Restrictions on Shares.................................    8
  4.4      Stockholder Rights.....................................    8
  4.5      Best Efforts To Register...............................    8
  4.6      Anti-Dilution..........................................    9

ARTICLE V
---------

ELIGIBILITY.......................................................    9
  5.1      Eligibility............................................    9
  5.2      Per-Person Option Limitations..........................    9

ARTICLE VI
----------
STOCK OPTIONS.....................................................   10
  6.1      General................................................   10
  6.2      Grant and Exercise.....................................   10
  6.3      Terms and Conditions...................................   10
  6.4      Termination by Reason of Death.........................   12
  6.5      Termination by Reason of Disability....................   12
  6.6      Other Termination......................................   12
  6.7      Cashing Out of Option..................................   12

ARTICLE VII
-----------

PERFORMANCE OPTIONS...............................................   13

  7.1      Performance Options....................................   13

ARTICLE VIII
------------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN............   14
  8.1      Limited Transfer During Offering.......................   14
  8.2      Committee Discretion...................................   15
  8.3      No Company Obligation..................................   15

ARTICLE IX
----------
CHANGE IN CONTROL PROVISIONS......................................   15
  9.1      Impact of Event........................................   15
  9.2      Definition of Change in Control........................   16
  9.3      Change in Control Price................................   16

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ARTICLE X

MISCELLANEOUS.................................................................  17
   10.1    Amendments and Termination.........................................  17
   10.2    Stand-Alone, Additional, Tandem, and Substitute Options............  17
   10.3    Form and Timing of Payment Under Options; Deferrals................  18
   10.4    Status of Options Under Code Section 162(m)........................  18
   10.5    Unfunded Status of Plan; Limits on Transferability.................  18
   10.6    General Provisions.................................................  18
   10.7    Mitigation of Excise Tax...........................................  20
   10.8    Rights with Respect to Continuance of Employment...................  20
   10.9    Options in Substitution for Options Granted by Other Corporations..  20
  10.10    Procedure for Adoption.............................................  21
  10.11    Procedure for Withdrawal...........................................  21
  10.12    Delay..............................................................  21
  10.13    Headings...........................................................  21
  10.14    Severability.......................................................  21
  10.15    Successors and Assigns.............................................  21
  10.16    Entire Agreement...................................................  22

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<PAGE>
 
            PLATINUM technology, inc. BROAD-BASED STOCK OPTION PLAN


                                   ARTICLE I
                                   ---------
                                        
                                 ESTABLISHMENT
                                 -------------


     1.1  Purpose.
          -------

     The PLATINUM technology, inc. Broad-Based Stock Option Plan ("Plan") is
hereby established by PLATINUM technology, inc. ("Company"). The purpose of the
Plan is to promote the overall financial objectives of the Company and its
stockholders by motivating those persons selected to participate in the Plan to
achieve long-term growth in stockholder equity in the Company and by retaining
the association of those individuals who are instrumental in achieving this
growth. The Plan is intended to qualify certain compensation awarded under the
Plan for tax deductibility under Section 162(m) of the Code (as defined herein)
to the extent deemed appropriate by the Committee (as defined herein). The Plan
is adopted effective as of June 15, 1998.


                                  ARTICLE II
                                  ----------
                                        

                                  DEFINITIONS
                                  -----------

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

     2.1  "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.

     2.2  "Agreement" means, individually or collectively, any agreement entered
into pursuant to the Plan pursuant to which an Option is granted to a
Participant.

     2.3  "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Options are transferred if and to
the extent permitted hereunder. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person, persons, trust or trusts entitled by will or the
laws of descent and distribution to receive such benefits.

                                       1
<PAGE>
 
     2.4  "Board of Directors" or "Board" means the Board of Directors of the
Company.

     2.5  "Cause" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall mean (a) any act or failure to
act deemed to constitute cause under the Company's established practices,
policies or guidelines applicable to the Participant or (b) the Participant's
act or act of omission which constitutes gross misconduct with respect to the
Company or an Affiliate in any material respect, including, without limitation,
an act or act of omission of a criminal nature, the result of which is
detrimental to the interests of the Company or an Affiliate, or conduct, or the
omission of conduct, which constitutes a material breach of a duty the
Participant owes to the Company or an Affiliate.

     2.6  "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 9.2 and 9.3, respectively.

     2.7  "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.

     2.8  "Commission" means the Securities and Exchange Commission or any
successor agency.

     2.9  "Committee" means the Compensation Committee of the Board or such
other Board committee as may be designated by the Board to administer the Plan;
provided, however, that the Committee shall consist solely of two or more
directors, each of whom is a "Non-Employee Director" as defined in Rule 16b-3
under the Exchange Act and each of whom is also an "outside director" under
Section 162(m) of the Code.

