Document:

<PAGE>

                                                                   EXHIBIT 10.19

                           FIRST AMENDMENT TO LEASE
                           ------------------------
                         (Adding Additional Premises)

          THIS FIRST AMENDMENT TO LEASE (this "Amendment") is executed as of the
15th of March, 2000, between RUSS BUILDING ("Landlord") and BEA SYSTEMS, INC.,
----
a Delaware corporation ("Tenant").

                                    RECITALS
                                    --------

          A.  Landlord, as landlord, and Tenant, as tenant, entered into a
lease, dated as of September 24, 1999 (the "Lease"), pursuant to which Tenant
leased certain premises in the building commonly known as the Russ Building,
located at 235 Montgomery Street, San Francisco, California (the "Building").
The premises presently demised under the Lease are referred to herein as the
"Existing Premises", and include a portion of the 14th floor of the Building
(the "Existing 14th Floor Premises").

          B.  Landlord and Tenant presently desire to amend the Lease to (i) add
the remaining rentable area of the 14th floor of the Building to the Lease, (ii)
set forth the monthly base rent and other amounts payable by Tenant with respect
to such additional space, (iii) acknowledge certain matters pertaining to the
construction of the Tenant Improvements in the Existing Premises and the impact
on the commencement of Tenant's obligation to pay Monthly Rent with respect to
the Existing Premises, and (iv) modify the Lease in certain other respects.
Capitalized terms not otherwise defined herein shall have the meanings given
them in the Lease.

          NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:

          1.  14th Floor Additional Premises. Effective as of the date hereof,
              ------------------------------
the space located on the fourteenth (14th) floor of the Building and shown
outlined on the attached Exhibit A (the "14th Floor Additional Premises") shall
                         ---------
be added to the premises covered by the Lease. Commencing on the date hereof,
all references in the Lease to the "Premises" shall be deemed to refer to the
Existing Premises (as defined in Recital A above) plus the 14th Floor Additional
Premises. Except as expressly hereinafter provided in this Amendment, all
provisions of the Lease applicable to the Existing Premises shall apply with
equal force and effect to the 14th Floor Additional Premises, as if the 14th
Floor Premises were originally demised under the Lease together with the
Existing Premises. Landlord and Tenant acknowledge that the 14th Floor
Additional Premises comprise all rentable space on the fourteenth (14th) floor
of the Building not presently leased by Tenant as part of the Existing Premises.

          2.  Term; Delivery of Possession; Tenant Improvements.
              --------------------------------------------------

          a. Term. The term of the Lease shall commence as to the 14th Floor
             ----
Additional Premises as provided in Paragraph 2.b. of the Lease, and for such
purposes the 14th Floor Premises shall be deemed a separate "Increment" and is
referred to herein for purposes of said Paragraph 2.b. as the "Third Increment".
In no event shall the Commencement Date of the First Increment or the Second
Increment have any bearing on the Commencement Date on the Third Increment.

          b. Delivery of Possession. Paragraph 3.b. of the Lease shall not be
             ----------------------
applicable to the 14th Floor Additional Premises, and in lieu thereof the
provisions of this Paragraph 2.b. shall apply. Landlord shall act diligently and
in good faith to deliver the 14th Floor Additional Premises to Tenant with the
applicable Tenant Improvements Substantially Completed therein as soon as
reasonably practicable. Notwithstanding the foregoing, or anything to the
contrary contained in the Lease, in the event of a delay in delivery of the 14th
Floor Additional Premises to Tenant, for any reason whatsoever, including,
without limitation, by reason of a delay in Substantial Completion of the Tenant
Improvements (including a delay which does not result from Tenant Delay),
neither the Lease nor this Amendment shall be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom, nor
shall Tenant's obligation to pay monthly rent applicable to the 14th Floor
Additional Premises be postponed.

          c. Improvements. For purposes of applying Paragraph 4 of the Lease to
             ------------
the construction of improvements in the 14th Floor Additional Premises,
Paragraph 4 shall applied to the 14th Floor Additional Premises separately from
the Existing Premises, and shall be modified as follows:

          (i) The dates in Paragraph 4.a. of the Lease applicable to Tenant's
submission to

                                       1
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Landlord of the Space Plans, Final Space Plans and Working Drawings shall not be
applicable to the 14th Floor Additional Premises, and in lieu thereof Tenant
shall make such submissions to Landlord at such times as Tenant shall elect.
Landlord shall respond to such submissions within the time periods set forth in
said Paragraph 4.a.

