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                                                                    EXHIBIT 10.3

                         SERVICESOFT TECHNOLOGIES, INC.

                              AMENDED AND RESTATED

                             1994 STOCK OPTION PLAN

1.   PURPOSE. The Servicesoft Technologies, Inc. Stock Option Plan (the "Plan")
is intended to provide a method whereby employees and other associated persons
(including officers and directors) of Servicesoft Technologies, Inc. (the
"Company") and its subsidiaries who are making, and are expected to continue
making, substantial contributions to the successful management and growth of the
Company and its subsidiaries may be offered an opportunity to acquire Common
Stock, par value $0.01 per share (the "Common Stock"), of the Company. The
intention is to increase the proprietary interest of those persons in the
Company and their incentive to remain in and advance in the service of the
Company and its subsidiaries and to attract and retain personnel of experience
and ability by granting such persons an opportunity to acquire a proprietary
interest in the Company. Accordingly, the Company may, from time to time, grant
to such employees as may be selected in the manner hereinafter provided,
incentive stock options ("Incentive Stock Options"), as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and nonstatutory
stock options ("Nonstatutory Stock Options") to purchase shares of Common Stock
of the Company on the terms and conditions hereinafter established. The
Incentive Stock Options and Nonstatutory Stock Options sometimes are referred to
herein individually as an "Option" and collectively as the "Options".

2.   ADMINISTRATION. The Plan shall be administered by a Compensation Committee
(the "Committee") appointed by the Board of Directors of the Company. The
Committee shall consist of no fewer than three members who may also be members
of the Board of Directors of the Company and participate in the Plan. Should the
Company become subject to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Committee shall consist of not fewer than three
"disinterested persons", as that term is defined in subparagraph (d)(3) of Rule
16b-3 ("Rule 16b-3") under the Exchange Act. Members of the Committee then will
not be able to participate in the Plan or become members if one year prior to an
occurrence whereby the Company becomes subject to Rule 16b-3 they received an
option under any plan of the Company. Subject to the terms and conditions of the
Plan and relevant commitments of the Company, the Committee shall have full
authority in its discretion, from time to time, and at any time, to select the
persons to whom Options shall be granted, to determine the number of shares to
be covered by each option, the time at which the Option shall be granted, the
terms and conditions of Option Agreements (as hereinafter defined) and, except
as hereinafter provided, the option exercise price and the term during which the
Options may be exercised.

     The Board of Directors may at any time appoint or remove members of the
Committee and may fill vacancies, however caused, in the Committee. The
Committee shall select one of its members as its Chairman, and shall hold its
meetings at such times

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and places as it shall deem advisable. A majority of its members shall
constitute a quorum. All actions of the Committee shall be taken by a majority
of its members and can be taken by written consent in lieu of a meeting. The
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable.

3.   INTERPRETATION AND AMENDMENT. The interpretation, construction or
determination of any provisions of the Plan by the Committee shall be final and
conclusive. No member of the Board of Directors or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan.

     The Board of Directors may, at any time, amend, alter, suspend or terminate
the Plan; PROVIDED, HOWEVER, that any such action shall not impair any Options
theretofore granted under the Plan, and provided further that no amendment of
the Plan may be effected with regard to the following actions without the
approval of the holders of at least the majority of the voting stock of the
Company: (i) the total number of shares of Common Stock that may be purchased
under the Plan shall not be increased (except as permitted by Paragraph 11);
(ii) the option period during which outstanding Options granted under the Plan
may be exercised shall not be extended; and (iii) the class of individuals
eligible to receive options under the Plan cannot be changed.

4.   PARTICIPANTS. Incentive Stock Options may be granted under the Plan to all
employees of the Company and its subsidiaries (including employees who are also
directors or officers of the Company or its subsidiaries). The term "subsidiary"
shall mean "subsidiary corporation" as defined in Section 425 of the Code. No
Incentive Stock Option shall be granted to an employee who, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of capital stock of the
Company or any subsidiary of the Company; PROVIDED, HOWEVER, that an Incentive
Stock Option may be granted to such an employee if, at the time such Incentive
Stock Option is granted, the option exercise price is at least one hundred and
ten percent (110%) of the fair market value of the Common Stock subject to the
Incentive Stock Option, and such Incentive Stock Option is by its terms not
exercisable after the expiration of five (5) years from the date such Incentive
Stock Option is granted. Nonstatutory Stock Options may be granted to any person
who has provided services to the Company, as determined is appropriate by the
Committee.

     Subject to the preceding paragraph, receipt of stock options under any
other stock option plan maintained by the Company or any subsidiary shall not,
for that reason, preclude a person from receiving Options under the Plan.

5.   COMMON STOCK. The Common Stock which may be issued and sold pursuant to
Options granted under the Plan from time to time shall not exceed in the
aggregate 2,200,000 shares of the Common Stock of the Company. The number of
shares issuable under the Plan may be increased to allow for the reissuance or
disposition of shares that have been issued upon the exercise of options granted
under the Plan and reacquired by the Company. The shares of Common Stock
reissued and sold under the Plan may be the Company's authorized but unissued
shares, or shares held in the Company's treasury.

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6.   TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan shall
be in such form and on such terms as the Committee shall, from time to time,
approve, but subject, nevertheless, to the following terms and conditions:

     (a) The Option shall state the total number of shares of Common Stock to
which it relates and no fractional shares of Common Stock shall be issued.