     2.10 "Common Stock" means the shares of the regular voting Common Stock,
$.001 par value, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.

     2.11 "Company" means PLATINUM technology, inc., a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and any assignee of
or successor to substantially all of the assets of the Company.

                                       2
<PAGE>
 
     2.12 "Covered Employee" means a Participant who is a "covered employee"
within the meaning of Section 162(m) of the Code.

     2.13 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully self-
induced sickness; or (ii) an injury or disease contracted, suffered, or incurred
while participating in a criminal offense. The determination of Disability shall
be made by the Committee. The determination of Disability for purposes of this
Plan shall not be construed to be an admission of disability for any other
purpose.

     2.14 "Effective Date" means June 15, 1998.

     2.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     2.16 "Fair Market Value" means the fair market value of Common Stock as
determined by the Committee or under procedures established by the Committee.
Unless otherwise determined by the Committee, the Fair Market Value per share of
Common Stock as of any given date shall be the closing sale price per share
reported on a consolidated basis for stock listed on the principal stock
exchange or market on which Common Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported.

    2.17  "Grant Date" means the date as of which an Option is granted pursuant
to the Plan.

    2.18  "NASDAQ" means The Nasdaq Stock Market, including the Nasdaq National
Market.

    2.19  "Option Period" means the period during which an Option shall be
exercisable in accordance with the related Agreement and Article VI.

    2.20  "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3(b).

    2.21  "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Option has been granted by the Committee under the
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, the Participant's parents, spouse or descendants, or a custodian
under a uniform gifts

                                       3
<PAGE>
 
to minors act or similar statute for the benefit of the Participant's
descendants, to the extent permitted by the Committee. Notwithstanding the
foregoing, the term "Termination of Employment" shall mean the Termination of
Employment of the person to whom the Option was originally granted.

    2.22  "Performance Option" means an Option, granted to a Participant under
Section 7.1 hereof, to purchase shares of Common Stock based upon performance
criteria specified by the Committee.

    2.23  "Plan" means the PLATINUM technology, inc. Broad-Based Stock Option
Plan, as herein set forth and as may be amended from time to time.

    2.24  "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been permissibly transferred; provided that
only one of the foregoing shall be the Representative at any point in time as
determined under applicable law and recognized by the Committee.

    2.25  "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such a plan, or if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.

    2.26  "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.

    2.27  "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

    2.28  "Stock Option" or "Option" means a right, granted to a Participant
under Section 6.1 hereof, to purchase Common Stock at a specified price during
specified time periods.

    2.29  "Termination of Employment" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Affiliate, or to be an officer, independent contractor, director or employee
of any entity that provides services to the Company or an Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, Retirement,

                                       4
<PAGE>
 
or severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. With respect to any person who is not an employee with
respect to the Company or a subsidiary of the Company, the Agreement shall
establish what act or event shall constitute a Termination of Employment for
purposes of the Plan. A transfer of employment from the Company to an Affiliate,
or from an Affiliate to the Company, will not be a Termination of Employment,
unless expressly determined by the Committee. A Termination of Employment shall
occur for an employee who is employed by an Affiliate if the Affiliate shall
cease to be an Affiliate, and the Participant shall not immediately thereafter
become an employee of the Company or an Affiliate.

     In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.



                                  ARTICLE III
                                  -----------

                                ADMINISTRATION
                                --------------


     3.1  Committee Structure and Authority. The Plan shall be administered by
the Committee. A majority of the Committee shall constitute a quorum at any
meeting thereof (including by telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the authority
to remove, replace or fill any vacancy of any member of the Committee upon
notice to the Committee and the affected member. Any member of the Committee may
resign upon notice to the Board. The Committee may allocate among one or more of
its members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.

     Among other things, the Committee shall have the authority, subject to the
terms of the Plan:

          (a)  to select those persons to whom Options may be granted from time
     to time;

          (b)  to determine whether and to what extent Options are to be granted
     hereunder;

          (c)  to determine the number of shares of Common Stock to be covered
     by each Option granted hereunder;

                                       5
<PAGE>
 
          (d)  to determine the terms and conditions of any Option granted
     hereunder (including, but not limited to, the Option Price, the Option
     Period, any exercise restriction or limitation and any exercise
     acceleration, forfeiture or waiver regarding any Option, any shares of
     Common Stock relating thereto, any performance criteria and the
     satisfaction of each criteria);

          (e)  to adjust the terms and conditions, at any time or from time to
     time, of any Option, subject to the limitations of Section 10.1;

          (f)  to determine to what extent and under what circumstances Common
     Stock and other amounts payable with respect to an Option shall be
     deferred;

