Document:

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                                                                    EXHIBIT 10.7

                             AGREEMENT AND RELEASE

          The Agreement and Release ("Agreement") is entered into by Katarina
Bonde ("Employee") and Captura Software Inc, a Delaware corporation (referred to
as "the Company").

                                   RECITALS

          A.  Employee has been employed by the Company since January 6, 1997
and during that time has worked in a number of positions, most recently as
Executive Vice President, Global Sales and Marketing. The last day of Employee's
employment with the Company is February 4, 2000.

          B.  Employee and the Company wish to enter into an agreement
pertaining to the termination of Employee's employment in order to effect an
appropriate transition.

                                  AGREEMENTS

          NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises contained below, it is agreed as follows:

          1.  Termination Date.  The last date of Employee's employment with the
              ----------------
Company is and shall be February 4, 2000 (the "Termination Date").

          2.  Payments And Benefits Through Termination Date.  Employee
              ----------------------------------------------
acknowledges that Employee will be paid all compensation owed through the
Termination Date, including payment of accrued hours, all of which is paid net
of usual and customary deductions. Life insurance and long-term disability
insurance coverage cease on the Termination Date. Employee will be reimbursed
for all business related expenses that are reimbursable under usual company
practice which were incurred prior to February 4, 2000. This reimbursement will
be made within fourteen (14) days of receiving completed employee expense
report(s), which shall include receipts and necessary documentation. All other
compensation and benefits offered by the Company terminate on the Termination
Date except as outlined below.

          3.  Additional Payments And Benefits.  Provided that Employee executes
              --------------------------------
and delivers this Agreement and does not breach or revoke it, and in
consideration for Employee's covenants and release herein, Employee will be
provided the following payments and benefits in addition to the payment of usual
and customary wages and benefits:

              (a)  Employee shall be provided severance pay through February 4,
2001 at the regular rate of pay at the Termination Date, subject to usual and
customary deductions and withholdings. This severance pay will begin following
the eighth day following the execution and delivery of the Agreement provided
there is no rescission, revocation or breach of the Agreement by the Employee.
Severance payments will be paid during regularly scheduled payroll processing.

              (b)  The Stock Option Agreement dated August 15, 1997 between
Employee and the Company (the "1997 Option") is hereby amended to provide that,
notwithstanding the
<PAGE>

termination of Employee's employment on February 4, 2000, so long as Employee is
not in breach or violation of this Agreement (i) all of the shares subject to
the 1997 Option shall be vested and exercisable as of February 4, 2001 and (ii)
the option shall be exercisable by Employee for a period of thirty (30) days
after February 4, 2001. All other terms of the 1997 Option shall remain in full
force and effect

          (c) The Stock Option Agreement dated November 10, 1998 between
Employee and the Company (the "1998 Option") is hereby amended to provide that,
notwithstanding the termination of Employee's employment on February 4, 2000, so
long as Employee is not in breach or violation of this Agreement (i) an
aggregate of 23,750 of the shares subject to the 1998 Option shall be vested and
exercisable as of February 4, 2001 and (ii) the option shall be exercisable by
Employee for a period of thirty (30) days after February 4, 2001. All other
terms of the 1998 Option shall remain in full force and effect.

          (d) The Stock Option Agreement dated November 4, 1999 between Employee
and the Company (the "1999 Option") is hereby amended to provide that,
notwithstanding the termination of Employee's employment on February 4, 2000, so
long as Employee is not in breach or violation of this Agreement (i) 12,500 of
the shares subject to the 1999 Option shall be vested and exercisable as of
February 4, 2001 and (ii) the option shall be exercisable by Employee for a
period of thirty (30) days after February 4, 2001.  Notwithstanding the
foregoing, in the event that, prior to February 4, 2001 there is a Change in
Control (as such term is defined in the Management Continuity Agreement dated
April 28, 1999 between Employee and the Company), then, so long as Employee is
not in breach or violation of this Agreement, an aggregate of 20,000 of the
shares subject to the 1999 Option shall be vested and exercisable immediately
prior to such Change in Control.  All other terms of the 1999 Option shall
remain in full force and effect.