     (b) The Option exercise price per share of Common Stock issuable upon the
exercise of an Incentive Stock Option shall be not less than one hundred percent
(100%) of the fair market value of the Common Stock covered by such Option at
the date such Option is granted, or, in the case of an employee who at the time
the Incentive Stock Option is granted owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of capital stock
of the Company or any subsidiary of the Company, the Option exercise price for
any Incentive Stock Option shall be not less than one hundred and ten percent
(110%) of the fair market value of the Common Stock covered by such Option.

     (c) Notwithstanding any other provision of the Plan, the term of an Option
shall be for a period of not more than ten (10) years from the date such Option
is granted.

     (d) An Option must be granted within ten (10) years of the earlier of the
date the Plan is adopted or the date this Plan is approved by the Company's
stockholders in accordance with Paragraph 22.

     (e) No individual shall be given the opportunity under this Plan to
exercise Incentive Stock Options for the purchase of Common Shares valued (at
the time of grant of the Incentive Stock Options) in excess of $100,000, in any
calendar year, unless and to the extent that said Options shall have first
become exercisable in the preceding year. No Incentive Stock Option shall be
granted hereunder in such a manner as would cause the foregoing restrictions to
be violated.

7.   RESTRICTIONS ON DISPOSITION AND OBLIGATION OF RESALE. Shares of Common
Stock acquired by an employee pursuant to the exercise of a Nonstatutory Stock
Option under the Plan shall not be sold, transferred, or otherwise disposed of
and shall not be pledged or otherwise hypothecated, except as provided in
Section 12 and in this Section 7. (Any such sale, transfer or other disposition,
or any pledge or other hypothecation shall hereinafter be referred to as a
"disposition"). In the event of the termination of employment for any reason
except retirement with the consent of the Company or death, such shares shall,
except as provided below, be offered for resale to the Company at the original
exercise price of the Nonstatutory Stock Option the exercise of which resulted
in the subject shares. Shares as to which the restrictions against disposition
and the obligations of resale to the Company have lapsed in accordance with the
provisions set forth below shall be referred to as "free shares". Shares as to
which the restrictions against disposition and the obligation of resale to the
Company have not lapsed as provided below shall be referred to as "restricted
shares". Holders of restricted shares may vote their shares at any meeting of
holders of shares of Common Stock. The Committee may provide for the issuance of
restricted shares subject to this paragraph to a Trustee in exchange for payment
of par

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value only and direct said Trustee to issue an appropriate proxy authorizing the
Optionee to vote said restricted shares.

     (a) The restrictions against disposition and the obligation of resale to
the Company of shares acquired pursuant to the Plan shall lapse as the Board of
Directors or Committee shall determine, and such terms shall be incorporated
into and be made a part of the option Agreement between the Company and the
employee. Any provision for the lapse of the restrictions against disposition
and the obligation of resale shall apply with respect to shares subject to an
option and/or shares issued upon the exercise of any related stock appreciation
rights whether or not the Option has been exercised in whole or part on the date
of lapse.

     (b) In the event of the termination of employment for any reason, shares
issued to the employee pursuant to the exercise of a Nonstatutory Stock Option
under the Plan, which shares have not as of the date of termination of
employment, become free shares as defined above, shall become subject to an
obligation of immediate resale to the Company. The obligation of resale in the
case of disability, termination of employment due to retirement with the consent
of the Company or death shall be terminated to the same extent as an unexercised
Option may be exercised under similar circumstances as set forth in Sections 9
and 11. Shares subject to such obligation of resale shall be delivered to the
Company within thirty (30) days following the termination of employment. Within
sixty (60) days following a timely delivery of such shares, the Company will
compensate the employee (at the original acquisition price) for such number of
shares as the Company elects to purchase and will return to the employee any
shares not so purchased. Nothing in this Paragraph 7 shall require the Company
to repurchase shares issued to employees under the Plan. In the event the
Company exercises its rights under this Plan, restricted shares that are not
delivered to the Company within thirty (30) days following the termination of
employment shall remain subject to the restrictions against disposition, and
such restrictions shall not lapse as otherwise provided in this Paragraph 7 and
in the employee's Option Agreement.

     (c) Notwithstanding any of the foregoing restrictions, any restricted
shares acquired under the Plan may at any time be pledged or otherwise
hypothecated to secure borrowing by the employee to obtain the acquisition price
to be paid by the employee for such shares, provided, however, that the amount
of such borrowing may not exceed the acquisition price of such shares.

     (d) The provisions of this Paragraph 7 and the provisions of any Option
Agreement between the Company and an employee relating to the restrictions
against disposition and the obligation of resale to the Company shall be applied
according to their terms or according to such other terms and conditions, or at
such other times and dates, as the Board of Directors or the Committee may from
time to time establish.

8.   STOCK APPRECIATION RIGHTS.

     (a) A "stock appreciation right" is the right of an Optionee, without
payment to the Company (except for applicable withholding taxes), to receive the
excess of the Fair

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Market Value per share on the date on which a stock appreciation right is
exercised over the option price per share as provided in the related underlying
Option. A stock appreciation right shall pertain to, and be granted only in
conjunction with, a related underlying Option granted under this Plan and shall
be exercisable and exercised only to the extent that the related option is
exercisable. The number of shares of Common Stock subject to the stock
appreciation right shall be all or part of the shares subject to the related
Option, as determined by the Committee. The stock appreciation right shall
either become all or partially non-exercisable and shall be all or partially
forfeited if the exercisable portion, or any part thereof, of the related option
is exercised and vice versa.