          (g)  to determine under what circumstances an Option may be settled in
     cash or Common Stock;

          (h)  to provide for the forms of Agreements to be utilized in
     connection with the Plan;

          (i)  to determine whether a Participant has a Disability or a
     Retirement;

          (j)  to determine what securities law requirements are applicable to
     the Plan, Options and the issuance of shares of Common Stock under the Plan
     and to require of a Participant that appropriate action be taken with
     respect to such requirements;

          (k)  to cancel, with the consent of the Participant or as otherwise
     provided in the Plan or an Agreement, outstanding Options;

          (l)  to interpret and make final determinations with respect to the
     remaining number of shares of Common Stock available under this Plan;

          (m)  to require, as a condition of the exercise of an Option or the
     issuance or transfer of a certificate of Common Stock, the withholding from
     a Participant of the amount of any Federal, state or local taxes as may be
     necessary in order for the Company or any other employer to obtain a
     deduction or as may be otherwise required by law;

          (n)  to determine whether and with what effect a Participant has
     incurred a Termination of Employment;

          (o)  to determine whether the Company or any other person has a right
     or obligation to purchase Common Stock from a Participant and, if so, the
     terms and conditions on which such Common Stock is to be purchased;

          (p)  to determine the restrictions or limitations on the transfer of
     Common Stock;

                                       6
<PAGE>

          (q) to determine whether an Option is to be adjusted, modified or
     purchased, or is to become fully exercisable, under the Plan or the terms
     of an Agreement;

          (r) to determine the permissible methods of Option exercise and
     payment, including cashless exercise arrangements;

          (s) to adopt, amend and rescind such rules and regulations as, in its
     opinion, may be advisable in the administration of the Plan; and

          (t) to appoint and compensate agents, counsel, auditors or other
     specialists to aid it in the discharge of its duties.

     The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Option issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Options granted at different times or to
different Participants.

     Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Option, may be made at the time of the grant of the Option or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
Participants. No determination shall be subject to de novo review if challenged
in court.

                                  ARTICLE IV
                                  ----------
                                        
                             STOCK SUBJECT TO PLAN
                             ---------------------

     4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Options under the Plan shall be Ten Million (10,000,000) shares of
Common Stock authorized for issuance. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.

     4.2 Release of Shares. If any shares of Common Stock that are subject to
any Option cease to be subject to an Option or are forfeited, if any Option
otherwise terminates without issuance of shares of Common Stock being made to
the Participant, or if any shares (whether or not restricted) of Common Stock
are received by the Company in connection with the exercise of an Option,
including the satisfaction of tax withholding, such shares, in the discretion of
the Committee, may again be available for distribution in connection with
Options under the Plan.

                                       7
<PAGE>

     4.3 Restrictions on Shares. Shares of Common Stock issued in conjunction
with an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in an Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
or NASDAQ (or other public market) on which the Common Stock may then be listed
(or regularly traded), (ii) the completion of any registration or qualification
of such shares under Federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Option. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in this Plan or as
the Committee may otherwise require. The Committee may require any person
exercising an Option to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.

     4.4 Stockholder Rights. No person shall have any rights of a stockholder as
to shares of Common Stock subject to an Option until, after proper exercise of
the Option or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred.
Upon exercise of the Option or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a stockholder for any purpose whatsoever prior to such issuance. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued or transferred in
the Company's official stockholder records, except as provided herein or in an
Agreement.

     4.5 Best Efforts To Register. The Company will register under the
Securities Act the Common Stock delivered or deliverable pursuant to Options on
Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon as the Committee, in its sole
discretion, shall deem such registration appropriate. The Company will use its
best efforts to cause the registration statement to become effective and will
file such supplements and amendments to the registration statement as may be
necessary to keep the registration statement in effect until the earliest of (a)
one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all shares
delivered pursuant to any Option.

                                       8
<PAGE>

     4.6 Anti-Dilution. In the event of any Company stock dividend, stock split,
combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company stock
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee shall adjust or substitute, as the case may
be, the number of shares of Common Stock available for Options under the Plan,
the number of shares of Common Stock covered by outstanding Options, the
exercise price per share of outstanding Options, and performance conditions and
any other characteristics or terms of the Options as the Committee shall deem
necessary or appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that the Committee may limit any such
adjustment so as to maintain the deductibility of the Options under Section
162(m) and that any fractional shares resulting from such adjustment shall be
eliminated by rounding to the next lower whole number of shares with appropriate
payment for such fractional shares as shall reasonably be determined by the
Committee.

