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                                                                    EXHIBIT 4.06

                                 ALLAIRE CORP.

                            1997 STOCK INCENTIVE PLAN

        1. Purpose. The purpose of this 1997 Stock Incentive Plan (the "Plan")
is to promote the interests of Allaire Corp. (the "Company") and its Affiliates,
if any, by providing key employees, directors, advisors and representatives of
the Company and any Affiliates an opportunity to acquire a proprietary interest
in the Company and thereby develop a stronger incentive to put forth maximum
effort for the continued success and growth of the Company and its Affiliates.
This Plan is also intended to facilitate recruiting and retaining key personnel
of outstanding ability.

        2. Definitions. The capitalized terms used in this Plan have the
meanings set forth in the list of defined terms attached to this Plan as Exhibit
A.

        3. Administration.

               (a) Authority of Committee. The Committee shall administer this
Plan. The Committee shall have exclusive power to make Awards and to determine
when and to whom Awards will be granted, and the form, amount and other terms
and conditions of each Award, subject to the provisions of this Plan. The
Committee may determine whether, to what extent and under what circumstances
Awards may be settled, paid or exercised in cash, Shares or other Awards or
other property, or canceled, forfeited or suspended. The Committee shall have
the authority to interpret this Plan and any Award or Agreement made under this
Plan, to establish, amend, waive and rescind any rules and regulations relating
to the administration of this Plan, to determine the terms and provisions of any
Agreements entered into hereunder (not inconsistent with this Plan), and to make
all other determinations necessary or advisable for the administration of this
Plan. The Committee may correct any defect, supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent it
shall deem desirable. The determinations of the Committee in the administration
of this Plan, as described herein, shall be final, binding and conclusive.

               (b) Rule 16b-3 Compliance. It is intended that, from and after
Section 12 Registration, this Plan and all Awards granted pursuant to it shall
be administered by the Committee so as to permit this Plan and Awards to comply
with Exchange Act Rule 16b-3. If any provision of this Plan or of any Award
would otherwise frustrate or conflict with the intent expressed in this Section
3(b), that provision to the extent possible shall be interpreted and deemed
amended in the manner determined by the Committee so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, the
provision shall be deemed void as applicable to Participants who are then
subject to the reporting requirements of Section 16 of the Exchange Act to the
extent permitted by law and in the manner deemed advisable by the Committee.

               (c) Delegation of Authority. The Committee may delegate all or
any part of its authority under this Plan to persons who are not Non-employee
Director for purposes of determining and administering Awards. From and after
Section 12 Registration, such delegation

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shall be for purposes of determining and administering Awards solely to
Employees who are not then subject to the reporting requirements of Section 16
of the Exchange Act.

               (d) Indemnification. To the full extent permitted by law, each
member and former member of the Committee and each person to whom the Committee
delegates or has delegated authority under this Plan shall be entitled to
indemnification by the Company against and from any loss, liability, judgment,
damage, cost and reasonable expense incurred by such member, former member or
other person by reason of any action taken, failure to act or determination made
in good faith under or with respect to this Plan.

        4. Shares Available; Maximum Payouts.

               (a) Shares Available. The number of Shares available for
distribution under this Plan is 1,726,000 (subject to adjustment under Section
12(f) hereof).

               (b) Shares Again Available. Any Shares subject to the terms and
conditions of an Award under this Plan which are not used because the Award
expires without all Shares subject to such Award having been issued or because
the terms and conditions of the Award are not met may again be used for an Award
under this Plan. Any Shares that are the subject of Awards which are
subsequently forfeited to the Company pursuant to the restrictions applicable to
such Award may again be used for an Award under this Plan. If a Participant
exercises a Stock Appreciation Right, any Shares covered by the Stock
Appreciation Right in excess of the number of Shares issued (or, in the case of
a settlement in cash or any other form of property, in excess of the number of
Shares equal in value to the amount of such settlement, based on the Fair Market
Value of such Shares on the date of such exercise) may again be used for an
Award under this Plan. If, in accordance with the Plan, a Participant uses
Shares to (i) pay a purchase or exercise price, including an Option exercise
price, or (ii) satisfy tax withholdings, such Shares may again be used for an
Award under this Plan.

               (c) Unexercised Awards. Any unexercised or undistributed portion
of any terminated, expired, exchanged, or forfeited Award or any Award settled
in cash in lieu of Shares (except as provided in Section 4(b) hereof) shall be
available for further Awards.

               (d) No Fractional Shares. No fractional Shares may be issued
under this Plan; fractional Shares will be rounded to the nearest whole Share.

               (e) Maximum Payouts. No more than 25% of all Shares subject to
this Plan may be granted in the aggregate pursuant to Restricted Stock and Other
Stock-Based Awards.

        5. Eligibility. Awards may be granted under this Plan at the discretion
of the Committee to any Employee of the Company or any Affiliate, whether or not
such person is an employee of the Company or any such Affiliate within the
meaning of the Code; provided, however, that key employees of the Company or its
Affiliates within the meaning of the Code (including any such employee who is
also an officer or director the the Company or any such Affiliate) shall be the
only persons eligible to receive Options intended to constitute Incentive Stock
Options.

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        6. General Terms of Awards.

               (a) Awards. Awards under this Plan may consist of Stock, Options
(either Incentive Stock Options or Non-Qualified Stock Options), Stock
Appreciation Rights, Performance Shares, Restricted Stock and Other Stock-Based
Awards. Awards of Restricted Stock may, in the discretion of the Committee,
provide the Participant with dividends or dividend equivalents and voting rights
prior to vesting (whether vesting is based on a period of time, the attainment
of specified performance conditions or otherwise).

               (b) Amount of Awards. Each Agreement shall set forth the number
of Shares of Stock, Shares of Restricted Stock or Performance Shares subject to
such Agreement, or the number of Shares to which the Option applies or with
respect to which payment upon the exercise of the Stock Appreciation Right is to
be determined, as the case may be, together with such other terms and conditions
applicable to the Award (not inconsistent with this Plan) as determined by the
Committee in its sole discretion.

               (c) Term. Each Agreement, other than those relating solely to
Awards of Stock without restrictions, shall set forth the Term of the Award and
any applicable Performance Period for Performance Shares, as the case may be,
but in no event shall the Term of an Award or the Performance Period be longer
than ten years after the date of grant. An Agreement with a Participant may
permit acceleration of vesting requirements and of the expiration of the
applicable Term upon such terms and conditions as shall be set forth in the
Agreement, which may, but need not, include, without limitation, acceleration
resulting from the occurrence of a Change in Control, a Fundamental Change, or
the Participant's death, Disability or Retirement. Acceleration of the
Performance Period of Performance Shares shall be subject to Section 9(b)
hereof.

               (d) Agreements. Each Award under this Plan shall be evidenced by
an Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in this Plan.

               (e) Transferability. During the lifetime of a Participant to whom
an Award is granted, only such Participant (or such Participant's legal
representative or, if so provided in the applicable Agreement in the case of a
Non-Qualified Stock Option, a permitted transferee as hereafter described) may
exercise an Option or Stock Appreciation Right or receive payment with respect
to Performance Shares or any other Award. No Award of Restricted Stock (prior to
the expiration of the restrictions), Options, Stock Appreciation Rights,
Performance Shares or other Award (other than an award of Stock without
restrictions) may be sold, assigned, transferred, exchanged, or otherwise
encumbered, and any attempt to do so shall be of no effect. Notwithstanding the
immediately preceding sentence, (i) an Agreement may provide that an Award shall
be transferable to a Successor in the event of a Participant's death and (ii) an
Agreement may provide that an Award (other than an Incentive Stock Option) shall
be transferable to any member of a Participant's "immediate family" (as such
term is defined in Rule 16a-1(e) promulgated under the Exchange Act, or any
successor rule or regulation) or to one or more trusts whose beneficiaries are
members of such Participant's "immediate family" or partnerships in which such
family members are the only partners; provided, however, that (1) the
Participant receives no consideration for the transfer and (2) such transferred
Award shall

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continue to be subject to the same terms and conditions as were applicable to
such Award immediately prior to its transfer.

               (f) Termination of Employment. Except as otherwise determined by
the Committee or provided by the Committee in an applicable Agreement, in case
of termination of employment, the following provisions shall apply:

               (1) Options and Stock appreciation Rights.