          (ii) Landlord's Contribution pursuant to Paragraph 4.g.ii. of the
Lease shall be Three Hundred Eighty-Nine Thousand Eight Hundred Twenty-Five
Dollars ($389,825.00) as respects the 14th Floor Additional Premises (which is
$25.00 per agreed rentable square foot of the 14th Floor Additional Premises).

          (iii) The portion of Landlord's Contribution for the 14th Floor
Additional Premises that may be applied to the fees and costs described in
Paragraph 4.g.ii.B. of the Lease, as allocable to the 14th Floor Additional
Premises, may not exceed Two Dollars ($2.00) per rentable square foot of the
14th Floor Additional Premises.

          3.  Monthly Rent; Tenant's Share.
              -----------------------     -

          a. Monthly Rent. Commencing on the date (the "14th Floor Additional
             ------------
Premises Rent Commencement Date") which is the earlier of (i) May 1, 2000, or
(ii) the date Tenant commences occupancy of the 14th Floor Additional Premises
or any portion thereof for the conduct of business, and continuing through the
balance of the Lease term, Tenant shall pay Landlord, as monthly rent for the
14th Floor Additional Premises, the sum of Sixty-Two Thousand Three Hundred
Seventy-Two Dollars ($62,372.00) in accordance with the terms of Paragraph 5 of
the Lease. The foregoing monthly rent payable by Tenant for the 14th Floor
Additional Premises shall be in addition to the Monthly Rent payable by Tenant
under the Lease for the Existing Premises, and from and after the 14th Floor
Additional Premises Rent Commencement Date, the term "Monthly Rent" as used in
the Lease shall mean the aggregate monthly rent payable by Tenant for the
Existing Premises and the 14th Floor Additional Premises. Tenant acknowledges
that its obligation to pay monthly rent for the 14th Floor Additional Premises
may commence, pursuant to the foregoing, prior to delivery of the 14th Floor
Additional Premises to Tenant and prior to the commencement of the term of the
Lease as to the 14th Floor Additional Premises.

          b. Tenant's Share. Commencing on the 14th Floor Additional Premises
             --------------
Rent Commencement Date, and continuing through the balance of the Lease term,
"Tenant's Share", as set forth in Paragraph 2.e. of the Lease, shall be
increased to 16.38%, to take into account the rentable square footage of the
14th Floor Additional Premises, which the parties hereby stipulate as 15,593
rentable square feet.

          4.  Security Deposit.; Letter of Credit. Effective as of the date that
              -----------------------------------
is thirty (30) days after the date of this Amendment, the amount "$181,393.00",
as set forth in Paragraphs 2.d. and 6 of the Lease, shall be deleted and the
amount "$243,765.00" substituted therefor. On or prior to the date that is
thirty (30) days after the date of this Amendment, Tenant shall deliver to
Landlord either (i) an amendment to the Letter of Credit previously delivered to
Landlord, whereby the amount of such Letter of Credit is increased to
$243,765.00, or (ii) a replacement Letter of Credit, in the amount of
$243,765.00, and otherwise meeting the requirements of Paragraph 6 of the Lease,
whereupon Landlord shall return to Tenant the Letter of Credit previously
delivered to Landlord. If Tenant shall not timely deliver such amendment or
replacement Letter of Credit, in lieu thereof Tenant shall deliver Sixty-Two
Thousand Three Hundred Seventy-Two Dollars ($62,372.00) in cash to Landlord no
later than the date that is thirty (30) days after the date of this Amendment,
failing which an Event of Default shall be deemed to have occurred under the
Lease. Such cash amount shall be held as Letter of Credit Proceeds pursuant to
Paragraph 6 of the Lease.

          5.  Option to Renew. Effective as of the date hereof, Paragraph 52.a.
              ---------------
of the Lease is amended by deleting the phrase "47,000 rentable square feet of
space" in both places it appears in such Paragraph and substituting in place
thereof in each such place the phrase "two (2) full floors".