     (b) At the discretion of the Committee, any Option granted under this Plan
may, at the time of such grant, include a stock appreciation right. The
Committee may impose conditions upon the grant or exercise of the stock
appreciation right which conditions may include a condition that the stock
appreciation right may only be exercised in accordance with the rules and
regulations adopted by the Committee from time to time. Such rules and
regulations may govern the right to exercise the stock appreciation right
granted prior to the adoption or amendment of such rules and regulations as well
as stock appreciation rights granted thereafter.

     (c) Subject to any restrictions or conditions imposed by the Committee, a
stock appreciation right may be exercised by the Optionee as to a number of
shares of Common Stock under its related Option only upon the surrender of a
like number of shares of Common Stock available to the exercisable portion of
the related Option. Upon the exercise of a stock appreciation right and the
surrender of the exercisable portion of the related Option, the Optionee shall
be awarded cash, shares of Common Stock or a combination of shares and cash at
the discretion of the Committee. The award shall have a total value equal to the
product obtained by multiplying (1) the excess of the Fair Market Value per
share on the date on which the stock appreciation right is exercised over the
option price per share by (2) the number of shares subject to the exercisable
portion of the related Option so surrendered. The Committee may from time to
time, determine a limit as to the payment of the share value of a stock
appreciation right. In the event loans by the Company to the Optionee are
outstanding at the time of termination of his employment, the limit shall be no
less than the then-outstanding loan amount as specified in Paragraph 8(a).

     (d) The portion of the stock appreciation right which may be awarded in
cash shall be determined by the Committee from time to time. Cash awards will be
subject to the disposition limitations specified in Paragraph 7 hereof The
number of shares awardable to an Optionee with respect to the noncash portion of
a stock appreciation right shall be determined by dividing such noncash portion
by the Fair Market Value per share on the exercisable date. No fractional shares
shall be issued.

9.   TERMINATION OF EMPLOYMENT. Subject to the provision of Section 10, the
Option Agreement may provide that if the holder of an Option is an employee of
the Company or any subsidiary and ceases to be so employed for any reason, then
any options that are exercisable by him at the time he ceases to be employed by
the Company or its subsidiaries, and only to the extent such options are
exercisable as of such time, may be exercised by him only within ninety (90)
days after the date he ceases to be employed by

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the Company or its subsidiary. Notwithstanding the foregoing, if the holder of
an Option is an employee of the Company or any subsidiary and ceases to be so
employed as a result of his dismissal for cause (as determined by the Board of
Directors in its sole discretion or as otherwise defined in an employment
agreement with the Optionholder in effect at that time), the Option Agreement
may provide for the immediate termination of any Options granted to such
employee. The ninety (90) day limit referred to in this paragraph may be
extended on a case-by-case basis at the sole discretion of the Committee.

     Solely for the purposes of the Plan, the transfer of an employee from the
employ of the Company to a subsidiary of the Company, or vice-versa, shall not
be deemed a termination of employment.

10.  TERMINATION AS A RESULT OF CHANGE OF CONTROL.

     (a) In the event that an Optionholder who is an employee of the Company is
terminated by the Company upon or within the twelve month period following a
Change of Control, and such termination is not a dismissal for cause, fifty
percent (50%) of the remaining unvested portion of the total number of Options
held by such Option holder issued previously under this Plan shall vest
immediately upon such termination and become exercisable, while the remaining
Options shall be governed by the provisions of Section 9 of this Plan and the
terms of the Option Agreement; PROVIDED, HOWEVER, that the Board of Directors of
the Company shall have the discretion to alter such arrangements with respect to
a Change of Control in the terms of any particular Option Agreement, and may in
particular provide for a different percentage of unvested Options to vest
immediately in the event of a Change of Control regardless of whether the
employment of the holder of such Options is subsequently terminated.

     (b) In the event of a Change of Control, fifty percent (50%) of the
remaining unvested portion of the total number of Options held by each director
of the Company who is not an employee of the Company, issued previously under
this Plan shall vest immediately upon such Change of Control and become
exercisable, while the remaining Options shall be governed by the provisions of
Section 9 of this Plan and the terms of the Option Agreement; PROVIDED, HOWEVER,
that the Board of Directors of the Company shall have the discretion to alter
such arrangements with respect to a Change of Control in the terms of any
particular Option Agreement, and may in particular provide for a different
percentage of unvested Options to vest immediately in the event of a Change of
Control.

     (c) For purposes of this Section 10, a "Change of Control" shall mean any
of the following events: (i) the dissolution or liquidation of the Company, (ii)
the sale of all or substantially all of the assets of the Company on a
consolidated basis to an unrelated person or entity, (iii) a merger,
reorganization or consolidation in which the holders of the Company's
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction, (iv) the sale of all of the
stock of the Company to an unrelated person or entity or (v) any other
transaction (other than a public offering or private placement) in which the
owners of the Company's outstanding voting power prior to such transaction do
not own at least a majority of the outstanding voting power of the

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relevant entity after the transaction, in each case, regardless of the form
thereof.

11.  DEATH. The Option Agreement may provide that if a holder of an Option shall
die while in the employ of the Company or any subsidiary of the Company, his
estate, personal representative or beneficiary shall have the right to exercise
any Options granted to the Optionholder pursuant to the Plan at any time within
two years from the date of his death (or within such shorter period as may be
specified by the Company in the Option Agreement), in respect of the total
number of shares as to which he would have been entitled to exercise an option
at the date of his death.