                      (ii) Death. If a Participant who has been granted an
               Option or Stock Appreciation Rights shall die before such Option
               or Stock Appreciation Rights has expired, the Option or Stock
               Appreciation Rights shall become exercisable in full, and may be
               exercised by the Participant's Successor at any time, or from
               time to time, within five years after the date of the
               Participant's death.

                      (iii) Disability or Retirement. If a Participant's
               employment terminates because of Disability or Retirement, the
               Option or Stock Appreciation Rights shall become exercisable in
               full, and the Participant may exercise his or her Options or
               Stock Appreciation Rights at any time, or from time to time,
               within (x) five years after the date of such termination if such
               termination results from the Participant's disability (one year
               in the case of an Incentive Stock Option) or (y) within three
               months, or such longer period as the Committee may permit, after
               the date of such termination if such termination results from the
               Participant's retirement.

                      (iv) Reasons other than Death, Disability or Retirement.
               If a Participant's employment terminates for any reason other
               than death, Disability or Retirement, the unvested or unexercised
               portion of any Award held by such Participant shall terminate at
               the date of termination of employment.

                      (v) Expiration of Term. Notwithstanding the foregoing
               paragraphs (i)-(iii), in no event shall an Option or a Stock
               Appreciation Right be exercisable after expiration of the Term of
               such Award.

               (2) Performance Shares. If a Participant's employment with the
Company or any of its Affiliates terminates during a Performance Period because
of death, Disability or Retirement, or under other circumstances provided by the
Committee in its discretion in the applicable Agreement, the Participant shall
be entitled to a payment of Performance Shares at the end of the Performance
Period based upon the extent to which achievement of performance targets was
satisfied at the end of such period (as determined at the end of the Performance
Period) and prorated for the portion of the Performance Period during which the
Participant was employed by the Company or any Affiliate. Except as provided in
this Section 6(f)(2) or in the applicable Agreement, if a Participant's
employment terminates with the Company or any of its Affiliates during a
Performance Period, then such Participant shall not be entitled to any payment
with respect to that Performance Period.

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               (3) Restricted Stock. Unless otherwise provided in the applicable
Agreement, in case of a Participant's death, Disability or Retirement, the
Participant shall be entitled to receive that number of shares of Restricted
Stock under outstanding Awards which has been pro rated for the portion of the
Term of the Awards during which the Participant was employed by the Company or
any Affiliate, and with respect to such Shares all restrictions shall lapse.

               (g) Rights as Shareholder. A Participant shall have no rights as
a shareholder with respect to any securities covered by an Award until the date
the Participant becomes the holder of record, and then only to the such rights
are not otherwise restricted by the Agreement covering such Award.

               (h) Lock-Up Agreements. Unless the Committee specifies otherwise,
each Award shall provide that upon the request of the Company or the Managing
Underwriter(s), any Participant shall, in connection with an initial public
offering of the Company's Stock, agree in writing that for a period of time (not
to exceed 180 days) from the effective date of the Registration Statement filed
with the Securities and Exchange Commission for such offering, he shall not
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any shares of the Company's Stock owned or controlled by
him. This provision shall apply only to a Participant who, at the time of the
request, is an officer or director of the Company or is the holder (assuming
exercise of all options and warrants, and the conversion of all convertible
securities held by the Participant, to the extent then exercisable or
convertible) of a number of shares of the Company's Stock equal to at least one
percent (1%) of the total number of shares of Stock then issued and outstanding.

        7. Stock Options.

               (a) Terms of All Options. Each Option shall be granted pursuant
to an Agreement as either an Incentive Stock Option or a Non-Qualified Stock
Option. Only Non-Qualified Stock Options may be granted to Employees who are not
employees of the Company or an Affiliate. The purchase price of each Share
subject to an Option shall be determined by the Committee and set forth in the
Agreement, but shall not be less than 50% of the Fair Market Value of a Share as
of the date the Option is granted. The purchase price of the Shares with respect
to which an Option is exercised shall be payable in full at the time of
exercise, provided that, to the extent permitted by law, Participants may
simultaneously exercise Options and sell the Shares thereby acquired pursuant to
a brokerage or similar relationship and use the proceeds from such sale to pay
the purchase price of such Shares. The purchase price may be paid in cash or, if
the Committee so permits, through a reduction of the number of Shares delivered
to the Participant upon exercise of the Option or delivery to the Company of
Shares held by such Participant (in each case, such Shares having a Fair Market
Value as of the date the Option is exercised equal to the purchase price of the
Shares being purchased pursuant to the Option), or a combination thereof, unless
otherwise provided in the Agreement. If the Committee so determines, the
Agreement relating to any Option may provide for the issuance of "reload"
Options pursuant to which, subject to the terms and conditions established by
the Committee and any applicable requirements of Exchange Act Rule 16b-3 or any
other applicable law, the Participant will, either automatically or subject to
subsequent Committee approval, be granted a new Option when the payment of the
exercise price of the original Option, or the

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payment of tax withholdings pursuant to Section 12(d) hereof, is made through
the delivery to the Company of Shares held by such Participant, such new
"reload" Option (i) being an Option to purchase the number of Shares provided as
consideration for the exercise price and in payment of taxes in connection with
the exercise of the original Option, and (ii) having a Per Share exercise price
equal to the Fair Market Value as of the date of exercise of the original
Option. Each Option shall be exercisable in whole or in part on the terms
provided in the Agreement. In no event shall any Option be exercisable at any
time after its Term. When an Option is no longer exercisable, it shall be deemed
to have lapsed or terminated.

               (b) Incentive Stock Options. In addition to the other terms and
conditions applicable to all Options:

                      (i) the purchase price of each Share subject to an
               Incentive Stock Option shall not be less than 100% of the Fair
               Market Value of a Share as of the date the Option is granted (or
               such other limit as may be required by the Code) if such
               limitation is necessary to qualify the Option as an Incentive
               Stock Option;

                      (ii) the aggregate Fair Market Value (determined as of the
               date the Option is granted) of the Shares with respect to which
               Incentive Stock Options held by an individual first become
               exercisable in any calendar year (under this Plan and all other
               incentive stock option plans of the Company and its Affiliates)
               shall not exceed $100,000 (or such other limit as may be required
               by the Code), if such limitation is necessary to qualify the
               Option as an Incentive Stock Option, and to the extent an Option
               or Options granted to a Participant exceed such limit, such
               Option or Options shall be treated as a Non-Qualified Stock
               Option;

                      (iii) an Incentive Stock Option shall not be exercisable
               and the Term of the Award shall not be more than ten years after
               the date of grant (or such other limit as may be required by the
               Code) if such limitation is necessary to qualify the Option as an
               Incentive Stock Option;

                      (iv) the Agreement covering an Incentive Stock Option
               shall contain such other terms and provisions which the Committee
               determines necessary to qualify such Option as an Incentive Stock
               Option; and

                      (v) no Participant may receive an Incentive Stock Option
               under this Plan if, at the time the Award is granted, the
               Participant owns (after application of the rules contained in
               Section 424(d) of the Code, or its successor provision) Shares
               possessing more than ten percent of the total combined voting
               power of all classes of stock of the Company or its subsidiaries,
               unless (A) the option price for such Incentive Stock Option is at
               least 110% of the Fair Market Value of the Shares subject to such
               Incentive Stock Option on the date of grant and (B) such Option
               is not exercisable after the date five years from the date such
               Incentive Stock Option is granted.