     It is agreed and acknowledged that the Company is not obligated to make the
payments and provide the benefits described in this paragraph 3, that the
Company does so only as consideration for the covenants and release herein, that
such payments and benefits would not be made in the absence of this Agreement
and that such payments constitute adequate consideration for the covenants and
release set forth in this Agreement. Other than those benefits and payments
specified in this Agreement, the Company shall have no obligation to provide and
shall provide no further payments or benefits of any kind to Employee.

     4.  Company Property.  Employee shall promptly turn over to the Company all
         ----------------
files, memoranda, records, keys, credit cards, manuals, data, records and other
documents, including electronically recorded documents and data, and physical
property including computer equipment, cell-phone, etc. which Employee received
from the Company or its employees or which Employee generated in the course of
Employee's relationship with the Company.

     5.  Waiver and Release.  On behalf of herself and her marital community,
         ------------------
heirs, executors, administrators and assigns, Employee expressly waives against
the Company and its present and former affiliates, successors, subsidiaries and
related entities (including, without limitation and their officers, directors,
stockholders, managers, employees, agents, representatives and attorneys (all of
which are collectively referred to as "Company Released Parties")) any and all
claims which occurred or which could be alleged to have occurred on the date of
or prior to the

                                      -2-
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execution of this release. Employee releases Company Released Parties
individually and in their representative capacities, from any claims, or
disputes, whether presently known or unknown, that occurred or could be alleged
to have occurred on the date of or prior to the execution of this release. On
behalf of itself and its present and former affiliates, successors, subsidiaries
and related entities (including, without limitation and their officers,
directors, stockholders, managers, employees, agents, representatives and
attorneys), the Company expressly waives against Employee and her marital
community, heirs, executors, administrators and assigns (all of whom are
collectively referred to as "Employee Released Parties") any and all claims
which occurred or which could be alleged to have occurred on the date of or
prior to the execution of this release. The Company releases Employee Released
Parties individually and in their representative capacities, from any claims, or
disputes, whether presently known or unknown, that occurred or could be alleged
to have occurred on the date of or prior to the execution of this release. It is
understood that the waivers and releases, set forth herein include, but are not
limited to, any and all claims for wages, employment benefits, and damages of
any kind whatsoever arising out of any contracts, expressed or implied; any
covenant of good faith and fair dealing; estoppel or misrepresentation;
discrimination, including age or disability discrimination; harassment; unjust
enrichment; wrongful termination or any legal restriction on the Company's right
to terminate the employment of Employee; any federal, state, local or other
governmental statute or ordinance, including, without limitation, Title VII of
the Civil Rights Act of 1964, Americans with Disabilities Act and the Act
Discrimination in Employment Act; or any other legal limitation on the
employment relationship. Employee acknowledges that Company Released Parties are
in no way liable for any claims described in this paragraph and Employee agrees
not to take any position inconsistent with this. The Company acknowledges that
Employee Released Parties are in no way liable for any claims described in this
paragraph and the Company agrees not to take any position inconsistent with
this. Excluded from this release are (a) claims Employee may have with regard to
vested benefits under ERISA, worker's compensation claims or any other claim
which may not be released in accordance with law and (b) claims arising under
this Agreement. Employee represents that Employee has not filed any complaints,
charges or lawsuits against any of the Released Parties with any governmental
agency or court and will refrain from bringing any complaints, charges or
lawsuits against any Released Party in the future. Employee will claim no
further right to employment by the Company beyond the Termination Date. The
parties acknowledge consult and has discussed it and its effects with her
personal advisor or attorney or has knowingly and voluntarily waived the right
to do so; (4) she understands that she is giving up all claims, damages, and
disputes, including claims under the Age Discrimination in Employment Act and
other statutes, which have arisen before the date of this Agreement; (5) she has
had ample time to review and analyze this entire Agreement; (6) she understands
its contents and its final and binding effect; (7) she has twenty-one (21) days
to consider this Agreement before she has signed it as her free and voluntary
act, and seven (7) days following execution of this Agreement to revoke this
Agreement.