          6.  Parking. Effective as of the 14th Floor Additional Premises Rent
              -------
Commencement Date, the number "twenty (20)" contained in Paragraph 55 of the
Lease shall be deleted, and the number "twenty-five (25) shall be substituted
therefor.

          7.  15th Floor Exhibit A. Retroactive to the date of the Lease, page 2
              --------------------
of Exhibit A of the Lease, which delineates the portion of the Existing Premises
on the 15th floor of the Building, shall be deleted, and page 2 of Exhibit A, as
attached hereto, shall be substituted therefor.

          8.  Interim Sublease of 14th Floor Additional Premises. In the event
              --------------------------------------------------
that Tenant shall desire to sublease all or any portion of the 14th Floor
Additional Premises for a term of no more than three (3) years commencing on or
prior to January I, 2001, Landlord agrees that it shall not have the option
described in Paragraph 13.d.(i) of the Lease with respect thereto.

                                       2
<PAGE>

          9.  Existing Premises.
              ------------------

          a. Tenant Improvements; Landlord's Work. The parties acknowledge that
             ------------------------------------
certain disputes have arisen between them with respect to the construction of
the Tenant Improvements in the Existing Premises, Change Orders with respect
thereto, Landlord's Work, the allocation of the costs of the foregoing between
Landlord and Tenant, and certain conditions with respect to the Base Building.
The parties have resolved such disputes to their mutual satisfaction and set
forth below their full, complete and final settlement with respect thereto.

          b. Tenant Delays. By reason of Tenant's failure to deliver the Working
             -------------
Drawings within the time period required under the Lease, Tenant's failure to
respond to Landlord's requests for information within the time periods required
under the Lease, and the Change Orders requested by Tenant through the date
hereof as set forth on Schedule I attached hereto (the "Agreed Change Orders"),
                       ----------
the parties agree that Tenant shall be charged with a net period of Tenant Delay
of twenty-eight (28) days. Accordingly, for purposes of determining the
commencement of Tenant's obligation to pay Monthly Rent with respect to each
Increment of the Existing Premises, the Commencement Date shall be deemed to
have occurred twenty-eight (28) days prior to the actual Commencement Date with
respect to each Increment of the Existing Premises. Tenant acknowledges that the
foregoing only takes into account Tenant Delay of which Landlord has knowledge
as of the date hereof. Landlord reserves its right to charge Tenant with further
Tenant Delay resulting from matters of which Landlord does not have knowledge as
of the date hereof or from any matters which arise after the date hereof.

          c. Budget. The parties acknowledge that the original budget for the
            -------
construction of the Tenant Improvements with respect to the Existing Premises
was in the total amount of $4,582,781.00. By reason of the Agreed Change Orders,
the parties acknowledge that the current budget for the construction of the
Tenant Improvements is $5,213,222.00. Tenant acknowledges that Landlord's sole
obligation with respect to such currently budgeted costs shall be in the amount
of Landlord's Contribution as set forth in Paragraph 4.g.ii. of the Lease, and
that the balance of such costs shall be paid by Tenant as Excess Cost pursuant
to Paragraph 4.g.ii.A of the Lease, without any claim by Tenant against Landlord
for payment or reimbursement for any such Excess Costs.

          d. Landlord's Work. Tenant acknowledges that Landlord has fully
             ---------------
performed, to Tenant's complete satisfaction, the items of Landlord's Work
described in paragraphs 2, 5 and 6 of Exhibit C to the Lease. Tenant has
                                      ---------
released Landlord from its obligation to perform the portion of Landlord's Work
described in paragraph 3 of Exhibit C in exchange for the credit issued by
                            ---------
Landlord pursuant to Agreed Change Order number CO 13r. Tenant further
acknowledges that the portion of Landlord's Work described in paragraph 1 of

Exhibit C has been fully performed to Tenant's complete satisfaction except for
---------
the final work to close off the stairway, which final work is currently
underway. Landlord acknowledges that the portion of Landlord's Work described in
paragraphs 4 and 7 of Exhibit C has not yet been fully performed.
                      ---------