        8. Stock Appreciation Rights. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon

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exercise of the Stock Appreciation Right all or a portion of the excess of (i)
the Fair Market Value of a specified number of Shares as of the date of exercise
of the Stock Appreciation Right over (ii) a specified price which shall not be
less than 50% of the Fair Market Value of such Shares as of the date of grant of
the Stock Appreciation Right. A Stock Appreciation Right may be granted in
connection with a previously or contemporaneously granted Option, or independent
of any Option. If issued in connection with an Option, the Committee may impose
a condition that exercise of a Stock Appreciation Right cancels the Option with
which it is connected and exercise of the connected Option cancels the Stock
Appreciation Right. Each Stock Appreciation Right may be exercisable in whole or
in part on the terms provided in the Agreement. Notwithstanding anything to the
contrary stated in this Plan, no Stock Appreciation Right shall be exercisable
prior to six months from the date of grant except in the event of the death or
Disability of the Participant. No Stock Appreciation Right shall be exercisable
at any time after its Term. When a Stock Appreciation Right is no longer
exercisable, it shall be deemed to have lapsed or terminated. Except as
otherwise provided in the applicable Agreement, upon exercise of a Stock
Appreciation Right, payment to the Participant (or to his or her Successor)
shall be made in the form of cash, Stock or a combination of cash and Stock as
promptly as practicable after such exercise. The Agreement may provide for a
limitation upon the amount or percentage of the total appreciation on which
payment (whether in cash and/or Stock) may be made in the event of the exercise
of a Stock Appreciation Right.

        9. Performance Shares.

               (a) Initial Award. An Award of Performance Shares shall entitle a
Participant (or a Successor) to future payments based upon the achievement of
performance targets established in writing by the Committee. Payment shall be
made in Stock, or a combination of cash and Stock, as determined by the
Committee , provided that at least 25% of the value of the vested Performance
Shares shall be distributed in the form of Stock. With respect to those
Participants who are "covered employees" within the meaning of Section 162(m) of
the Code and the regulations thereunder, such performance targets shall consist
of one or any combination of two or more of earnings or earnings per share
before income tax (profit before taxes), net earnings or net earnings per share
(profits after tax), inventory, total, or net operating asset turnover,
operating income, total shareholder return, return on equity, pre-tax and
pre-interest expense return on average invested capital, which may be expressed
on a current value basis, or sales growth, and any such targets may relate to
one or any combination of two or more of corporate, group, unit, division,
Affiliate or individual performance. The Agreement may establish that a portion
of the maximum amount of a Participant's Award will be paid for performance
which exceeds the minimum target but falls below the maximum target applicable
to such Award. The Agreement shall also provide for the timing of such payment.
Following the conclusion or acceleration of each Performance Period, the
Committee shall determine the extent to which (i) performance targets have been
attained, (ii) any other terms and conditions with respect to an Award relating
to such Performance Period have been satisfied, and (iii) payment is due with
respect to a Performance Share Award.

               (b) Acceleration and Adjustment. The Agreement may permit an
acceleration of the Performance Period and an adjustment of performance targets
and payments with respect to some or all of the Performance Shares awarded to a
Participant, upon such terms and conditions as shall be set forth in the
Agreement, upon the occurrence of certain events, which

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may, but need not, include without limitation a Change in Control, a Fundamental
Change, the Participant's death, Disability or Retirement, a change in
accounting practices of the Company or its Affiliates, or, with respect to
payments in Stock for Performance Share Awards, a reclassification, stock
dividend, stock split or stock combination as provided in Section 12(f) hereof.

               (c) Valuation. Each Performance Share earned after conclusion of
a Performance Period shall have a value equal to the Fair Market Value of a
Share on the last day of such Performance Period.

        10. Restricted Stock. Subject to Section 4(e), Restricted Stock may be
granted in the form of Shares registered in the name of the Participant but held
by the Company until the end of the Term of the Award. Any employment
conditions, performance conditions and the Term of the Award shall be
established by the Committee in its discretion and included in the applicable
Agreement. The Committee may provide in the applicable Agreement for the lapse
or waiver of any such restriction or condition based on such factors or criteria
as the Committee, in its sole discretion, may determine. No Award of Restricted
Stock may vest earlier than one year from the date of grant, except as provided
in the applicable Agreement.

        11. Other Stock-Based Awards. Subject to Section 4(e) the Committee may
from time to time grant Awards of Stock, and other Awards under this Plan
(collectively herein defined as "Other Stock-Based Awards"), including without
limitation those Awards pursuant to which Shares may be acquired in the future,
such as Awards denominated in Stock units, securities convertible into Stock and
phantom securities. The Committee, in its sole discretion, shall determine the
terms and conditions of such Awards provided that such Awards shall not be
inconsistent with the terms and purposes of this Plan. The Committee may, in its
sole discretion, direct the Company to issue Shares subject to restrictive
legends and/or stop transfer instructions which are consistent with the terms
and conditions of the Award to which such Shares relate.

        12. General Provisions.

               (a) Effective Date of this Plan. This Plan shall become effective
as of February 4, 1997, provided that this Plan is approved and ratified by the
affirmative vote of the holders of a majority of the outstanding Shares of Stock
present or represented and entitled to vote in person or by proxy at a meeting
of the shareholders of the Company, or by written action, no later than December
31, 1997. If this plan is not so approved by such holders, any Awards granted
under this Plan subject to such approval shall be null and void.

               (b) Duration of this Plan. This Plan shall remain in effect until
all Stock subject to it shall be distributed or all Awards have expired or
lapsed, whichever is latest to occur, or this Plan is terminated pursuant to
Section 12(e) hereof. No Award of an Incentive Stock Option shall be made more
than ten years after the effective date provided in Section 12(a) hereof (or
such other limit as may be required by the Code) if such limitation is necessary
to qualify the Option as an Incentive Stock Option. The date and time of
approval by the Committee of the granting of an Award shall be considered the
date and time at which such Award is made or granted, notwithstanding the date
of any Agreement with respect to such Award; provided, however, that the
Committee may grant Awards other than Incentive Stock

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Options to be effective and deemed to be granted on the occurrence of certain
specified contingencies.

               (c) Right to Terminate Employment. Nothing in this Plan or in any
Agreement shall confer upon any Participant who is an Employee the right to
continue in the employment of the Company or any Affiliate or affect any right
which the Company or any Affiliate may have to terminate or modify the
employment of the Participant with or without cause.

               (d) Tax Withholding. The Company may withhold from any payment of
cash or Stock to a Participant or other person under this Plan an amount
sufficient to cover any required withholding taxes, including the Participant's
social security and Medicare taxes (FICA) and federal, state and local income
tax with respect to income arising from payment of the Award. The Company shall
have the right to require the payment of any such taxes before issuing any Stock
pursuant to the Award. In lieu of all or any part of a cash payment from a
person receiving Stock under this Plan, the individual may elect to cover all or
any part of the required withholdings, and to cover any additional withholdings
up to the amount needed to cover the individual's full FICA and federal, state
and local income tax with respect to income arising from payment of the Award,
through a reduction of the number of Shares delivered to such individual or a
subsequent return to the Company of Shares held by the Participant or other
person, in each case valued in the same manner as used in computing the
withholding taxes under the applicable laws.

               (e) Amendment, Modification and Termination of this Plan. Except
as provided in this Section 12(e), the Board may at any time amend, modify,
terminate or suspend this Plan. Except as provided in this Section 12(e), the
Committee may at any time alter or amend any or all Agreements under this Plan
to the extent permitted by law. Amendments are subject to approval of the
shareholders of the Company only if such approval is necessary to maintain this
Plan in compliance with the requirements of Exchange Act Rule 16b-3, Section 422
of the Code, their successor provisions, or any other applicable law or
regulation. No termination, suspension or modification of this Plan may
materially and adversely affect any right acquired by any Participant (or a
Participant's legal representative) or any Successor under an Award granted
before the date of termination, suspension or modification, unless otherwise
agreed by the Participant in the Agreement or otherwise or required as a matter
of law. It is conclusively presumed that any adjustment for changes in
capitalization provided for in Section 9(b) or 12(f) hereof does not adversely
affect any right of a Participant under an Award.

               (f) Adjustment for Changes in Capitalization. Appropriate
adjustments in the aggregate number and type of Shares available for Awards
under this Plan, in the limitations on the number and type of Shares that may be
issued to an individual Participant, in the number and type of Shares and amount
of cash subject to Awards then outstanding, in the Option exercise price as to
any outstanding Options and, subject to Section 9(b) hereof, in outstanding
Performance Shares and payments with respect to outstanding Performance Shares
may be made by the Committee in its sole discretion to give effect to
adjustments made in the number or type of Shares through a Fundamental Change
(subject to Section 12(g) hereof), recapitalization, reclassification, stock
dividend, stock split, stock combination, or other relevant change, provided
that fractional Shares shall be rounded to the nearest whole Share.