                                   ARTICLE V
                                   ---------
                                        
                                  ELIGIBILITY
                                  -----------

     5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Options shall be those
persons who are directors, officers, employees and consultants of the Company or
any subsidiary of the Company, who shall be in a position, in the opinion of the
Committee, to make contributions to the growth, management, protection and
success of the Company and its subsidiaries. Of those persons described in the
preceding sentence, the Committee may, from time to time, select persons to be
granted Options and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the terms and
conditions of the Option, the Committee may give consideration to the person's
functions and responsibilities, the person's contributions to the Company and
its subsidiaries, the value of the individual's service to the Company and its
subsidiaries and such other factors deemed relevant by the Committee. The
Committee may designate in writing any person who is not eligible to participate
in the Plan if such person would otherwise be eligible to participate in this
Plan (and members of the Committee are expressly excluded from participation in
the Plan).

     5.2 Per-Person Option Limitations. In each fiscal year during any part of
which the Plan is in effect, a Participant may not be granted Options relating
to more than One Million (1,000,000) shares of Common Stock, subject to
adjustment as provided in Section 4.6, under each of Article VI and Section
7.1(b).

                                       9
<PAGE>

                                  ARTICLE VI
                                  ----------
                                        
                                 STOCK OPTIONS
                                 -------------

     6.1 General. The Committee shall have authority to grant Stock Options
under the Plan at any time or from time to time. Stock Options granted hereunder
are not intended to be, and are not designated as, "incentive stock options"
within the meaning of Section 422 of the Code. Stock Options granted hereunder
shall be taxable pursuant to Section 83 of the Code. An Option shall entitle the
Participant to receive shares of Common Stock upon exercise of such Option,
subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Agreement
(the terms and provisions of which may differ from other Agreements), including,
without limitation, payment of the Option Price.

     6.2 Grant and Exercise. The grant of a Stock Option shall occur as of the
date the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in the Plan. Such Agreement shall become
effective upon execution by the Participant.

     6.3 Terms and Conditions. Stock Options shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:

          (a) Option Period. The Option Period of each Stock Option shall be
     fixed by the Committee; provided that no Stock Option shall be exercisable
     more than ten (10) years after the date the Stock Option is granted.

          (b) Option Price. The Option Price per share of the Common Stock
     purchasable under an Option shall be determined by the Committee; provided,
     however, that the Option Price per share shall be not less than the Fair
     Market Value per share on the date the Option is granted.

          (c) Exercisability. Subject to Section 9.1, Stock Options shall be
     exercisable at such time or times and subject to such terms and conditions
     as shall be determined by the Committee. If the Committee provides that any
     Stock Option is exercisable only in installments, the Committee may at any
     time waive such installment exercise provisions, in whole or in part. In
     addition, the Committee may at any time accelerate the exercisability of
     any Stock Option.

          (d) Method of Exercise. Subject to the provisions of this Article VI,
     a Participant may exercise Stock Options, in whole or in part, at any time
     during the Option Period by the Participant's giving written notice of
     exercise on a form provided by the Committee (if available) to the Company
     specifying the number of shares of Common Stock subject to the Stock Option
     to be purchased. Such notice shall be accompanied by payment in full of the

                                      10
<PAGE>

     purchase price by cash or check or such other form of payment as the
     Company may accept. If approved by the Committee, payment in full or in
     part may also be made (i) by delivering Common Stock already owned by the
     Participant having a total Fair Market Value on the date of such delivery
     equal to the Option Price; (ii) by the execution and delivery of a note or
     other evidence of indebtedness (and any security agreement thereunder)
     satisfactory to the Committee and permitted in accordance with Section
     6.3(e); (iii) by authorizing the Company to retain shares of Common Stock
     which would otherwise be issuable upon exercise of the Option having a
     total Fair Market Value on the date of delivery equal to the Option Price;
     (iv) by the delivery of cash or the extension of credit by a broker-dealer
     to whom the Participant has submitted a notice of exercise or otherwise
     indicated an intent to exercise an Option (in accordance with Part 220,
     Chapter II, Title 12 of the Code of Federal Regulations, so-called
     "cashless" exercise); or (v) by any combination of the foregoing. No shares
     of Common Stock shall be issued until full payment therefor, as determined
     by the Committee, has been made. A Participant shall have all of the rights
     of a stockholder of the Company holding the class of Common Stock that is
     subject to such Stock Option (including, if applicable, the right to vote
     the shares and the right to receive dividends), when the Participant has
     given written notice of exercise, has paid in full for such shares and such
     shares have been recorded on the Company's official stockholder records as
     having been issued or transferred.

          (e) Company Loan or Guarantee. Upon the exercise of any Option and
     subject to the pertinent Agreement and the discretion of the Committee, the
     Company may at the request of the Participant:

                  (i) lend to the Participant an amount equal to such portion of
          the Option Price as the Committee may determine; or

                  (ii) guarantee a loan obtained by the Participant from a 
          third-party for the purpose of tendering the Option Price.