          10.  Release.
               --------

          a. Tenant, for itself, its legal successors and assigns, its agents,
servants and employees, and each of them, does hereby release and forever
discharge Landlord, Shorenstein Company, L.P., a California limited partnership,
Turner-Shorenstein L.P., a California limited partnership, their legal
successors and assigns, their shareholders, partners, agents, servants and
employees, and each of them, together with the Indemnitees (as defined in
Paragraph 14.b. of the Lease) (all of the foregoing, collectively, the "Landlord
Parties"), of and from any and all claims, demands, damages, debts, liabilities,
actions, and causes of action of every kind and nature whatsoever, whether now
known or unknown, which Tenant ever had, now has or may hereafter have against
the Landlord Parties or any of them, arising out of, based in whole or part
upon, or relating to the Lease, the construction of the Tenant Improvements or
any act, omission, event, matter or thing occurring at any time up to the date
of this Amendment in connection therewith; provided, however, that nothing in
                                           --------  -------
this Amendment is intended to release Landlord from its obligations to be
performed under the Lease from and after the date of this Amendment.

          b. Tenant acknowledges that it has been informed of the provisions of
Section 1542 of the Civil Code of the State of California and does hereby
expressly waive and relinquish all rights and benefits which it has or may have
had under said Section, which reads as follows:

          A general release does not extend to claims which the creditor does
          not know or suspect to exist in his favor at the time of executing the
          release, which if known by him must have materially affected his
          settlement with the debtor.

                                       3
<PAGE>

          c. Tenant acknowledges that it is aware that it may hereafter discover
facts or law different from or in addition to those now known or believed to be
flue in respect to the claims, demands, damages, debts, liabilities, actions or
causes of action herein released, and hereby agrees that this release shall be
and remain in effect in all respects as complete and general release as to the
matters to be released, notwithstanding any such different and additional facts
or law.

          d. Tenant represents and warrants that it has not heretofore assigned
or transferred or purported to transfer or assign to any person, firm or
corporation any claim, demand, damages, debt, liability, action or cause of
action herein released. Tenant shall indemnify and hold harmless the Landlord
Parties against any claim, demand, damages, debt, liability, action, cause of
action, cost or expense including attorneys' fees actually paid or incurred,
arising out of or in connection with any such transfer or assignment or
purported or claimed transfer or assignment.

          e. Tenant represents and warrants that it has consulted with competent
counsel in connection with the provisions of this Paragraph 10, it fully
understands the scope and implications of the foregoing release, and does hereby
grant the same knowingly, voluntarily and with the advice of said counsel.

          11. Real Estate Brokers.  Tenant represents and warrants that it has
              --------------------
negotiated this Amendment directly with the real estate brokers identified in
Paragraph 2 of the Lease, and has not authorized or employed, or acted by
implication to authorize or to employ, any other real estate broker or salesman
to act for Tenant in connection with this Amendment. Tenant shall indemnify,
defend and hold Landlord harmless from and against any and all Claims by any
real estate broker or salesman other than the real estate brokers identified in
Paragraph 2 of the Lease for a commission, finder's fee or other compensation as
a result of Tenant's entering into this Lease. Landlord shall pay any commission
owing to the Real Estate Brokers identified in Paragraph 2 of the Lease pursuant
to a separate agreement, and shall indemnify, defend and hold Tenant harmless
from and against any and all Claims by such real estate brokers.

          12. Lease in Full Force and Effect. Except as provided above, the
              ------------------------------
Lease is unmodified hereby and remains in full force and effect.

       IN WITNESS WHEREOF, the parties hereto have executed this document as of
the date and year first above written.

Landlord:                                     Tenant:

RUSS BUILDING                                 BEA SYSTEMS, INC.,
                                              a Delaware corporation

By:  Shorenstein Company, L.P., a             By  /s/ William Klein
                                                -----------------------
     California limited partnership,
     General Partner
                                              Name  William Klein
                                                  ---------------------

     By: Shorenstein Management, Inc., a      Title  CFO
                                                   --------------------
     California corporation,
     General Partner
                                                        Tenant

     By  /s/ Douglas Shorenstein
        -----------------------
             Douglas W. Shorenstein
             President

                Landlord

                                       4
<PAGE>

                               THE RUSS BUILDING

                                    FLOOR 14

                                   EXHIBIT A
                                   ---------

                              [MAP APPEARS HERE]