12. STOCK SPLITS MERGERS, ETC. In case of any stock split, stock dividend or
similar transaction which increases or decreases the number of outstanding
shares of Common Stock, appropriate adjustment shall be made by the Board of
Directors, whose determination shall be final, to the number of shares of Common
Stock which may be purchased under the Plan and the number and option exercise
price per share of Common Stock which may be purchased under any outstanding
Options. In the case of a merger, sale of assets or similar transaction which
results in a replacement of the Company's Common Stock with stock of another
corporation, the Company will be required to replace any outstanding Options
granted under the Plan with comparable options to purchase the stock of such
other corporation. The Company may provide for immediate maturity of all
outstanding Options prior to the effectiveness of such merger, sale of assets or
similar transaction, with all Options not being exercised within the time period
specified by the Board of Directors being terminated.

13.  TRANSFERABILITY. Options are not assignable or transferable, except by will
or the laws of descent and distribution to the extent set forth in Paragraph 11
and, during an Optionholder's lifetime, may be exercised only by him.

14.  EXERCISE OF OPTIONS. An Optionholder electing to exercise an option shall
give written notice to the Company of such election and of the number of shares
of Common Stock that he has elected to acquire and/or, as the case may be, the
number of shares of Common Stock as to which stock appreciation rights are being
claimed. A holder of Options shall have no rights of a stockholder with respect
to shares of Common Stock covered by the Option until after the date of issuance
of a stock certificate to him upon partial or complete exercise of his Option.

15.  WRITTEN OPTION AGREEMENT. Agreements granting Options under the Plan
("Option Agreements") shall be in writing, duly executed and delivered by or on
behalf of the Company and the Optionholder, and shall contain such terms and
conditions as the committee deems advisable. If there is any conflict between
the terms and conditions of any option Agreement and of the Plan, the terms and
conditions of the Plan shall control.

16.  PAYMENT. The Option exercise price shall be payable upon the exercise of
the Option in cash, by certified check or by the tender of shares of Common
Stock or, at the discretion of the Board of Directors, by paying in cash, at the
minimum, the par value of the shares of Common Stock being acquired and
executing a promissory note for the balance of the option exercise price,
provided that said note shall bear interest at a rate

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which is no less than the lowest applicable U.S. federal rate required to be
charged to preclude the recharacterization of any amount of stated principal as
interest for U.S. federal tax purposes. If the shares of Common Stock are
tendered as payment of the option exercise price, the value of such shares shall
be their fair market value as of the date of exercise. If such tender would
result in the issuance of fractional shares of Common Stock, the Company shall
instead return the difference in cash or by check to the employee.

17.  RESTRICTIONS ON ISSUING SHARES. The exercise of each Option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise in the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company. The
Company shall use its best efforts to effect or secure the necessary
withholding, listing, registration, qualification, consent or approval so as to
effect the exercise of each Option and issue and deliver the shares purchased
thereunder.

18.  TERM OF PLAN. The Plan shall terminate ten (10) years after the Plan is
adopted by the Board of Directors, and no Option shall be granted pursuant to
the Plan after that date.

19.  APPLICATION OF FUNDS. The proceeds received by the Company from the sale of
Common Stock pursuant to the exercise of Options granted under the Plan will be
used for general corporate purposes.

20.  OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose no
obligation on the Optionholder to exercise such option.

21.  CONTINUANCE OF EMPLOYMENT. Neither the Plan nor any Option Agreement shall
impose any obligation on the Company or on any subsidiary of the Company to
continue the employment of an Optionholder, and nothing in the Plan or in any
Option Agreement shall confer upon any Optionholder any right to continue in the
employ of the Company or the subsidiary of the Company or conflict with the
right of either to terminate such employment at any time.

22.  EFFECTIVENESS OF THE PLAN. The Plan shall become effective on the date of
its adoption by the Board of Directors, but subject, nevertheless, to (a)
approval, within twelve (12) months thereof, by the stockholders representing at
least a majority of the voting stock of the Company or by such greater
percentage as may from time to time be required under the laws of the State of
Delaware, and (b) such approvals as may be required by any other public
authorities. Options under this Plan may be granted but not exercised until it
is approved by the Company's shareholders. In the event the Plan is not
approved, the Plan shall terminate and all Options granted shall be void and
have no force or effect.

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As amended and restated through July 7, 1999.<PAGE>   1

                                                                    EXHIBIT 10.4

                         SERVICESOFT TECHNOLOGIES, INC.
                        1999 STOCK OPTION AND GRANT PLAN

     Section 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

     The name of the plan is the Servicesoft Technologies, Inc. 1999 Stock
Option and Grant Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, directors, consultants, advisors and other key
persons of Servicesoft Technologies, Inc. (the "Company") and its Subsidiaries
(as defined below) upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business 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, 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:

     "Act" means the Securities Exchange Act of 1934, as amended.

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

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

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

     "Committee" has the meaning specified in Section 2.

     "Effective Date" means the date on which the Plan is approved by Board of
Directors as set forth in Section 13.

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     "Fair Market Value" of the Stock on any given date means (i) if the Stock
is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall not be less than the average of the highest bid and lowest asked prices of
the Stock reported for such date or, if no bid and asked prices were reported
for such date, for the last day preceding such date for which such prices were
reported; or (ii) if the Stock is admitted to trading on a national securities
exchange or the NASDAQ National Market System, then clause (i) shall not apply
and the Fair Market Value on any date shall not be less than the closing price
reported for the Stock on such exchange or system for such date or, if no sales
were reported for such date, for the last date preceding such date for which a
sale was reported; or (iii) if the Stock is not publicly traded on a securities
exchange or traded in the over-the-counter market or, if traded or quoted, there
are no transactions or quotations within the last ten trading days or trading
has been halted for extraordinary reasons, the Fair Market Value on any given
date shall be determined in good faith by the Committee with reference to the
rules and principles of valuation set forth in Section 20.2031-2 of the Treasury
Regulations; and (iv) notwithstanding the foregoing, the Fair Market Value of
the Stock on the effective date of the Initial Public Offering shall be the
offering price to the public of the Stock on such date.