     The terms and conditions of any loan or guarantee, including the term,
     interest rate and any security interest thereunder and whether the loan
     shall be with recourse, shall be determined by the Committee, except that
     no extension of credit or guarantee shall obligate the Company for an
     amount to exceed the lesser of the aggregate Fair Market Value per share of
     the Common Stock on the date of exercise, less the par value of the shares
     of Common Stock to be purchased upon the exercise of the Option, or the
     amount permitted under applicable laws or the regulations and rules of the
     Federal Reserve Board and any other governmental agency having
     jurisdiction.

          (f) Non-transferability of Options. Except as otherwise provided in an
     Agreement or determined by the Committee, no Stock Option or interest
     therein shall be transferable by the Participant other than by will or by
     the laws of

                                      11
<PAGE>
 
     descent and distribution, and all Stock Options shall be exercisable during
     the Participant's lifetime only by the Participant.


     6.4  Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of ninety
(90) days following the date of the appointment of a Representative (or such
other period or no period as the Committee may specify) or until the expiration
of the Option Period, whichever period is the shorter.

     6.5  Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the period of ninety (90) days (or such other period or no
period as the Committee may specify) immediately following the date of such
Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the foregoing.

     6.6  Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death or Disability or with Cause), any
Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser of the ninety (90) day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period. Unless
otherwise provided in an Agreement or determined by the Committee, if the
Participant incurs a Termination of Employment which is either (a) voluntary on
the part of the Participant (and is not due to Retirement) or (b) with Cause,
the Option shall terminate immediately. The death or Disability of a Participant
after a Termination of Employment otherwise provided herein shall not extend the
time permitted to exercise an Option.

     6.7  Cashing Out of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of any Stock Option
with respect to which Option at least six months have elapsed since the Grant
Date (provided that such limitation shall not apply to an Option granted to a
Participant who has subsequently died) to be exercised by paying the Participant
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock that is subject to the Option over the Option Price times
the number of shares of Common Stock subject to the Option on the effective date
of such cash-out.

                                      12
<PAGE>
 
                                  ARTICLE VII
                                  -----------

                              PERFORMANCE OPTIONS
                              -------------------


     7.1  Performance Options.

          (a) Performance Conditions. The right of a Participant to exercise or
     receive a grant or settlement of any Option, and its timing, may be subject
     to performance conditions specified by the Committee. The Committee may use
     business criteria and other measures of performance it deems appropriate in
     establishing any performance conditions, and may exercise its discretion to
     reduce or increase the amounts payable under any Option subject to
     performance conditions, except as limited under Sections 7.1(b) and 7.1(c)
     hereof in the case of a Performance Option intended to qualify under Code
     Section 162(m).

          (b) Performance Options Granted to Designated Covered Employees. If
     the Committee determines that a Performance Option to be granted to a
     person the Committee regards as likely to be a Covered Employee should
     qualify as "performance-based compensation" for purposes of Code Section
     162(m), the grant and/or settlement of such Performance Option shall be
     contingent upon achievement of preestablished performance goals and other
     terms set forth in this Section 7.1(b).

               (i) Performance Goals Generally. The performance goals for such
          Performance Options shall consist of one or more business criteria and
          a targeted level or levels of performance with respect to such
          criteria, as specified by the Committee consistent with this Section
          7.1(b). Performance goals shall be objective and shall otherwise meet
          the requirements of Code Section 162(m), including the requirement
          that the level or levels of performance targeted by the Committee
          result in the performance goals being "substantially uncertain." The
          Committee may determine that more than one performance goal must be
          achieved as a condition to settlement of such Performance Options.
          Performance goals may differ for Performance Options granted to any
          one Participant or to different Participants.

               (ii) Business Criteria. One or more of the following business
          criteria for the Company, on a consolidated basis, and/or for
          specified subsidiaries or business units of the Company (except with
          respect to the total stockholder return and earnings per share
          criteria), shall be used exclusively by the Committee in establishing
          performance goals for such Performance Options: (1) total stockholder
          return; (2) such total stockholder return as compared to total return
          (on a comparable basis) of a publicly available index such as, but not
          limited to, the Standard & Poor's 500, the Nasdaq Stock Market-U.S.
          Index or the H&Q Software Sector Index; (3) net income; (4) pre-tax
          earnings; (5) EBITDA; (6) pre-

                                      13
<PAGE>
 
          tax operating earnings after interest expense and before bonuses,
          service fees, and extraordinary or special items; (7) operating
          margin; (8) earnings per share; (9) return on equity; (10) return on
          capital; (11) return on investment; (12) operating income, excluding
          the effect of charges for acquired in-process technology and before
          payment of executive bonuses; (13) earnings per share, excluding the
          effect of charges for acquired in-process technology and before
          payment of executive bonuses; (14) working capital; and (15) total
          revenues.