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               (g) Fundamental Change. In the event of a proposed Fundamental
Change: (a) involving a merger, consolidation or statutory share exchange,
unless appropriate provision shall be made (which the Committee may, but shall
not be obligated to, make) for the protection of the outstanding Options and
Stock Appreciation Rights by the substitution of options, stock appreciation
rights and appropriate voting common stock of the corporation surviving any such
merger or consolidation or, if appropriate, the Parent of such surviving
corporation, to be issuable upon the exercise of options or used to calculate
payments upon the exercise of stock appreciation rights in lieu of Options,
Stock Appreciation Rights and capital stock of the Company, or (b) involving the
dissolution or liquidation of the Company, the Committee may, but shall not be
obligated to, declare, at least twenty days prior to the occurrence of the
Fundamental Change, and provide written notice to each holder of an Option or
Stock Appreciation Right of the declaration, that each outstanding Option and
Stock Appreciation Right, whether or not then exercisable, shall be canceled at
the time of, or immediately prior to the occurrence of, the Fundamental Change
in exchange for payment to each holder of an Option or Stock Appreciation Right,
within 20 days after the Fundamental Change, of cash equal to (i) for each Share
covered by the canceled Option, the amount, if any, by which the Fair Market
Value (as defined in this Section 12(g)) per Share exceeds the exercise price
per Share covered by such Option or (ii) for each Stock Appreciation Right, the
price determined pursuant to Section 8 hereof, except that Fair Market Value of
the Shares as of the date of exercise of the Stock Appreciation Right, as used
in clause (i) of Section 8, shall be deemed to mean Fair Market Value for each
Share with respect to which the Stock Appreciation Right is calculated
determined in the manner hereinafter referred to in this Section 12(g). At the
time of the declaration provided for in the immediately preceding sentence, each
Stock Appreciation Right that has been outstanding for at least six months and
each Option shall immediately become exercisable in full and each person holding
an Option or a Stock Appreciation Right shall have the right, during the period
preceding the time of cancellation of the Option or Stock Appreciation Right, to
exercise the Option as to all or any part of the Shares covered thereby or the
Stock Appreciation Right in whole or in part, as the case may be. In the event
of a declaration pursuant to this Section 12(g), each outstanding Option and
Stock Appreciation Right that shall not have been exercised prior to the
Fundamental Change shall be canceled at the time of, or immediately prior to,
the Fundamental Change, as provided in the declaration. Notwithstanding the
foregoing, no person holding an Option or Stock Appreciation Right shall be
entitled to the payment provided for in this Section 12(g) if such Option or
Stock Appreciation Right shall have expired pursuant to an Agreement. For
purposes of this Section 12(g) only, "Fair Market Value" per Share means the
cash plus the fair market value, as determined in good faith by the Committee,
of the non-cash consideration to be received per Share by the shareholders of
the Company upon the occurrence of the Fundamental Change, notwithstanding
anything to the contrary provided in this Plan.

               (h) Other Benefit and Compensation Programs. Payments and other
benefits received by a Participant under an Award shall not be deemed a part of
a Participant's regular, recurring compensation for purposes of any termination,
indemnity or severance pay laws and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan,
contract or similar arrangement provided by the Company or an Affiliate, unless
expressly so provided by such other plan, contract or arrangement or the
Committee determines that an Award or portion of an Award should be included to
reflect competitive

                                       10
<PAGE>   11

compensation practices or to recognize that an Award has been made in lieu of a
portion of competitive cash compensation.

               (i) Beneficiary Upon Participant's Death. To the extent that the
transfer of a Participant's Award at death is permitted by this Plan or under an
Agreement, (i) a Participant's Award shall be transferable to the beneficiary,
if any, designated on forms prescribed by and filed with the Committee and (ii)
upon the death of the Participant, such beneficiary shall succeed to the rights
of the Participant to the extent permitted by law and this Plan. If no such
designation of a beneficiary has been made, the Participant's legal
representative shall succeed to the Awards, which shall be transferable by will
or pursuant to laws of descent and distribution to the extent permitted by this
Plan or under an Agreement.

               (j) Unfunded Plan. This Plan shall be unfunded and the Company
shall not be required to segregate any assets that may at any time be
represented by Awards under this Plan. Neither the Company, its Affiliates, the
Committee, nor the Board shall be deemed to be a trustee of any amounts to be
paid under this Plan nor shall anything contained in this Plan or any action
taken pursuant to its provisions create or be construed to create a fiduciary
relationship between the Company and/or its Affiliates, and a Participant or
Successor. To the extent any person acquires a right to receive an Award under
this Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company.

               (k) Limits of Liability.

                      (i) Any liability of the Company to any Participant with
               respect to an Award shall be based solely upon contractual
               obligations created by this Plan and the Agreement.

                      (ii) Except as may be required by law, neither the Company
               nor any member or former member of the Board or of the Committee,
               nor any other person participating (including participation
               pursuant to a delegation of authority under Section 3(b) hereof)
               in any determination of any question under this Plan, or in the
               interpretation, administration or application of this Plan, shall
               have any liability to any party for any action taken, or not
               taken, in good faith under this Plan.

               (l) Compliance with Applicable Legal Requirements. No certificate
for Shares distributable pursuant to this Plan shall be issued and delivered
unless the issuance of such certificate complies with all applicable legal
requirements including, without limitation, compliance with the provisions of
applicable state securities laws, the Securities Act of 1933, as amended and in
effect from time to time or any successor statute, the Exchange Act and the
requirements of the exchanges, if any, on which the Company's Shares may, at the
time, be listed.

               (m) Deferrals and Settlements. The Committee may require or
permit Participants to elect to defer the issuance of Shares or the settlement
of Awards in cash under such rules and procedures as it may establish under this
Plan. It may also provide that deferred settlements include the payment or
crediting of interest on the deferral amounts.

                                       11
<PAGE>   12

        13. Governing Law. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.

        14. Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.

                                       12
<PAGE>   13

EXHIBIT A

                                  ALLAIRE CORP.

                            1997 STOCK INCENTIVE PLAN

                              List Of Defined Terms

        (a) "Affiliate" means any corporation that is a "parent corporation" or
"subsidiary corporation" of the Company, as those terms are defined in Sections
424(e) and (f) of the Code, or any successor provision, and, for purposes other
than the grant of Incentive Stock Options, any joint venture in which the
Company or any such "parent corporation" or "subsidiary corporation" owns an
equity interest.

        (b) "Agreement" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and conditions of
an Award in such form (not inconsistent with this Plan) as the Committee
approves from time to time, together with all amendments thereof, which
amendments may be unilaterally made by the Company (with the approval of the
Committee) unless such amendments are deemed by the Committee to be materially
adverse to the Participant and are not required as a matter of law.

        (c) "Award" means a grant made under this Plan in the form of Stock,
Options, Stock Appreciation Rights, Restricted Stock, Performance Shares or any
Other Stock-Based Award.

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

        (e)    "Change in Control" means:

               (i)     a majority of the directors of the Company shall be
                       persons other than persons

                       (A)     for whose election proxies shall have been
                               solicited by the Board or

                       (B)     who are then serving as directors appointed by
                               the Board to fill vacancies on the Board caused
                               by death or resignation (but not by removal) or
                               to fill newly-created directorships,

               (ii)    30% or more of the (1) combined voting power of the then
                       outstanding voting securities of the Company entitled to
                       vote generally in the election of directors
                       ("Outstanding Company Voting Securities") or (2) the
                       then outstanding Shares of Stock ("Outstanding Company
                       Common Stock") is acquired or beneficially owned (as
                       defined in Rule 13d-3 under the Exchange Act, or any
                       successor rule thereto) by any individual, entity or
                       group (within the meaning of Section 13(d)(3) or
                       14(d)(2) of the Exchange Act), provided, however, that
                       the following acquisitions and beneficial ownership
                       shall not constitute Changes in Control pursuant to this
                       paragraph 2(e)(ii):

<PAGE>   14

                        (A)     any acquisition or beneficial ownership by the
                                Company or a Subsidiary, or

                        (B)     any acquisition or beneficial ownership by any
                                employee benefit plan (or related trust)
                                sponsored or maintained by the Company or one or
                                more of its Subsidiaries,