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

     "Independent Director" means a member of the Board who is neither an
employee or officer of the Company or any Subsidiary.

     "Initial Public Offering" means the first underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Stock to the public.

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

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

     "Restricted Stock Award" means any Award granted pursuant to Section 6.

     "Service Relationship" means any relationship as an employee, part-time
employee or consultant of the Company or any Subsidiary of the Company such
that, for example, a Service Relationship shall be deemed to continue without
interruption in the event the participant's status changes from full-time
employee to part-time employee or consultant.

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

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     "Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities, beginning with the
Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

     "Unrestricted Stock Award" means any Award 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 the Board of
Directors of the Company, or at the discretion of the Board, by a committee of
the Board consisting of not less than two Directors; PROVIDED, HOWEVER, that if
each member of the Committee is not (i) a "Non-Employee Director" within the
meaning of Rule 16b-3(a)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (ii) an "Outside Director" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder, any
Awards granted to individuals subject to the reporting requirements of Section
16 of the Exchange Act shall be approved by the Board of Directors. All
references herein to the Committee shall be deemed to refer to the entity then
responsible for administration of the Plan at the relevant time (i.e., either
the Board of Directors or a committee of the Board, as applicable).

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

               (1) to select the officers, employees, Independent Directors,
consultants, advisers and key persons of the Company and its Subsidiaries to
whom Awards may from time to time be granted;

               (2) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards and Unrestricted Stock Awards, or any combination of the foregoing,
granted to any one or more participants;

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

               (4) to determine and modify from time to time 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;

               (5) to accelerate at any time the exercisability or vesting of
all or any portion of any Award and/or to include provisions in Awards providing
for such acceleration,

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               (6) to impose any limitations on Awards granted under the Plan,
including limitations on transfers repurchase provisions and the like and to
exercise repurchase rights or obligations;

               (7) subject to the provisions of Section 5(a)(3), to extend at
any time the period in which Stock Options may be exercised;

               (8) to determine at any time 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 constituting
interest (at rates determined by the Committee) or dividends or deemed dividends
on such deferrals; and

               (9) at any time 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.

          (c)  DELEGATION OF AUTHORITY TO GRANT AWARDS. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Committee
shall include a limitation as to the amount of Awards that may be granted during
the period of delegation and shall contain guidelines as to the determination of
the exercise price of any Option, the price of other Awards and the vesting
criteria. The Committee may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the Committee's
delegate or delegates that were consistent with the terms of the Plan.

     Section 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

          (a)  STOCK ISSUABLE. The maximum number of shares of Stock reserved
and available for issuance under the Plan shall initially be 1,876,498 shares of
Stock; PROVIDED THAT, on the consummation of the Company's initial public
offering of its Common Stock and on each January 1 during the term of the Plan,
commencing on January 1, 2001, unless the Board determines otherwise, the
maximum number of shares of Stock for which Awards may be granted under the Plan
shall be automatically increased (i) to the number which maintains the number of
shares reserved for issuance under the Plan and any other stock and/or option
plan of the Company at twenty percent (20%) of the issued and outstanding
capital stock of the Company calculated on an as-converted, fully-diluted basis
(the "Diluted Capital Stock") (after

<PAGE>   5

such increase) or (ii) by a number of shares of Stock equal to four percent (4%)
of the Diluted Capital Stock, whichever is greater; PROVIDED FURTHER THAT, in no
event shall the number of shares reserved for issuance under the Plan exceed
10,000,000. For purposes of the foregoing limitations, the shares of Stock
underlying any Awards which are forfeited, canceled, reacquired by the Company,
satisfied without the issuance of Stock or otherwise terminated (other than by
exercise) shall be added back to the shares of stock available for issuance
under the Plan. Subject to such overall limitation, shares of Stock may be
issued up to such maximum number pursuant to any type or types of Award;
PROVIDED, HOWEVER, that from and after the date the Plan is subject to Section
162(m) of the Code, Awards with respect to no more than 1,000,000 shares of
Stock may be granted to any one individual participant during any one calendar
year period. The shares available for issuance under the Plan may be authorized
but unissued shares of Stock or shares of Stock reacquired by the Company.

          (b)  RECAPITALIZATIONS. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction in the capital structure of the
Company without consideration, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of shares or other
securities of the Company or any successor company, or additional shares or new
or different shares or other securities of the Company or other non-cash assets
are distributed with respect to such shares of Stock or other securities, the
Committee shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options or other Awards that can be granted to any one individual
participant, (iii) the number and kind of shares or other securities subject to
any then outstanding Awards under the Plan, and (iv) the price for each share
subject to any then outstanding Stock Options or other Awards under the Plan,
without changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of shares) as to which such Stock Options remain
exercisable and the repurchase price for shares subject to repurchase. No
fractional shares of Stock shall be issued under the Plan resulting from any
such adjustment, but will either be replaced by a cash payment equal to the fair
market value of such fraction of a share or will be rounded up to the nearest
whole share, as reasonably determined by the Committee. Any adjustment or
determination by the Committee shall be final, binding and conclusive.