               (iii) Performance Period: Timing For Establishing Performance
          Goals. Achievement of performance goals in respect of such Performance
          Options shall be measured over such periods as may be specified by the
          Committee. Performance goals shall be established on or before the
          dates that are required or permitted for "performance-based
          compensation" under Code Section 162(m).

               (iv) Settlement of Performance Options; Other Terms. Settlement
          of Performance Options may be in cash or Common Stock, other Options,
          or other property, in the discretion of the Committee. The Committee
          may, in its discretion, reduce the amount of a settlement otherwise to
          be made in connection with such Performance Options, but may not
          exercise discretion to increase any such amount payable in respect of
          a Performance Option subject to this Section 7.1(b). The Committee
          shall specify the circumstances in which such Performance Options
          shall be forfeited or paid in the event of a Termination of Employment
          or a Change in Control prior to the end of a performance period or
          settlement of Performance Options, and other terms relating to such
          Performance Options.

          (c) Written Determinations. All determinations by the Committee as to
     the establishment of performance goals and the potential Performance
     Options related to such performance goals and as to the achievement of
     performance goals relating to such Options shall be made in writing in the
     case of any Option intended to qualify under Code Section 162(m). The
     Committee may not delegate any responsibility relating to such Performance
     Option.

                                 ARTICLE VIII
                                 ------------

            PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
            ------------------------------------------------------

     8.1   Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of any Option.

                                      14
<PAGE>
 
     8.2  Committee Discretion. The Committee may in its sole discretion include
in any Agreement an obligation that the Company purchase a Participant's shares
of Common Stock received upon the exercise of an Option (including the purchase
of any unexercised Options which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company, upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article VIII shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine. Notwithstanding any provision herein
to the contrary, the Company may upon determination by the Committee assign its
right to purchase shares of Common Stock under this Article VIII, whereupon the
assignee of such right shall have all the rights, duties and obligations of the
Company with respect to purchase of the shares of Common Stock.

     8.3  No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to disclose affirmatively to a
record or beneficial holder of Common Stock or an Option, and such holder shall
have no right to be advised of, any material information regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Option or the Company's purchase of Common Stock or an Option
from such holder in accordance with the terms hereof.

                                  ARTICLE IX
                                  ----------
                                  
                         CHANGE IN CONTROL PROVISIONS
                         ----------------------------

     9.1  Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, unless otherwise provided in an Agreement, in the event of a
Change in Control (as defined in Section 9.2):

          (a) Any Stock Options outstanding as of the date such Change in
     Control and not then exercisable shall become fully exercisable to the full
     extent of the original grant;

          (b) The performance goals and other conditions with respect to any
     outstanding Performance Option shall be deemed to have been satisfied in
     full, and such Option shall be fully distributable, if and to the extent
     provided by the Committee in the Agreement relating to such Option or
     otherwise, notwithstanding that the Option may not be fully deductible to
     the Company under Section 162(m) of the Code.

          (c) Notwithstanding any other provision of the Plan, unless the
     Committee shall provide otherwise in an Agreement, a Participant shall have
     the right, whether or not the Option is fully exercisable or may be
     otherwise realized by the Participant, by giving notice during the 60-day
     period from and after a Change in Control to the Company, to elect to
     surrender all or part of

                                      15
<PAGE>
 
     the Option to the Company and to receive cash, within 30 days of such
     notice, in an amount equal to the amount by which the "Change in Control
     Price" (as defined in Section 9.3) per share of Common Stock on the date of
     such election shall exceed the amount which the Participant must pay to
     exercise the Option per share of Common Stock under the Option (the
     "Spread") multiplied by the number of shares of Common Stock granted under
     the Option as to which the right granted under this Section 9.1 shall have
     been exercised.