                        (C)     any acquisition or beneficial ownership by the
                                Participant or any group that includes the
                                Participant, or

                        (D)     any acquisition or beneficial ownership by a
                                Parent or its wholly-owned subsidiaries, as long
                                as they shall remain wholly-owned subsidiaries,
                                of 100% of the Outstanding Company Voting
                                Securities as a result of a merger or statutory
                                share exchange which complies with paragraph
                                2(e)(iii)(A)(2) or the exception in paragraph
                                2(e)(iii)(B) hereof in all respects,

                (iii)   the shareholders of the Company approve a definitive
                        agreement or plan to

                        (A)     merge or consolidate the Company with or into
                                another corporation (other than (1) a merger or
                                consolidation with a Subsidiary or (2) a merger
                                in which

                                (a)     the Company is the surviving
                                        corporation,

                                (b)     no Outstanding Company Voting Securities
                                        or Outstanding Company Common Stock
                                        (other than fractional shares) held by
                                        shareholders of the Company immediately
                                        prior to the merger is converted into
                                        cash, securities, or other property
                                        (except (i) voting stock of a Parent
                                        owning directly or indirectly through
                                        wholly-owned subsidiaries, both
                                        beneficially and of record 100% of the
                                        Outstanding Company Voting Securities
                                        immediately after the Merger or (ii)
                                        cash upon the exercise by holders of
                                        Outstanding Company Voting Securities of
                                        statutory dissenters' rights),

                                (c)     the persons who were the beneficial
                                        owners, respectively, of the Outstanding
                                        Company Voting Securities and
                                        Outstanding Company Common Stock
                                        immediately prior to such merger
                                        beneficially own, directly or
                                        indirectly, immediately after the
                                        merger, more than 70% of, respectively,
                                        the then outstanding common stock and
                                        the voting power of the then outstanding
                                        voting securities of the surviving
                                        corporation or its Parent entitled to
                                        vote generally in the election of
                                        directors, and

                                (d)     if voting securities of the Parent are
                                        exchanged for Outstanding Company Voting
                                        Securities in the merger, all

                                       2
<PAGE>   15

                                        holders of any class or series of
                                        Outstanding Company Voting Securities
                                        immediately prior to the merger have the
                                        right to receive substantially the same
                                        per share consideration in exchange for
                                        their Outstanding Company Voting
                                        Securities as all other holders of such
                                        class or series),

                        (B)     exchange, pursuant to a statutory share
                                exchange, Outstanding Company Voting Securities
                                of any one or more classes or series held by
                                shareholders of the Company immediately prior to
                                the exchange for cash, securities or other
                                property, except for (a) voting stock of a
                                Parent owning directly, or indirectly through
                                wholly-owned subsidiaries, both beneficially and
                                of record 100% of the Outstanding Company Voting
                                Securities immediately after the statutory share
                                exchange if (i) the persons who were the
                                beneficial owners, respectively, of the
                                Outstanding Company Voting Securities and
                                Outstanding Company Common Stock immediately
                                prior to such statutory share exchange own,
                                directly or indirectly, immediately after the
                                statutory share exchange more than 70% of,
                                respectively, the then outstanding common stock
                                and the voting power of the then outstanding
                                voting securities of such Parent entitled to
                                vote generally in the election of directors, and
                                (ii) all holders of any class or series of
                                Outstanding Company Voting Securities
                                immediately prior to the statutory share
                                exchange have the right to receive substantially
                                the same per share consideration in exchange for
                                their Outstanding Company Voting Securities as
                                all other holders of such class or series or (b)
                                cash with respect to fractional shares of
                                Outstanding Company Voting Securities or payable
                                as a result of the exercise by holders of
                                Outstanding Company Voting Securities of
                                statutory dissenters' rights,

                        (C)     sell or otherwise dispose of all or
                                substantially all of the assets of the Company
                                (in one transaction or a series of
                                transactions), or

                        (D)     liquidate or dissolve the Company, unless a
                                majority of the voting stock (or the voting
                                equity interest) of the surviving corporation or
                                its parent corporation or of any corporation (or
                                other entity) acquiring all or substantially all
                                of the assets of the Company (in the case of a
                                merger, consolidation or disposition of assets)
                                or the Company or its Parent (in the case of a
                                statutory share exchange) is, immediately
                                following the merger, consolidation, statutory
                                share exchange or disposition of assets,
                                beneficially owned by the Participant or a group
                                of persons, including the Participant, acting in
                                concert.

                                       3
<PAGE>   16

        (f) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.

        (g) "Committee" means two or more persons designated by the Board to
administer this Plan under Section 3 of the Plan. From and after Section 12
Registration, the persons designated by the Board shall be "Non-employee
Directors" and the Committee shall otherwise be constituted so as to permit
awards under this Plan to comply with Exchange Act Rule 16b-3.

        (h) "Company" means Allaire Corp., a Minnesota corporation, or any
successor to all or substantially all of its businesses by merger,
consolidation, purchase of assets or otherwise.

        (i) "Disability" means the disability of a Participant such that the
Participant is considered disabled under any retirement plan of the Company
which is qualified under Section 401 of the Code, or as otherwise determined by
the Committee.

        (j) "Non-employee Director" means a member of the Board who is
considered a non-employee director within the meaning of Exchange Act Rule
16b-3.

        (k) "Employee" means any full-time or part-time employee (including an
officer or director who is also an employee) of the Company or an Affiliate.
Except with respect to grants of Incentive Stock Options, "Employee" shall also
include other individuals and entities who are not "employees" of the Company or
an Affiliate but who provide services to the Company or an Affiliate in the
capacity of an independent contractor. References in this Plan to "employment"
and related terms shall include the providing of services in any such capacity.

        (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended; "Exchange Act Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act as in effect with
respect to the Company or any successor regulation.

        (m) "Fair Market Value" as of any date means, unless otherwise expressly
provided in this Plan:

               (i) the closing sale price of a Share (A) on The Nasdaq Stock
        Market, or (B) if the Shares are not traded on the Nasdaq Stock Market,
        on the composite tape for New York Stock Exchange ("NYSE") listed
        shares, or (C) if the Shares are not quoted on the NYSE composite tape,
        on the principal United States securities exchange registered under the
        Exchange Act on which the Shares are listed, in any case on the date
        immediately preceding that date, or, if no sale of Shares shall have
        occurred on that date, on the next preceding day on which a sale of
        Shares occurred, or

               (ii) if clause (i) is not applicable, what the Committee
        determines in good faith to be 100% of the fair market value of a Share
        on that date.

        However, if the applicable securities exchange or system has closed for
the day at the time the event occurs that triggers a determination of Fair
Market Value, all references in this paragraph to the "date immediately
preceding that date" shall be deemed to be references to "that date." In the
case of an Incentive Stock Option, if such determination of Fair Market Value is
not

                                       4
<PAGE>   17

consistent with the then current regulations of the Secretary of the Treasury,
Fair Market Value shall be determined in accordance with said regulations. The
determination of Fair Market Value shall be subject to adjustment as provided in
Section 12(f) of the Plan.

        (n) "Fundamental Change" means a dissolution or liquidation of the
Company, a sale of substantially all of the assets of the Company, a merger or
consolidation of the Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, or a statutory share exchange
involving capital stock of the Company.

        (o) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the Code or any
successor to such section.

        (p) "Non-Qualified Stock Option" means an Option other than an Incentive
Stock Option.

        (q) "Other Stock-Based Award" means an Award based on Stock other than
Options, Stock Appreciation Rights, Restricted Stock or Performance Shares.

        (r) "Option" means a right to purchase Stock, including both
Non-Qualified Stock Options and Incentive Stock Options.

        (s) "Parent" means a "parent corporation", as that term is defined in
Section 424(e) of the Code, or any successor provision.

        (t)    "Participant" means an Employee to whom an Award is made.

        (u) "Performance Period" means the period of time as specified in an
Agreement over which Performance Shares are to be earned.

        (v) "Performance Shares" means a contingent award of a specified number
of Performance Shares, with each Performance Share equivalent to one Share, a
variable percentage of which may vest depending upon the extent of achievement
of specified performance objectives during the applicable Performance Period.

        (w) "Plan" means this 1997 Stock Incentive Plan, as amended and in
effect from time to time.