                              (Page 1 of 2 Pages)

                                       5
<PAGE>

                               THE RUSS BUILDING

                                    FLOOR 15

                                   EXHIBIT A
                                   ---------

                              [MAP APPEARS HERE]

                              (Page 2 of 2 Pages)

                                       6
<PAGE>

                                   Schedule 1
                                   ----------

Project: BEA Systems, 235 Montgomery, Floors 14 & 16

============================================================================

Following are listed Tenant Change Orders for referenced project:
<TABLE>
<CAPTION>

TCO        Date
-------   -------
<S>       <C>

#1        1/18/00
#2        1/18/00
#3        1/18/00
#4r2       3/2/00
#5r2       3/2/00
#6r2       3/2/00
#7r2       3/2/00
#8r        3/2/00
#9r        3/2/00
#10r       3/2/00
#11r       3/2/00
#12r       3/2/00
#13r       3/2/00

</TABLE>

                            Schedule 1
                            ----------

                                       7<PAGE>

                                                                   EXHIBIT 10.20

                               BEA SYSTEMS, INC.

                    2000 NON-QUALIFIED STOCK INCENTIVE PLAN

     1.  Purposes of the Plan. The purposes of this Non-Qualified Stock
         --------------------
Incentive Plan are to attract and retain the best available personnel, to
provide additional incentive to Employees (who are not Officers) and Consultants
and to promote the success of the Company's business.

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

          (a) "Administrator" means the Board or any of the Committees appointed
               -------------
to administer the Plan.

          (b) "Affiliate" and "Associate" shall have the respective meanings
               ---------       ---------
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

          (c) "Applicable Laws" means the legal requirements relating to the
               ---------------
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.

          (d) "Award" means the grant of an Option, SAR, Dividend Equivalent
               -----
Right, Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.

          (e) "Award Agreement" means the written agreement evidencing the grant
               ---------------
of an Award executed by the Company and the Grantee, including any amendments
thereto.

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

          (g) "Cause" means, with respect to the termination by the Company or a
               -----
Related Entity of the Grantee's Continuous Service, that such termination is for
"Cause" as such term is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee's: (i) refusal or failure to act
in accordance with any specific, lawful direction or order of the Company or a
Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person. At least 30 days prior to the termination of the Grantee's
Continuous Service pursuant to (i) or (ii) above, the Administrator shall
provide the Grantee with notice of the Company's or such Related Entity's intent
to terminate, the reason therefor, and an opportunity for the Grantee to cure
such defects in his or her service to the Company's or such Related

                                       1
<PAGE>

Entity's satisfaction. During this 30 day (or longer) period, no Award issued to
the Grantee under the Plan may be exercised or purchased.

          (h) "Change in Control" means a change in ownership or control of the
               -----------------
Company effected through either of the following transactions:

              (i)  the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or

              (ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.

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

          (j) "Committee" means any committee appointed by the Board to
               ---------
administer the Plan.

          (k) "Common Stock" means the common stock of the Company.
               ------------

          (l) "Company" means BEA Systems, Inc., a Delaware corporation.
               -------

          (m) "Consultant" means any person (other than an Employee or a
               ----------
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

          (n) "Continuing Directors" means members of the Board who either (i)
               --------------------
have been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months and
were elected or nominated for election as Board members by at least a majority
of the Board members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.

          (o) "Continuous Service" means that the provision of services to the
               ------------------
Company or a Related Entity in any capacity of Employee or Consultant, is not
interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee or Consultant, or (iii) any change in status as long as the individual
remains in the service of the Company or a Related Entity in any capacity of
Employee or Consultant (except as

                                       2
<PAGE>

otherwise provided in the Award Agreement). An approved leave of absence shall
include sick leave, military leave, or any other authorized personal leave.

          (p) "Corporate Transaction" means any of the following transactions:
               ---------------------

               (i)   a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;

               (ii)  the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company;

               (iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or

               (iv)  acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities (whether or not in a transaction
also constituting a Change in Control), but excluding any such transaction that
the Administrator determines shall not be a Corporate Transaction.

          (q) "Director" means a member of the Board or the board of directors
               --------
of any Related Entity.