     9.2  Definition of Change in Control. For purposes of this Plan, a "Change
in Control" shall be deemed to have occurred if (a) any corporation, person or
other entity (other than the Company, a majority-owned subsidiary of the Company
or any of its subsidiaries, or an employee benefit plan (or related trust)
sponsored or maintained by the Company), including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the
beneficial owner of stock representing more than the greater of (i) twenty-five
percent (25%) of the combined voting power of the Company's then outstanding
securities or (ii) the percentage of the combined voting power of the Company's
then outstanding securities which equals (A) ten percent (10%) plus (B) the
percentage of the combined voting power of the Company's outstanding securities
held by such corporation, person or entity on the Effective Date; (b)(i) the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation other than a majority-
owned subsidiary of the Company, or to sell or otherwise dispose of all or
substantially all of the Company's assets, and (ii) the persons who were the
members of the Board of Directors of the Company prior to such approval do not
represent a majority of the directors of the surviving, resulting or acquiring
entity or the parent thereof; (c) the stockholders of the Company approve a plan
of liquidation of the Company; or (d) within any period of 24 consecutive
months, persons who were members of the Board of Directors of the Company
immediately prior to such 24-month period, together with any persons who were
first elected as directors (other than as a result of any settlement of a proxy
or consent solicitation contest or any action taken to avoid such a contest)
during such 24-month period by or upon the recommendation of persons who were
members of the Board of Directors of the Company immediately prior to such 24-
month period and who constituted a majority of the Board of Directors of the
Company at the time of such election, cease to constitute a majority of the
Board.

     9.3  Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (a) the highest reported sales price of a share of
Common Stock in any transaction reported on the principal exchange on which such
shares are listed or on NASDAQ during the 60-day period prior to and including
the date of a Change in Control or (b) if the Change in Control is the result of
a tender or exchange offer, merger, consolidation, liquidation or sale of all or
substantially all of the assets of the Company (in each case a "Corporate
Transaction"), the highest price per share of Common Stock paid in such
Corporate Transaction. To the extent that the consideration paid in any such
Corporate Transaction consists all or in part of securities or other non-cash
consideration, the value of such securities or other non-cash consideration
shall be determined in the sole discretion of the Committee.

                                      16
<PAGE>
 
                                   ARTICLE X
                                   ---------

                                 MISCELLANEOUS
                                 -------------

     10.1  Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under a Stock Option
theretofore granted without the Participant's consent.

     The Committee may amend the Plan at any time provided that (a) no amendment
shall impair the rights of any Participant under any Option theretofore granted
without the Participant's consent, and (b) any amendment shall be subject to the
approval or rejection of the Board.

     The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without the Participant's consent or reduce an Option Price.

     Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments, and to grant Options which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding
anything in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that would, but
for the right hereunder, be eligible for such accounting treatment, the
Committee may modify or adjust the right so that pooling of interest accounting
shall be available, including the substitution of Common Stock having a Fair
Market Value equal to the cash otherwise payable hereunder for the right which
caused the transaction to be ineligible for pooling of interest accounting.

     10.2  Stand-Alone, Additional, Tandem, and Substitute Options. Options
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Option or any award granted under another plan of the Company,
any subsidiary, or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Options may be granted at any time. If an Option is granted in substitution or
exchange for another Option or award, the Committee shall require the surrender
of such other Option or award in consideration for the grant of the new Option.
In addition, Options may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or any subsidiary,
in which the Fair Market Value of Common Stock subject to the Option is
equivalent in value to the cash compensation, or in which the exercise price of
the Option is equal to the Fair Market Value of the underlying Common Stock
minus the value of the cash compensation surrendered.

                                      17
<PAGE>
 
     10.3  Form and Timing of Payment Under Options; Deferrals. Subject to the
terms of the Plan and any applicable Agreement, payments to be made by the
Company or an Affiliate upon the exercise of an Option or settlement of an
Option may be made in such forms as the Committee shall determine, including,
without limitation, cash, Common Stock, other Options or other property, and may
be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Option may be accelerated, and cash paid in lieu of
Common Stock in connection with such settlement, in the discretion of the
Committee or upon occurrence of one or more specified events (in addition to a
Change in Control). Installment or deferred payments may be required by the
Committee (subject to Section 10.1 of the Plan) or permitted at the election of
the Participant. Payments may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred payments
or the granting or crediting of dividend equivalents in respect of installment
or deferred payments denominated in Common Stock.

     10.4  Status of Options Under Code Section 162(m). It is the intent of the
Company that Options granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any Agreement relating to such
an Option does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.

     10.5  Unfunded Status of Plan; Limits on Transferability. It is intended
that the Plan be an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan. Unless otherwise provided in this Plan or in an Agreement,
no Option shall be subject to the claims of Participant's creditors and no
Option may be transferred, assigned, alienated or encumbered in any way other
than by will or the laws of descent and distribution or to a Representative upon
the death of the Participant.

     10.6  General Provisions.

          (a) Representation. The Committee may require each person purchasing
     or receiving shares pursuant to an Option to represent to and agree with
     the Company in writing that such person is acquiring the shares without a
     view to the distribution thereof. The certificates for such shares may
     include any legend which the Committee deems appropriate to reflect any
     restrictions on transfer.

                                      18
<PAGE>
 
          (b) No Additional Obligation. Nothing contained in the Plan shall
     prevent the Company or an Affiliate from adopting other or additional
     compensation arrangements for its employees.