          (c)  MERGERS AND OTHER CORPORATE TRANSACTIONS. In the case of (i) a
merger, reorganization or consolidation between the Company in which the Company
is not the surviving corporation and in which entity the holders of the
Company's outstanding voting stock immediately prior to the transaction hold
less than a majority of the outstanding voting stock of the surviving entity
immediately after the transaction, (ii) the sale of all or substantially all of
the assets of the Company to an unrelated person or entity, (iii) the sale of
all of the Stock of the Company to an unrelated person or entity, or (iv) the
acquisition, sale or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction (in each case, a "Corporate
Transaction"), unless provision is made in connection with the Corporate
Transaction for the assumption of Awards heretofore granted, or the substitution
of such Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment to the number and kind of shares, and if appropriate, the
per share exercise price as provided in Section 3(b) above, fifty percent (50%)
of the remaining unvested portion of the total Awards held by
<PAGE>   6

such participant issued previously under the Plan shall vest immediately and
become exercisable, except with respect to such Awards as the Committee
otherwise determines at the time of grant of such Awards. If provision is made
in connection with the Corporate Transaction for the assumption of the Awards
heretofore granted, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, and a participant's Service Relationship
with such successor entity or parent thereof is, on or within twelve (12) months
after such Corporate Transaction, terminated by such successor entity or parent
thereof, then fifty percent (50%) of the remaining outstanding Awards held by
such participant, to the extent not fully vested and exercisable, shall become
fully vested and exercisable. Notwithstanding the foregoing , in the event of a
Corporate Transaction, fifty percent (50%) of the remaining unvested portion of
the total number of Awards held by each director of the Company who is not an
employee of the Company, issued previously under the Plan shall vest immediately
upon such Corporate Transaction and become exercisable, whether or not provision
is made for the assumption of such Awards or the substitution of such Awards
with new Awards of the successor entity or parent thereof. Upon the
effectiveness of the Corporate Transaction, the Plan and all Awards granted
hereunder shall, unless assumed by the successor entity, terminate. In the event
of such termination, each optionee shall be permitted to exercise for a period
of at least 15 days prior to the date of such termination all outstanding Awards
held by such optionee which are then exercisable.

          (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 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.

     Section 4. ELIGIBILITY.

          Participants in the Plan will be such officers and other employees,
Independent Directors, consultants, advisors and other key persons of the
Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries as are
selected from time to time by the Committee, in its sole discretion.

     Section 5. STOCK OPTIONS.

          Any Stock Option granted under the Plan shall be pursuant to a stock
option agreement which shall be in such form as the Committee may from time to
time approve. Option agreements need not be identical.

          Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. Non-Qualified
Stock Options may be granted to officers, employees, Independent Directors,
advisors, consultants and other key persons of the Company and its

<PAGE>   7

Subsidiaries. To the extent that any Option does not qualify as an Incentive
Stock Option, it shall be deemed a Non-Qualified Stock Option.

          No Incentive Stock Option shall be granted under the Plan after
November 1, 2009.

          (a)  TERMS OF STOCK OPTIONS. Stock Options granted under the plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan as
the Committee shall deem desirable:

               (1)  EXERCISE PRICE. The exercise price per share for the Stock
covered by a Stock Option shall be determined by the Committee at the time of
grant but shall not be less than 100% of the Fair Market Value in the case of
Incentive Stock Options. 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 10%
of the combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the option price of such Incentive Stock Option shall be not less
than 110% of the Fair Market Value on the grant date.

               (2)  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
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
10% of the combined voting power of all classes of Stock of the Company or any
parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the term of such Option shall be no more than five years from the
date of grant.

               (3)  EXERCISABILITY; RIGHTS OF A STOCKHOLDER. 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; PROVIDED, HOWEVER, that Stock Options granted in lieu of cash compensation
shall be exercisable in full as of 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 stockholder only as to shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock Options.

               (4)  METHOD OF EXERCISE. Stock Options may be exercised in whole
or in part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made by
one or more of the following methods; provided, however, that the methods set
forth in subsections (ii) and (iii) below shall become available only after the
closing of the Initial Public Offering:

                    (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 under any Company plan and that have been held by the
optionee free of such restrictions for at least six months, if permitted by the
Committee in its discretion such surrendered shares shall be valued at Fair
Market Value on the exercise date;

<PAGE>   8

                    (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; or

                    (iv) By the optionee delivering to the Company a promissory
note if the Board has authorized the loan of funds to the optionee for the
purpose of enabling or assisting the optionee to effect the exercise of his
Stock Option; PROVIDED THAT at least so much of the exercise price as represents
the par value of the Stock shall be paid other than with a promissory note.

          Payment instruments will be received subject to collection. The
delivery of certificates representing the 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 applicable provisions of laws.

               (5)  TERMINATION. Unless otherwise provided in the option
agreement or determined by the Committee, upon the optionee's termination of
employment (or other business relationship) with the Company and its
Subsidiaries, the optionee's rights in his Stock Options shall automatically
terminate.

               (6)  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
shares of Stock with respect to which Incentive Stock Options granted under this
Plan and any other plan of the Company or its parent and subsidiary corporations
become exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. To the extent that any Stock Option exceeds this
limit, it shall constitute a Non-Qualified Stock Option.

          (b)  NON-TRANSFERABILITY OF OPTIONS. No Stock option shall be
transferable by the optionee otherwise 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; provided, however, that an optionee
may transfer, without consideration for the transfer, the Non-Qualified Stock
Options to members of his immediate family, to trusts for the benefit of such
family members, to partnerships in which such family members are the only
partners, or to charitable organization so long as the transferee agrees in
writing to be bound by the terms and conditions of this Plan and the applicable
Option Agreement.