          (r) "Disability" means that a Grantee is permanently unable to carry
               ----------
out the responsibilities and functions of the position held by the Grantee by
reason of any medically determinable physical or mental impairment. A Grantee
will not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.

          (s) "Dividend Equivalent Right" means a right entitling the Grantee to
               -------------------------
compensation measured by dividends paid with respect to Common Stock.

          (t) "Employee" means any person who is an employee of the Company or
               --------
any Related Entity. The payment of a director's fee by the Company or a Related
Entity shall not be sufficient to constitute "employment" by the Company.

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

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

                                       3
<PAGE>

               (i)   Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the closing price for a Share for the last
market trading day prior to the time of the determination (or, if no closing
price was reported on that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the Administrator to be
the primary market for the Common Stock or the Nasdaq National Market, whichever
is applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or

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

          (w) "Grantee" means an Employee or Consultant who receives an Award
               -------
pursuant to an Award Agreement under the Plan.

          (x) "Immediate Family" means any child, stepchild, grandchild, parent,
               ----------------
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-
in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or sister-
in-law, including adoptive relationships, any person sharing the Grantee's
household (other than a tenant or employee), a trust in which these persons have
more than fifty percent (50%) of the beneficial interest, a foundation in which
these persons (or the Grantee) control the management of assets, and any other
entity in which these persons (or the Grantee) own more than fifty percent (50%)
of the voting interests.

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

          (z) "Non-Qualified Stock Option" means an Option not intended to
               --------------------------
qualify as an Incentive Stock Option.

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

          (bb) "Option" means an option to purchase Shares pursuant to an Award
                ------
Agreement granted under the Plan.

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

          (dd) "Performance Shares" means Shares or an Award denominated in
                ------------------
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.

                                       4
<PAGE>

          (ee) "Performance Units" means an Award which may be earned in whole
                -----------------
or in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.

          (ff) "Plan" means this 2000 Non-Qualified Stock Incentive Plan.
                ----

          (gg) "Related Entity" means any Parent, Subsidiary and any business,
                --------------
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.

          (hh) "Related Entity Disposition" means the sale, distribution or
                --------------------------
other disposition by the Company, a Parent or a Subsidiary of all or
substantially all of the interests of the Company, a Parent or a Subsidiary in
any Related Entity effected by a sale, merger or consolidation or other
transaction involving that Related Entity or the sale of all or substantially
all of the assets of that Related Entity, other than any Related Entity
Disposition to the Company, a Parent or a Subsidiary.

          (ii) "Restricted Stock" means Shares issued under the Plan to the
                ----------------
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.

          (jj) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
                ----------
or any successor thereto.

          (kk) "SAR" means a stock appreciation right entitling the Grantee to
                ---
Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.

          (ll) "Share" means a share of the Common Stock.
                -----

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

     3.  Stock Subject to the Plan.
         -------------------------

          (a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is
2,000,000 Shares. The Shares to be issued pursuant to Awards may be authorized,
but unissued, or reacquired Common Stock.

          (b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. Shares that actually have been issued
under the Plan pursuant to an Award shall not be returned to the Plan and shall
not become available for future issuance under the Plan, except that

                                       5
<PAGE>

if unvested Shares are forfeited, or 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)  Plan Administrator.
               ------------------

               (i)  Administration With Respect to Consultants and Employees.
                    --------------------------------------------------------
With respect to grants of Awards to Consultants and Employees who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. The Board may authorize one or more Officers to
grant such Awards and may limit such authority as the Board determines from time
to time consistent with Applicable Laws.

               (ii) Administration Errors. In the event an Award is granted in a
                    ---------------------
manner inconsistent with the provisions of this subsection (a), such Award shall
be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

          (b) Powers of the Administrator. Subject to Applicable Laws and the
              ---------------------------
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:

               (i)   to select the Employees and Consultants to whom Awards may
be granted from time to time hereunder;

               (ii)  to determine whether and to what extent Awards are granted
hereunder;

               (iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

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

               (v)   to determine the terms and conditions of any Award granted
hereunder;

               (vi)  to amend the terms of any outstanding Award granted under
the Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;

               (vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan, including without limitation, any notice of Award
or Award Agreement, granted pursuant to the Plan;

                                       6
<PAGE>

               (viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and

               (ix)   to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.