     6.  Entire Agreement.  This Agreement, together with the 1997 Option, the
         ----------------
1998 Option, the 1999 Option and Employee Invention and Confidentiality
Agreement set forth the entire understanding between Employee and the Company
and supersedes any prior agreements or understandings, express or implied,
pertaining to the terms of Employee's employment or relationship with the
Company and the termination of the employment relationship. Employee
acknowledges that in executing this Agreement, Employee does not rely upon any
representation or statement by any representative of the Company or any Released
Party concerning the subject matter

                                      -3-
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of this Agreement, except as expressly set forth in the text of the Agreement.
This Agreement may only be amended in writing signed by Employee and a duly
authorized officer of the Company. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.

     7.  Other.  This Agreement will be governed by the laws of the State of
         -----
Washington, excluding its choice of law provisions. Employee understands that in
entering into this Agreement, Employee is waiving all potential claims against
the Company and Released Parties. Employee is the sole and exclusive owner of
all respective claims, demands and courses of action, and that no other party
has any right, title or interest whatsoever in any of the matters referred to
herein, and there has been no assignment, transfer, conveyance or other
disposition of Employee of any matters refereed to herein. Nothing in this
Agreement is intended as or should be construed as an admission of liability or
wrongdoing by any of the parties to the Agreement.

     8.  Effective Date.  This Agreement shall be effective on the eighth (8th)
         --------------
day following its execution and delivery by Employee.

                                      -4-
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
4/th/ day of February, 2000.

Captura Software, Inc.

By: /s/ Esther C. Christensen
   ---------------------------
Its:   HR Manager
    --------------------------

EMPLOYEE

   /s/ Katarina Bonde
------------------------------
Katarina Bonde<PAGE>

                                                                    EXHIBIT 10.8

                            CAPTURE SOFTWARE, INC.

                     AMENDED AND RESTATED 1997 STOCK PLAN

                   (as amended and restated October 9, 2000)

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

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

          (a)  "Administrator" means the Board or any of its Committees as shall
                -------------
be administering the Plan in accordance with Section 4 hereof.

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

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

          (d)  "Change of Control" means the closing of any of the following:
                -----------------

               (i)   a merger, acquisition, combination or consolidation
(including by way of tender or exchange offer), or similar transaction, or
series of related transactions, in which the stockholders of the Company
immediately prior to such transaction, or series of related transactions, hold,
immediately thereafter, less than fifty percent (50%) of the outstanding voting
securities of either the Company or the successor, surviving or parent entity;

               (ii)  the sale, exchange, or transfer of all or substantially all
of the assets of the Company; or

               (iii) a liquidation or dissolution of the Company.

     The Board shall have the right to determine whether any series of
transactions is related, and its determination shall be final, binding and
conclusive.

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

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

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

          (h)  "Company" means Captura Software, Inc., a Delaware corporation.
                -------

          (i)  "Consultant" means any person who is engaged by the Company or
                ----------
any Parent or Subsidiary to render consulting or advisory services to such
entity.

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

          (k)  "Disability" means total and permanent disability as defined in
                ----------
Section 22(e)(3) of the Code.

          (l)  "Employee" means any person, including Officers and Directors,
                --------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

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

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

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

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

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

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

                                                                             -2-
<PAGE>

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

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

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

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

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

          (u)  "Optioned Stock" means the Common Stock subject to an Option or a
                --------------
Stock Purchase Right.

          (v)  "Optionee" means the holder of an outstanding Option or Stock
                --------
Purchase Right granted under the Plan.

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

          (x)  "Plan" means this 1997 Stock Plan.
                ----

          (y)  "Restricted Stock" means shares of Common Stock acquired pursuant
                ----------------
to a grant of a Stock Purchase Right under Section 12 below.

          (z)  "Section 16(b)" means Section 16(b) of the Exchange Act.
                -------------

          (aa) "Service" means the Optionee's employment or service with the
                -------
Company, whether in the capacity of an Employee, a Director or a Consultant. The
Optionee's Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Optionee renders Service to the Company,
provided that there is no interruption or termination of the Optionee's Service.
Subject to the foregoing, the Company, in its sole discretion, shall determine
whether the Optionee's Service has terminated and the effective date of such
termination. (NOTE: If the Option is exercised more than three (3) months after
the date on which the Optionee ceased to be an Employee (other than by reason of
death or a permanent and total disability as defined in Section 22(e)(3) of the
Code), the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)

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

          (cc) "Share" means a share of the Common Stock, as adjusted in
                -----
accordance with Section 13 below.