        (x) "Restricted Stock" means Stock granted under Section 10 of the Plan
so long as such Stock remains subject to one or more restrictions.

        (y) "Retirement" means termination of employment on or after age 55,
provided the Employee has been employed by the Company and/or one or more
Affiliates for at least ten years, or termination of employment on or after age
62, provided in either case that the Employee has given the Company at least six
months' prior written notice of such termination, or as otherwise determined by
the Committee.

        (z) "Section 12 Registration" means the date on which the Company first
registers a class of its equity securities under Section 12 of the Exchange Act.

                                       5
<PAGE>   18

        (aa) "Share" means a share of Stock.

        (bb) "Stock" means the common stock, per value $.01 per share, of the
Company.

        (cc) "Stock Appreciation Right" means a right, the value of which is
determined relative to appreciation in value of Shares pursuant to an Award
granted under Section 8 of the Plan.

        (dd) "Subsidiary" means a "subsidiary corporation," as that term is
defined in Section 424(f) of the Code, or any successor provision.

        (ee) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant and, if the Participant is
deceased, the legal representative of the estate of the Participant or the
person or persons who may, by bequest or inheritance, or under the terms of an
Award or of forms submitted by the Participant to the Committee under Section
12(i) of the Plan, acquire the right to exercise an Option or Stock Appreciation
Right or receive cash and/or Shares issuable in satisfaction of an Award in the
event of a Participant's death.

        (ff) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the restrictions
placed on Restricted Stock or any other Award are in effect.

        Except when otherwise indicated by the context, reference to the
masculine gender shall include, when used, the feminine gender and any term used
in the singular shall also include the plural.

                                       6<PAGE>   1

                                                                    EXHIBIT 4.07

                              ALLAIRE CORPORATION

                            1998 STOCK INCENTIVE PLAN

                      (as amended effective March 13, 2000)

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

        The name of the plan is the Allaire Corporation 1998 Stock Incentive
Plan (the "Plan"). The purpose of the Plan is to encourage and enable officers,
directors, and employees of Allaire Corporation (the "Company") and its
Subsidiaries and other persons to acquire a proprietary interest in the Company.
It is anticipated that providing such persons with a direct stake in the
Company's welfare will assure a closer identification of their interests with
those of the Company and its shareholders, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.

        The following terms shall be defined as set forth below:

        "Award" or "Awards", except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Statutory Stock
Options, Restricted Stock Awards, Unrestricted Stock Awards, Performance Share
Awards and Stock Appreciation Rights.

        "Board" means the Board of Directors of the Company.

        "Cause" means (i) any material breach by the participant of any
agreement to which the participant and the Company are both parties, and (ii)
any act or omission justifying termination of the participant's employment for
cause, as determined by the Committee.

        "Change of Control" shall have the meaning set forth in Section 15.

        "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

        "Conditioned Stock Award" means an Award granted pursuant to Section 6.

        "Committee" shall have the meaning set forth in Section 2.

        "Disability" means disability as set forth in Section 22(e)(3) of the
Code.

        "Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 17.

        "Eligible Person" shall have the meaning set forth in Section 4.

        "Fair Market Value" on any given date means the closing price per share
of the Stock on such date as reported by a nationally recognized stock exchange,
or, if the Stock is not listed on such an exchange, as reported by NASDAQ, or,
if the Stock is not quoted on NASDAQ, the fair market value of the Stock as
determined by the Committee.

<PAGE>   2

        "Incentive Stock Option" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.

        "Non-Statutory Stock Option" means any Stock Option that is not an
Incentive Stock Option.

        "Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries in accordance with the retirement policies of the
Company and its Subsidiaries then in effect.

        "Outside Director" means any director who (i) is not an employee of the
Company or of any "affiliated group," as such term is defined in Section 1504(a)
of the Code, which includes the Company (an "Affiliate"), (ii) is not a former
employee of the Company or any Affiliate who is receiving compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
Company's or any Affiliate's taxable year, (iii) has not been an officer of the
Company or any Affiliate and (iv) does not receive remuneration from the Company
or any Affiliate, either directly or indirectly, in any capacity other than as a
director. "Outside Director" shall be determined in accordance with Section
162(m) of the Code and the Treasury regulations issued thereunder.

        "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

        "Performance Share Award" means an Award granted pursuant to Section 8.

        "Stock" means the Common Stock, $.01 par value per share, of the
Company, subject to adjustments pursuant to Section 3.

        "Stock Appreciation Right" means an Award granted pursuant to Section 9.

        "Subsidiary" means a subsidiary as defined in Section 424 of the Code.

        "Unrestricted Stock Award" means Awards granted pursuant to Section 7.

SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
           AND DETERMINE AWARDS.

        (a) Committee. The Plan shall be administered by a committee of the
Board (the "Committee") consisting of not less than two (2) Outside Directors,
but the authority and validity of any act taken or not taken by the Committee
shall not be affected if any person administering the Plan is not an "Outside
Director." Except as specifically reserved to the Board under the terms of the
Plan, the Committee shall have full and final authority to operate, manage and
administer the Plan on behalf of the Company. Action by the Committee shall
require the affirmative vote of a majority of all members thereof.

        (b) Powers of Committee. The Committee shall have the power and
authority to grant and modify Awards consistent with the terms of the Plan,
including the power and authority:

                                      -2-
<PAGE>   3

                (i) to select the persons to whom Awards may from time to time
        be granted;

                (ii) to determine the time or times of grant, and the extent, if
        any, of Incentive Stock Options, Non-Statutory Stock Options, Restricted
        Stock, Unrestricted Stock, Performance Shares and Stock Appreciation
        Rights, or any combination of the foregoing, granted to any one or more
        participants;

                (iii) to determine the number of shares to be covered by any
        Award;

                (iv) to determine and modify the terms and conditions, including
        restrictions, not inconsistent with the terms of the Plan, of any Award,
        which terms and conditions may differ among individual Awards and
        participants, and to approve the form of written instruments evidencing
        the Awards; provided, however, that no such action shall adversely
        affect rights under any outstanding Award without the participant's
        consent;

                (v) to accelerate the exercisability or vesting of all or any
        portion of any Award;

                (vi) subject to the provisions of Section 5(a)(ii), to extend
        the period in which any outstanding Stock Option or Stock Appreciation
        Right may be exercised;

                (vii) to determine whether, to what extent, and under what
        circumstances Stock and other amounts payable with respect to an Award
        shall be deferred either automatically or at the election of the
        participant and whether and to what extent the Company shall pay or
        credit amounts equal to interest (at rates determined by the Committee)
        or dividends or deemed dividends on such deferrals; and

                (viii) to adopt, alter and repeal such rules, guidelines and
        practices for administration of the Plan and for its own acts and
        proceedings as it shall deem advisable; to interpret the terms and
        provisions of the Plan and any Award (including related written
        instruments); to make all determinations it deems advisable for the
        administration of the Plan; to decide all disputes arising in connection
        with the Plan; and to otherwise supervise the administration of the
        Plan.

        All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION.

        (a) Shares Issuable. The maximum number of shares of Stock with respect
to which Awards (including Stock Appreciation Rights) may be granted under the
Plan shall be eight million eight hundred thousand (8,800,000). For purposes of
this limitation, the shares of Stock underlying any Awards which are forfeited,
cancelled, reacquired by the Company or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock with respect to which
Awards may be granted under the Plan so long as the participants to whom such
Awards had been previously granted received no benefits of ownership of the
underlying shares of Stock to which the Award related. Subject to such overall
limitation, any type or types of Award may

                                      -3-
<PAGE>   4

be granted with respect to shares, including Incentive Stock Options. Shares
issued under the Plan may be authorized but unissued shares or shares reacquired
by the Company.

        (b) Limitation on Awards. In no event may any Plan participant be
granted Awards (including Stock Appreciation Rights) with respect to more than
one million (1,000,000) shares of Stock in any calendar year. The number of
shares of Stock relating to an Award granted to a Plan participant in a calendar
year that is subsequently forfeited, cancelled or otherwise terminated shall
continue to count toward the foregoing limitation in such calendar year. In
addition, if the exercise price of an Award is subsequently reduced, the
transaction shall be deemed a cancellation of the original Award and the grant
of a new one so that both transactions shall count toward the maximum shares
issuable in the calendar year of each respective transaction.