          (c)  ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a grant
of Stock, the Committee may require the recipient to deposit all certificates
representing the Stock together with stock powers or other instruments of
transfer approved by the Committee appropriately endorsed in blank, with the
Company or an agent designated by the Company to hold in escrow

<PAGE>   9

until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any recipient who is permitted to execute a promissory note as
partial or full consideration for the purchase of Stock under this Plan will be
required to pledge and deposit with the Company all or part of the Stock so
purchased as collateral to secure the payment of recipient's obligation to the
Company under the promissory note; PROVIDED, HOWEVER, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the recipient under the promissory note notwithstanding any pledge of
the recipient's Stock or other collateral. In connection with any pledge of the
Stock, the recipient will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Stock purchased with the promissory not may be released from the pledge on a pro
rata basis as the promissory note is paid.

     Section 6. RESTRICTED STOCK AWARDS

          (a)  NATURE OF RESTRICTED STOCK AWARDS. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other 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"). Conditions may be based on continuing employment (or other business
relationship) and/or achievement or pre-established performance goals and
objectives.

          (b)  RIGHTS AS A STOCKHOLDER. Upon execution of a written instrument
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(d) below.

          (c)  RESTRICTIONS. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates under the
conditions specified in the relevant instrument relating to the Award, or upon
such other event or events as may be stated in the instrument evidencing the
Award, the Company or its assigns shall have the right or shall agree, as may be
specified in the relevant instrument, to repurchase some or all of the shares of
Stock subject to the Award at such purchase price as is set forth in such
instrument.

          (d)  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 Restricted Stock
shall become vested, subject to such further rights of the Company or its
assigns as may be specified in the instrument evidencing the Restricted Stock
Award.

<PAGE>   10

          (e)  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

          (a)  GRANT OR SALE OF UNRESTRICTED STOCK. The Committee may, in its
sole discretion, grant (or sell at a purchase price determined by the Committee)
an Unrestricted Stock Award to any participant, pursuant to which such
participant may receive shares of Stock free of any vesting restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of any cash compensation due to such
individual.

          (b)  ELECTIONS TO RECEIVE UNRESTRICTED STOCK IN LIEU OF COMPENSATION.
Upon the request of a participant and with the consent of the Committee, each
such participant may, pursuant to an advance written election delivered to the
Company no later than the date specified by the Committee, receive a portion of
the cash compensation otherwise due to such participant in the form of shares of
Unrestricted Stock either currently or on a deferred basis.

          (c)  RESTRICTIONS ON TRANSFERS. The right to receive shares of
Unrestricted Stock on a deferred basis may not be sold, assigned, transferred,
pledged or otherwise encumbered, other than by will or the laws of descent and
distribution.

     Section 8. 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 STOCK. Subject to approval by the Committee, a
participant may elect 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 any 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, 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 9. TRANSFER, LEAVE OF ABSENCE, ETC.

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

<PAGE>   11

          (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; or

          (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 10. 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 in a manner not inconsistent with the terms of the Plan), 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. If and to the extent determined by the Committee
to be required by the Act to ensure that Incentive Stock Options granted under
the Plan are qualified under Section 422 of the Code, Plan amendments shall be
subject to approval by the Company's stockholders who are eligible to vote at a
meeting of stockholders.

     Section 11. STATUS OF PLAN

     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 foregoing sentence.

Section 12.       GENERAL PROVISIONS

          (a)  NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The
Committee may require each person acquiring Stock 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 law and other legal and stock exchange or similar
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)  OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adopting of this
Plan and the grant of Awards do not

<PAGE>   12

confer upon any employee any right to continued employment with the Company or
any Subsidiary; and any Awards shall not be considered compensation for purposes
of determining any severance benefits the participants may otherwise be entitled
to.

     Section 13. EFFECTIVE DATE OF PLAN

     The Plan shall become effective on the date of its adoption by the Board of
Directors, but subject, nevertheless, to (a) approval, within twelve (12) months
thereof, by the stockholders representing at least a majority of the voting
stock of the Company or by such greater percentage as may from time to time be
required under the laws of the State of Delaware, and (b) such approvals as may
be required by any other public authorities. Options under this Plan may be
granted but not exercised until it is approved by the Company's shareholders. In
the event the Plan is not approved, the Plan shall terminate and all Options
granted shall be void and have no force or effect.

     Section 14. GOVERNING LAW

     This Plan shall be governed by Delaware law except to the extent such law
is preempted by federal law.

Adopted by the Board of Directors and Effective:  November 1, 1999

<PAGE>   13

                         SERVICESOFT TECHNOLOGIES, INC.

                                 AMENDMENT NO. 1

                                       TO

                        1999 STOCK OPTION AND GRANT PLAN

                               FEBRUARY 10, 2000

                                   WITNESSETH:

          WHEREAS, the Board of Directors and the Stockholders of Servicesoft
Technologies, Inc. (the "Company") approved and adopted the 1999 Stock Option
and Grant Plan (the "Plan") of the Company, dated November 1, 1999;

          WHEREAS, the Board of Directors and the Stockholders of the Company
have determined that it is in the best interest of the Company to amend the Plan
in order to provide for the issuance of Awards under the Plan to officers and
other employees, Independent Directors, consultants, and key persons of the
Company and its Subsidiaries who are legal residents of the State of California
and to clarify certain provisions of the Plan;

          NOW, THEREFORE, the Plan is amended as follows:

          1.   AMENDMENT TO SECTION 1. Section 1 of the Plan shall be amended to
include the following definition:

               "Cause" means a vote of the Board of Directors of the Company or
     the successor entity, as the case may be, resolving that the grantee should
     be dismissed as a result of (i) any material breach by the grantee of any
     agreement to which the grantee and the Company are parties, (ii) any act
     (other than retirement) or omission to act by the grantee which would
     reasonably be likely to have a material adverse effect on the business of
     the Company or its Subsidiaries or successor entity, as the case may be, or
     on the grantee's ability to perform services for the Company or its
     Subsidiaries or successor entity, as the case may be, including, without
     limitation, the conviction of any crime (other than ordinary traffic
     violations), or (iii) any material misconduct or willful and deliberate
     non-performance of duties by the grantee in connection with the business or
     affairs of the Company or its Subsidiaries or successor entity, as the case
     may be.