                                                                             -3-
<PAGE>

          (dd) "Stock Purchase Right" means a right to purchase Common Stock
                --------------------
pursuant to Section 12 below.

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

          (ff) "Termination for Cause" means termination by the Company of the
                ---------------------
Optionee's Service with the Company for any of the following reasons: (i) theft,
dishonesty, or falsification of any Company records; (ii) improper use or
disclosure of the Company's confidential or proprietary information; (iii) any
action by the Optionee which has a detrimental effect on the Company's
reputation or business; (iv) the Optionee's failure or inability to perform any
reasonable assigned duties after written notice from the Company of, and a
reasonable opportunity to cure, such failure or inability; (v) any material
breach by the Optionee of any employment agreement between the Optionee and the
Company, which breach is not cured pursuant to the terms of such agreement; or
(vi) the Optionee's conviction of any criminal act which impairs the Optionee's
ability to perform his or her duties with the Company.

     3.   Stock Subject to the Plan. Subject to the provisions of Section 13 of
          -------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 5,550,000 Shares, plus an annual increase to be added
on the first day of the Company's fiscal year (beginning on the first day of the
Company's 2002 fiscal year) equal to the least of (i) five percent (5%) of the
total outstanding shares of Common Stock as of the last day of the immediately
preceding fiscal year; (ii) 2,000,000 Shares; or (iii) such lesser amount as may
be determined by the Board. The Shares may be authorized but unissued, or
reacquired Common Stock.

         If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).  However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.

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

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

               (i)  Multiple Administrative Bodies. Different Committees with
                    ------------------------------
respect to different groups of Service Providers may administer the Plan.

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

                                                                             -4-
<PAGE>

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

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

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

               (i)     to determine the Fair Market Value;

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

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

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

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

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

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

               (viii)  to initiate an Option Exchange Program;

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

               (x)     to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that

                                                                             -5-
<PAGE>

the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and

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

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

     5.   Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
          -----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

     6.   Limitations.
          -----------

          (a)  Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, the
portion of such Options exceeding $100,000 shall be treated as Nonstatutory
Stock Options. For purposes of this Section 6(b), Incentive Stock Options shall
be taken into account in the order in which they were granted. The Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

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

          (c)  The following limitations shall apply to grants of Options:

               (i)    No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 750,000 Shares.

               (ii)   In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 1,500,000
Shares, which shall not count against the limit set forth in subsection (i)
above.

               (iii)  The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.

               (iv)   If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For

                                                                             -6-
<PAGE>

this purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and a grant of a new Option.

     7.   Term of Plan. The Plan shall become effective upon its adoption by the
          ------------
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 15 of the Plan.

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

     9.   Option Exercise Price and Consideration.
          ---------------------------------------

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

               (i)   In the case of an Incentive Stock Option

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

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

               (ii)  In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

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

          (b)  The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash;
(2) check; (3) promissory note; (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised; (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan; or (6) any combination of the foregoing methods of payment. In making

                                                                             -7-
<PAGE>

its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected
to benefit the Company.

     10.  Exercise of Option.
          ------------------

          (a)  Procedure for Exercise; Rights as a Stockholder. Any Option
               -----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.

               An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares as soon as practicable
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13 of the Plan.

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

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

          (c)  Disability of Optionee. If an Optionee ceases to be a Service
               ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
(of at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If,

                                                                             -8-
<PAGE>

on the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

          (d)  Death of Optionee. If an Optionee dies while a Service Provider,
               -----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

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

     11.  Non-Transferability of Options and Stock Purchase Rights. Unless
          --------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.

     12.  Stock Purchase Rights.
          ---------------------

          (a)  Rights to Purchase. Stock Purchase Rights may be issued either
               ------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The offer shall be accepted by execution of a
Restricted Stock purchase agreement in the form determined by the Administrator.

          (b)  Repurchase Option. Unless the Administrator determines otherwise,
               -----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse

                                                                             -9-
<PAGE>

at such rate as the Administrator may determine. The repurchase option shall
lapse at a rate determined by the Administrator.

          (c)  Other Provisions. The Restricted Stock purchase agreement shall
               ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

          (d)  Rights as a Stockholder. Once the Stock Purchase Right is
               -----------------------
exercised, the purchaser shall have rights equivalent to those of a stockholder
and shall be a stockholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 13 of
the Plan.