        (c) Stock Dividends, Mergers, etc. In the event that after approval of
the Plan by the stockholders of the Company in accordance with Section 17, the
Company effects a stock dividend, stock split or similar change in
capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind of shares of stock or securities with
respect to which Awards may thereafter be granted (including without limitation
the limitations set forth in Sections 3(a) and (b) above), (ii) the number and
kind of shares remaining subject to outstanding Awards, and (iii) the option or
purchase price in respect of such shares. In the event of any merger,
consolidation, dissolution or liquidation of the Company, the Committee in its
sole discretion may, as to any outstanding Awards, make such substitution or
adjustment in the aggregate number of shares reserved for issuance under the
Plan and in the number and purchase price (if any) of shares subject to such
Awards as it may determine and as may be permitted by the terms of such
transaction, or accelerate, amend or terminate such Awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any Award, shall require payment or other consideration which
the Committee deems equitable in the circumstances), subject, however, to the
provisions of Section 15.

        (d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances. Shares which may be delivered under
such substitute awards may be in addition to the maximum number of shares
provided for in Section 3(a).

SECTION 4. ELIGIBILITY.

        Awards may be granted to officers, directors, and employees of the
Company or its Subsidiaries ("Eligible Persons").

SECTION 5. STOCK OPTIONS.

        The Committee may grant to Eligible Persons options to purchase stock.

                                      -4-
<PAGE>   5

        Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

        Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Statutory Stock Options. Unless otherwise so designated, an
Option shall be a Non-Statutory Stock Option. To the extent that any option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Statutory
Stock Option.

        No Incentive Stock Option shall be granted under the Plan after the
tenth anniversary of the earlier of (i) the date of adoption of the Plan by the
Board, or (ii) the date on which the Plan is approved by the stockholders as set
forth in Section 17.

        The Committee in its discretion may determine the effective date of
Stock Options, provided, however, that grants of Incentive Stock Options shall
be made only to persons who are, on the effective date of the grant, employees
of the Company or any Subsidiary. Stock Options granted pursuant to this Section
5(a) shall be subject to the following terms and conditions and the terms and
conditions of Section 13 and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem
desirable.

                (a) Exercise Price. The exercise price per share for the Stock
        covered by a Stock Option granted pursuant to this Section 5(a) shall be
        determined by the Committee at the time of grant but shall be, in the
        case of Incentive Stock Options, not less than one hundred percent
        (100%) of Fair Market Value on the date of grant. If an employee owns or
        is deemed to own (by reason of the attribution rules applicable under
        Section 424(d) of the Code) more than ten percent (10%) of the combined
        voting power of all classes of stock of the Company or any Subsidiary or
        parent corporation and an Incentive Stock Option is granted to such
        employee, the option price shall be not less than one hundred ten
        percent (110%) of Fair Market Value on the grant date.

                (b) Option Term. The term of each Stock Option shall be fixed by
        the Committee, but no Incentive Stock Option shall be exercisable more
        than ten (10) years after the date the option is granted. If an employee
        owns or is deemed to own (by reason of the attribution rules of Section
        424(d) of the Code) more than ten percent (10%) of the combined voting
        power of all classes of stock of the Company or any Subsidiary or parent
        corporation and an Incentive Stock Option is granted to such employee,
        the term of such option shall be no more than five (5) years from the
        date of grant.

                (c) Exercisability; Rights of a Shareholder. Stock Options shall
        become vested and exercisable at such time or times, whether or not in
        installments, as shall be determined by the Committee at or after the
        grant date. The Committee may at any time accelerate the exercisability
        of all or any portion of any Stock Option. An optionee shall have the
        rights of a shareholder only as to shares acquired upon the exercise of
        a Stock Option and not as to unexercised Stock Options.

                (d) Method of Exercise. Stock Options may be exercised in whole
        or in part, by delivering written notice of exercise to the Company,
        specifying the number of shares to

                                      -5-
<PAGE>   6

        be purchased. Payment of the purchase price may be made by one or more
        of the following methods:

                        (i) In cash, by certified or bank check or other
                instrument acceptable to the Committee;

                        (ii) In the form of shares of Stock that are not then
                subject to restrictions, if permitted by the Committee, in its
                discretion. Such surrendered shares shall be valued at Fair
                Market Value on the exercise date; or

                        (iii) By the optionee delivering to the Company a
                properly executed exercise notice together with irrevocable
                instructions to a broker to promptly deliver to the Company cash
                or a check payable and acceptable to the Company to pay the
                purchase price; provided that in the event the optionee chooses
                to pay the purchase price as so provided, the optionee and the
                broker shall comply with such procedures and enter into such
                agreements of indemnity and other agreements as the Committee
                shall prescribe as a condition of such payment procedure. The
                Company need not act upon such exercise notice until the Company
                receives full payment of the exercise price; or

                        (iv) By any other means (including, without limitation,
                by delivery of a promissory note of the optionee payable on such
                terms as are specified by the Committee) which the Committee
                determines are consistent with the purpose of the Plan and with
                applicable laws and regulations.

        The delivery of certificates representing shares of Stock to be
        purchased pursuant to the exercise of a Stock Option will be contingent
        upon receipt from the Optionee (or a purchaser acting in his stead in
        accordance with the provisions of the Stock Option) by the Company of
        the full purchase price for such shares and the fulfillment of any other
        requirements contained in the Stock Option or imposed by applicable law.

                (e) Non-transferability of Options. Except as the Committee may
        provide with respect to a Non-Statutory Stock Option, no Stock Option
        shall be transferable other than by will or by the laws of descent and
        distribution and all Stock Options shall be exercisable, during the
        optionee's lifetime, only by the optionee.

                (f) Annual Limit on Incentive Stock Options. To the extent
        required for "incentive stock option" treatment under Section 422 of the
        Code, the aggregate Fair Market Value (determined as of the time of
        grant) of the Stock with respect to which incentive stock options
        granted under this Plan and any other plan of the Company or its
        Subsidiaries become exercisable for the first time by an optionee during
        any calendar year shall not exceed $100,000.

                (g) Form of Settlement. Shares of Stock issued upon exercise of
        a Stock Option shall be free of all restrictions under the Plan, except
        as otherwise provided in this Plan.

SECTION 6. RESTRICTED STOCK AWARDS.

                                      --6-
<PAGE>   7

        (a) Nature of Restricted Stock Award. The Committee in its discretion
may grant Restricted Stock Awards to any Eligible Person, entitling the
recipient to acquire, for a purchase price determined by the Committee, shares
of Stock subject to such restrictions and conditions as the Committee may
determine at the time of grant ("Restricted Stock"), including continued
employment and/or achievement of pre-established performance goals and
objectives.

        (b) Acceptance of Award. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within sixty (60) days (or such shorter date as
the Committee may specify) following the award date by making payment to the
Company of the specified purchase price, of the shares covered by the Award and
by executing and delivering to the Company a written instrument that sets forth
the terms and conditions applicable to the Restricted Stock in such form as the
Committee shall determine.

        (c) Rights as a Shareholder. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Award. Unless the Committee
shall otherwise determine, certificates evidencing shares of Restricted Stock
shall remain in the possession of the Company until such shares are vested as
provided in Section 6(e) below.

        (d) Restrictions. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries for any reason (including death, Disability, Normal
Retirement and for Cause), the Company shall have the right, at the discretion
of the Committee, to repurchase shares of Restricted Stock with respect to which
conditions have not lapsed at their purchase price, or to require forfeiture of
such shares to the Company if acquired at no cost, from the participant or the
participant's legal representative. The Company must exercise such right of
repurchase or forfeiture within ninety (90) days following such termination of
employment (unless otherwise specified in the written instrument evidencing the
Restricted Stock Award).

        (e) Vesting of Restricted Stock. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such preestablished performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested." The Committee at any time may
accelerate such date or dates and otherwise waive or, subject to Section 13,
amend any conditions of the Award.

        (f) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.

SECTION 7. UNRESTRICTED STOCK AWARDS.