          (c) Withholding. No later than the date as of which an amount first
     becomes includible in the gross income of the Participant for Federal
     income tax purposes with respect to any Option, the Participant shall pay
     to the Company (or other entity identified by the Committee), or make
     arrangements satisfactory to the Company or other entity identified by the
     Committee regarding the payment of, any Federal, state, local or foreign
     taxes of any kind required by law to be withheld with respect to such
     amount required in order for the Company or an Affiliate to obtain a
     current deduction. Unless otherwise determined by the Committee,
     withholding obligations may be settled with Common Stock, including Common
     Stock that is part of the Option that gives rise to the withholding
     requirement, provided that any applicable requirements under Section 16 of
     the Exchange Act are satisfied. The obligations of the Company under the
     Plan shall be conditional on such payment or arrangements, and the Company
     and its Affiliates shall, to the extent permitted by law, have the right to
     deduct any such taxes from any payment otherwise due to the Participant.

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

          (e) Controlling Law. The Plan and all Options made and actions taken
     thereunder shall be governed by and construed in accordance with the laws
     of the State of Illinois (other than its law respecting choice of law)
     except to the extent the General Corporation Law of the State of Delaware
     would be mandatorily applicable. The Plan shall be construed to comply with
     all applicable law and to avoid liability to the Company, an Affiliate or a
     Participant, including, without limitation, liability under Section 16(b)
     of the Exchange Act.

          (f) Offset. Any amounts owed to the Company or an Affiliate by the
     Participant of whatever nature may be offset by the Company from the value
     of any shares of Common Stock, cash or other thing of value under this Plan
     or an Agreement to be transferred to the Participant, and no shares of
     Common Stock, cash or other thing of value under this Plan or an Agreement
     shall be transferred unless and until all disputes between the Company and
     the Participant have been fully and finally resolved and the Participant
     has waived all claims to such against the Company or an Affiliate.

          (g) Fail Safe. With respect to persons subject to Section 16 of the
     Exchange Act, transactions under this Plan are intended to comply with all
     applicable conditions of Rule 16b-3. To the extent any transaction under
     the Plan or action by the Committee fails to so comply, it shall be deemed
     null and

                                      19
<PAGE>
 
     void, to the extent permitted by law and deemed advisable by the Committee.
     The Committee may authorize the repurchase of any Option or shares of
     Common Stock resulting from any Option in order to prevent a person from
     incurring or potentially incurring liability under Section 16(b) of the
     Exchange Act.

     10.7  Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 10.7),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments"), would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable or
right accruing under the Plan being subject to an excise tax under Section 4999
of the Code or being disallowed as a deduction under Section 280G of the Code.
The determination of whether any reduction in the rights or payments under this
Plan is to apply shall be made by the Committee in good faith after consultation
with the Participant, and such determination shall be conclusive and binding on
the Participant. The Participant shall cooperate in good faith with the
Committee in making such determination and providing the necessary information
for this purpose. The foregoing provisions of this Section 10.7 shall apply with
respect to any person only if, after reduction for any applicable Federal excise
tax imposed by Section 4999 of the Code and Federal income tax imposed by the
Code, the Total Payments accruing to such person would be less than the amount
of the Total Payments as reduced, if applicable, under the foregoing provisions
of the Plan and after reduction for only Federal income taxes.

     10.8  Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual's becoming a Participant in this Plan.

     10.9  Options in Substitution for Options Granted by Other Corporations.
Options (including cash in respect of fractional shares) may be granted under
the Plan from time to time in substitution for awards held by employees,
directors or service providers of other corporations who are about to become
officers, directors or employees of the Company or an Affiliate as the result of
a merger or consolidation of the employing corporation with the Company or an
Affiliate, or the acquisition by the Company or an Affiliate of the assets of
the employing corporation, or the

                                      20
<PAGE>
 
acquisition by the Company or Affiliate of the stock of the employing
corporation, as the result of which it becomes a designated employer under the
Plan. The terms and conditions of the Options so granted may vary from the terms
and conditions set forth in this Plan at the time of such grant as the majority
of the members of the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the awards in substitution for which they are
granted.

     10.10  Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.

     10.11  Procedure for Withdrawal. Any Affiliate which has adopted the Plan
may, by resolution of the board of directors of such Affiliate, with the consent
of the Board of Directors and subject to such conditions as may be imposed by
the Board of Directors, terminate its adoption of the Plan.

     10.12  Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, whichever is shorter. The Company shall have the right to suspend or
delay any time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company.

     10.13  Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.

     10.14  Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.

     10.15  Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.

                                      21
<PAGE>
 
     10.16  Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.

                                      22