          2.   AMENDMENT TO SECTION 3(b). Clauses (i) and (ii) of Section 3(b)
of the Plan entitled "Recapitilization" shall be amended to add the underscored
language and delete the stricken language, as set forth below:

               "(i) the maximum number of shares initially reserved for issuance
     under the Plan and the maximum number that may subsequently be reserved for
     issuance under the Plan, (ii) the number of Stock Options that can be
     granted to any one individual participant,"

<PAGE>   14

          3.   AMENDMENT TO ADD APPENDIX A. An appendix A to the Plan in
substantially the form attached hereto as EXHIBIT A is hereby adopted and
approved.

          4.   CAPITALIZED TERMS. Capitalized terms used herein not otherwise
defined herein shall have the meanings set forth in the Plan.

DATE APPROVED BY THE BOARD OF DIRECTORS:    February 10, 2000

<PAGE>   15

                                   APPENDIX A

                                       to

                         SERVICESOFT TECHNOLOGIES, INC.
                        1999 STOCK OPTION AND GRANT PLAN

                          FOR CALIFORNIA RESIDENTS ONLY

          This Appendix to the Servicesoft Technologies, Inc. 1999 Stock Option
and Grant Plan (the "Plan") shall have application only to optionees receiving
Incentive Stock Options or Non-Qualified Stock Options under the Plan who are
residents of the State of California. Capitalized terms contained herein shall
have the same meanings given to them in the Plan, unless otherwise provided in
this Appendix. Notwithstanding any provisions contained in the Plan to the
contrary and to the extent required by applicable law, the following terms and
conditions shall apply to all Awards granted to residents of the State of
California, until such time as the Common Stock becomes a "listed security"
under the Securities Act of 1933, as amended.

          1.   Non-Qualified Stock Options shall have an exercise price that is
not less than 85% of the Fair Market Value of the stock at the time the Option
is granted, as determined by the Board, except that the exercise price shall be
110% of the Fair Market Value in the case of any person who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporation.

          2.   The purchase price for any Restricted Stock Awards that may be
purchased under the Plan shall be at least 85% of the Fair Market Value of the
stock at the time the optionee is granted such Award, or at the time the
purchase is consummated. Notwithstanding the foregoing, the purchase price shall
be 100% of the Fair Market Value of the stock at the time the optionee is
granted such Award or at the time the purchase is consummated in the case of any
person who owns stock possessing more than 10% of the total combined voting
power of all classes of the Company or its parent or subsidiary corporations.

          3.   Options shall have an exercise period of not more than ten years
from the date the Option is granted.

          4.   No Award shall be transferable by a participant other than by
will or the laws of descent and distribution; PROVIDED, HOWEVER, that the
Committee, in its sole discretion, may permit a participant to transfer an
Option (a) by gift to members of his immediate family, or (b) to an inter vivos
or testamentary trust pursuant to which the Option is to be passed to
beneficiaries upon the death of the settlor.

          5.   Options shall become exercisable at the rate of at least 20% per
year over five years from the date the Option is granted, subject to reasonable
conditions such as continued employment. However, in the case of the Option
granted to officers, directors or consultants of the Company or any of its
affiliates, the Option may become fully exercisable, subject to

<PAGE>   16

reasonable conditions such as continued employment, at any time or during any
period established by the Company or any of its affiliates.

          6.   Unless employment is terminated for Cause, the right to exercise
an Option in the event of termination of employment, to the extent that the
participant is otherwise entitled to exercise an Option on the date employment
terminates, shall be:

          a.        at least six months from the date of termination if the
               participant's employment was terminated as a result of death or
               disability; and

          b.        at least 30 days from the date of termination if the
               participant's employment was terminated other than on account of
               death or disability;

          c.        but in no event later than the remaining term of the Option.

          7.   No Award may be granted to a resident of California more than ten
years after the earlier of the date of adoption of the Plan and the date the
Plan is approved by the shareholders.

          8.   Any Award exercised before shareholder approval is obtained shall
be rescinded if shareholder approval is not obtained within 12 months before or
after the Plan is adopted. Such shares shall not be counted in determining
whether such approval is obtained.

          9.   The Company shall provide annual financial statements of the
Company to each California resident holding an outstanding Award under the Plan.
Such financial statements need not be audited and need not be issued to key
employees whose duties at the Company assure them access to equivalent
information.

          10.  Any right of repurchase on behalf of the Company in the event of
an optionee's termination of employment or other business relationship shall be
at such purchase price as is set forth in the instrument, provided that the
right to repurchase at the original purchase price lapses at the rate of at
least 20% of the shares per year over five years from the date the Award is
granted (without respect to the date the Award was exercised or became
exercisable) and the right to repurchase shall be exercised for cash or
cancellation of indebtedness for the shares within 90 days of termination of
employment (or in case of securities issued upon exercise of Options after the
date of termination, within 90 days after the date of the exercise). The
foregoing notwithstanding, the securities held by an officer, director or
consultant of the Company or an affiliate of the Company may be subject to
additional or greater restrictions.

                                      -16-

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