                                      -7-
<PAGE>   8

        (a) Grant or Sale of Unrestricted Stock. The Committee in its discretion
may grant or sell to any Eligible Person shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock") at a purchase price
determined by the Committee. Shares of Unrestricted Stock may be granted or sold
as described in the preceding sentence in respect of past services or other
valid consideration.

        (b) Restrictions on Transfers. The right to receive unrestricted Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered, other
than by will or the laws of descent and distribution.

SECTION 8. PERFORMANCE SHARE AWARDS.

        Nature of Performance Shares. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any Eligible
Person. The Committee in its discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares.

SECTION 9. STOCK APPRECIATION RIGHTS.

        The Committee in its discretion may grant Stock Appreciation Rights to
any Eligible Person (i) alone, or (ii) simultaneously with the grant of a Stock
Option and in conjunction therewith or in the alternative thereto. A Stock
Appreciation Right shall entitle the participant upon exercise thereof to
receive from the Company, upon written request to the Company at its principal
offices (the "Request"), a number of shares of Stock (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Stock and cash, as specified in the Request (but subject to the
approval of the Committee in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having an
aggregate Fair Market Value equal to the product of (i) the excess of Fair
Market Value, on the date of such Request, over the exercise price per share of
Stock specified in such Stock Appreciation Right or its related Option,
multiplied by (ii) the number of shares of Stock for which such Stock
Appreciation Right shall be exercised. Notwithstanding the foregoing, the
Committee may specify at the time of grant of any Stock Appreciation Right that
such Stock Appreciation Right may be exercisable solely for cash and not for
Stock.

SECTION 10. TERMINATION OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.

        (a) Incentive Stock Options:

                (i) Termination by Death. If any participant's employment by the
        Company and its Subsidiaries terminates by reason of death, any
        Incentive Stock Option owned by such participant may thereafter be
        exercised to the extent exercisable at the date of death, by the legal
        representative or legatee of the participant, for a period of two (2)
        years (or such longer period as the Committee

                                      -8-
<PAGE>   9

        shall specify at any time) from the date of death, or until the
        expiration of the stated term of the Incentive Stock Option, if earlier.

                (ii) Termination by Reason of Disability or Normal Retirement.

                (A) Any Incentive Stock Option held by a participant whose
        employment by the Company and its Subsidiaries has terminated by reason
        of Disability may thereafter be exercised, to the extent it was
        exercisable at the time of such termination, for a period of one (1)
        year (or such longer period as the Committee shall specify at any time)
        from the date of such termination of employment, or until the expiration
        of the stated term of the Option, if earlier.

                (B) Any Incentive Stock Option held by a participant whose
        employment by the Company and its Subsidiaries has terminated by reason
        of Normal Retirement may thereafter be exercised, to the extent it was
        exercisable at the time of such termination, for a period of ninety (90)
        days (or such longer period as the Committee shall specify at any time)
        from the date of such termination of employment, or until the expiration
        of the stated term of the Option, if earlier.

                (C) The Committee shall have sole authority and discretion to
        determine whether a participant's employment has been terminated by
        reason of Disability or Normal Retirement.

                (D) Except as otherwise provided by the Committee at the time of
        grant, the death of a participant during a period provided in this
        Section 10(b) for the exercise of an Incentive Stock Option shall extend
        such period for two (2) years from the date of death, subject to
        termination on the expiration of the stated term of the Option, if
        earlier.

                (iii) Termination for Cause. If any participant's employment by
        the Company and its Subsidiaries has been terminated for Cause, any
        Incentive Stock Option held by such participant shall immediately
        terminate and be of no further force and effect; provided, however, that
        the Committee may, in its sole discretion, provide that such Option can
        be exercised for a period of up to thirty (30) days from the date of
        termination of employment or until the expiration of the stated term of
        the Option, if earlier.

                (iv) Other Termination. Unless otherwise determined by the
        Committee, if a participant's employment by the Company and its
        Subsidiaries terminates for any reason other than death, Disability,
        Normal Retirement or for Cause, any Incentive Stock Option held by such
        participant may thereafter be exercised, to the extent it was
        exercisable on the date of termination of employment, for ninety (90)
        days (or such longer period as the Committee shall specify at any time)
        from the date of termination of employment or until the expiration of
        the stated term of the Option, if earlier.

        (b) Non-Statutory Stock Options and Stock Appreciation Rights. Any
Non-Statutory Stock Option or Stock Appreciation Right granted under the Plan
shall contain such terms and

                                      -9-
<PAGE>   10

conditions with respect to its termination as the Committee, in its discretion,
may from time to time determine.

SECTION 11. TAX WITHHOLDING.

        (a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

        (b) Payment in Shares. A Participant may elect, with the consent of the
Committee, to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to an Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due with respect to such Award, or (ii) transferring to the
Company shares of Stock owned by the participant with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due.

SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a
termination of employment:

        (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another;

        (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 13. AMENDMENTS AND TERMINATION.

     The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. However, no such amendment,
unless approved by the stockholders of the Company, shall be effective if it
would cause the Plan to fail to satisfy the incentive stock option requirements
of the Code.

SECTION 14. STATUS OF PLAN.

                                      -10-
<PAGE>   11

     With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.

SECTION 15. CHANGE OF CONTROL PROVISIONS.

                (a) Upon the occurrence of a Change of Control as defined in
        this Section 15:

                        (i) subject to the provisions of clause (iii) below,
                after the effective date of such Change of Control, each holder
                of an outstanding Stock Option, Restricted Stock Award,
                Performance Share Award or Stock Appreciation Right shall be
                entitled, upon exercise of such Award, to receive, in lieu of
                shares of Stock (or consideration based upon the Fair Market
                Value of Stock), shares of such stock or other securities, cash
                or property (or consideration based upon shares of such stock or
                other securities, cash or property) as the holders of shares of
                Stock received in connection with the Change of Control;

                        (ii) the Committee may accelerate the time for exercise
                of, and waive all conditions and restrictions on, each
                unexercised and unexpired Stock Option, Restricted Stock Award,
                Performance Share Award and Stock Appreciation Right, effective
                upon a date prior or subsequent to the effective date of such
                Change of Control, specified by the Committee; or

                        (iii) each outstanding Stock Option, Restricted Stock
                Award, Performance Share Award and Stock Appreciation Right may
                be cancelled by the Committee as of the effective date of any
                such Change of Control provided that (x) notice of such
                cancellation shall be given to each holder of such an Award and
                (y) each holder of such an Award shall have the right to
                exercise such Award to the extent that the same is then
                exercisable or, in full, if the Committee shall have accelerated
                the time for exercise of all such unexercised and unexpired
                Awards, during the thirty (30) day period preceding the
                effective date of such Change of Control.

                (b) "Change of Control" shall mean the occurrence of any one of
        the following events:

                        (i) any "person" (as such term is used in Sections 13(d)
                and 14(d)(2) of the Act) becomes a "beneficial owner" (as such
                term is defined in Rule 13d-3 promulgated under the Act) (other
                than the Company, any trustee or other fiduciary holding
                securities under an employee benefit plan of the Company, or any
                corporation owned, directly or indirectly, by the stockholders
                of the Company in substantially the same proportions as their
                ownership of stock of the Company), 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; or

                                      -11-
<PAGE>   12

                        (ii) the stockholders of the Company approve a merger or
                consolidation of the Company with any other corporation or other
                entity, 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 than sixty-five percent (65%) of the
                combined voting power of the voting securities of the Company or
                such surviving entity outstanding immediately after such merger
                or consolidation; or

                        (iii) the stockholders of the Company approve 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.

SECTION 16. GENERAL PROVISIONS.

        (a) No Distribution; Compliance with Legal Requirements. The Committee
may require each person acquiring shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

        No shares of Stock shall be issued pursuant to an Award until all
applicable securities laws and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.

        (b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.

        (c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

SECTION 17. EFFECTIVE DATE OF PLAN.

        The Plan shall become effective upon approval by the holders of a
majority of the shares of capital stock of the Company present or represented
and entitled to vote at a meeting of stockholders.

SECTION 18. GOVERNING LAW.

        This Plan shall be governed by, and construed and enforced in accordance
with, the substantive laws of the State of Delaware without regard to its
principles of conflicts of laws.

                                      * * *

                                      -12-

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