     13.  Adjustments Upon Changes in Capitalization, Dissolution or Change of
          --------------------------------------------------------------------
Control.
-------

          (a)  Changes in Capitalization.  Subject to any required action by the
               -------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.

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

                                                                            -10-
<PAGE>

          (c)  Change of Control. Except as otherwise provided in Sections 13(d)
               -----------------
or (e), in the event of a Change of Control, each outstanding Option and Stock
Purchase Right shall be assumed or an equivalent option or right substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Option or Stock Purchase Right, the Optionee shall fully vest
in and have the right to exercise the Option or Stock Purchase Right as to all
of the Optioned Stock, including Shares as to which it would not otherwise be
vested or exercisable. If an Option or Stock Purchase Right becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a Change
of Control, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the Change of Control, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the Change of
Control, the consideration (whether stock, cash, or other securities or
property) received in the Change of Control by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
                                     --------  -------
consideration received in the Change of Control is not solely common stock of
the successor corporation or its Parent, the Administrator may, with the consent
of the successor corporation, provide for the consideration to be received upon
the exercise of the Option or Stock Purchase Right, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right, to be solely common stock
of the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the Change of
Control.

          (d)  Termination After Change of Control. If the Optionee's Service
               -----------------------------------
with the Company is involuntarily terminated (by the Company or any successor
entity or corporation of which Optionee may have become a Service Provider as a
result of a Change of Control) within twelve (12) months after a Change of
Control (other than a Termination for Cause), (i) his or her Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
was involuntarily terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of six (6) months after the date on which the Optionee's Service was
involuntarily terminated, but in any event no later than the Option expiration
date for such Optionee and (ii) solely for purposes of computing the number of
vested Shares, the Optionee shall be given credit for an additional twelve (12)
months of continuous Service after the date of involuntary termination;
provided, however, that in no event shall the vesting of Shares exceed 100%. The
--------  -------
Company makes no representation as to the tax consequences if the Option is
exercised more than three (3) months after the date on which the Optionee's
Service as an Employee terminated. The Optionee should consult with the
Optionee's own tax advisor as to the tax consequences to the Optionee of any
such delayed exercise.

     14.  Time of Granting Options and Stock Purchase Rights. The date of grant
          --------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by

                                                                            -11-
<PAGE>

the Administrator. Notice of the determination shall be given to each Employee
to whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.

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

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

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

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

     16.  Conditions Upon Issuance of Shares.
          ----------------------------------

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

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

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

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

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

                                                                            -12-
<PAGE>

                   PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS

<TABLE>
<CAPTION>
    Date of
   Adoption/
   Amendment/                                                                        Date of
   Adjustment         Section              Effect of Amendment                    Shareholder
   ----------         -------              -------------------
                                                                                   Approval
                                                                                   --------
<S>                   <C>          <C>                                          <C>
October 10, 1997          3        Increase amount of shares from 650,000 to    October 10, 1997
                                   1,050,000 of Common Stock available for
                                   issuance under the Plan

July 31, 1998             3        Increase amount of shares from 1,050,000     July 31, 1998
                                   to 1,450,000 of Common Stock available for
                                   issuance under the Plan

February 1, 1999          3        Increase amount of shares from 1,450,000     February 1, 1999
                                   to 2,050,000 of Common Stock available for
                                   issuance under the Plan

November 4, 1999          3        Increase amount of shares from 2,050,000     February 11, 2000
                                   to 3,050,000 of Common Stock available for
                                   issuance under the Plan

February 29, 2000         3        Increase amount of shares from 3,050,000     April 17, 2000
                                   to 4,550,000 of Common Stock available for
                                   issuance under the Plan

October 9, 2000           -        Amendment and Restatement effective upon
                                   IPO; Increase amount of shares from
                                   4,550,000 to 5,550,000 of Common Stock
                                   available for issuance under the Plan,
                                   with an annual increase of the lesser of
                                   (i) 2,000,000 shares, (ii) 5% of shares of
                                   Common Stock outstanding on the last day
                                   of previous fiscal year, or (iii) amount
                                   determined by the Board of  Directors
</TABLE>

                                                                            -13-

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