     5.  Eligibility. Awards may be granted to Employees and Consultants.
         -----------
Officers and Directors are not eligible to receive Awards under the Plan. An
Employee or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees or
Consultants who are residing in foreign jurisdictions as the Administrator may
determine from time to time.

     6.   Terms and Conditions of Awards.
          ------------------------------

          (a) Type of Awards. The Administrator is authorized under the Plan to
              --------------
award any type of arrangement to an Employee or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iii) any other security with the value derived from the
value of the Shares. Such awards include, without limitation, Options, SARs,
sales or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance
Units or Performance Shares, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.

          (b) Designation of Award. Each Award shall be designated in the Award
              --------------------
Agreement. In the case of an Option, the Option shall be designated as a Non-
Qualified Stock Option.

          (c) Conditions of Award. Subject to the terms of the Plan, the
              -------------------
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

          (d) Acquisitions and Other Transactions. The Administrator may issue
              -----------------------------------
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or

                                       7
<PAGE>

obligations to grant future awards in connection with the Company or a Related
Entity acquiring another entity, an interest in another entity or an additional
interest in a Related Entity whether by merger, stock purchase, asset purchase
or other form of transaction.

          (e) Deferral of Award Payment. The Administrator may establish one or
              -------------------------
more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.

          (f) Award Exchange Programs. The Administrator may establish one or
              -----------------------
more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.

          (g) Separate Programs. The Administrator may establish one or more
              -----------------
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.

          (h) Early Exercise. The Award Agreement may, but need not, include a
              --------------
provision whereby the Grantee may elect at any time while an Employee or
Consultant to exercise any part or all of the Award prior to full vesting of the
Award. Any unvested Shares received pursuant to such exercise may be subject to
a repurchase right in favor of the Company or a Related Entity or to any other
restriction the Administrator determines to be appropriate.

          (i) Term of Award. The term of each Award shall be the term stated in
              -------------
the Award Agreement.

          (j) Transferability of Awards. Awards may be transferred by gift or
              -------------------------
through a domestic relations order to members of the Grantee's Immediate Family
to the extent provided in the Award Agreement or in the manner and to the extent
determined by the Administrator.

          (k) Time of Granting Awards. The date of grant of an Award shall for
              -----------------------
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee or Consultant
to whom an Award is so granted within a reasonable time after the date of such
grant.

                                       8
<PAGE>

     7.   Award Exercise or Purchase Price, Consideration and Taxes.
          ---------------------------------------------------------

          (a)  Exercise or Purchase Price. The exercise or purchase price, if
               --------------------------
any, for an Award shall be as follows:

               (i)   In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant unless otherwise determined by the
Administrator.

               (ii)  In the case of other Awards, such price as is determined by
               the
Administrator.

               (iii) Notwithstanding the foregoing provisions of this Section 7
(a), in the case of an Award issued pursuant to Section 6(d), above, the
exercise or purchase price for the Award shall be determined in accordance with
the principles of Section 424 (a) of the Code.

          (b) Consideration. Subject to Applicable Laws, the consideration to be
              -------------
paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment, shall be determined by the Administrator. In addition to
any other types of consideration the Administrator may determine, the
Administrator is authorized to accept as consideration for Shares issued under
the Plan the following, provided that the portion of the consideration equal to
the par value of the Shares must be paid in cash or other legal consideration
permitted by the Delaware General Corporation Law:

               (i)   cash:

               (ii)  check;

               (iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;

               (iv)  surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator);

               (v)   with respect to Options, payment through a broker-dealer
sale and remittance procedure pursuant to which the Grantee (A) shall provide
written instructions to a Company designated brokerage firm to effect the
immediate sale of some or all of the purchased Shares and remit to the Company,
out of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased Shares and (B)
shall provide written directives to the Company to deliver the certificates for
the purchased Shares directly to such brokerage firm in order to complete the
sale transaction; or

                                       9
<PAGE>

               (vi)  any combination of the foregoing methods of payment.

          (c) Taxes. No Shares shall be delivered under the Plan to any Grantee
              -----
or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares. Upon exercise
of an Award, the Company shall withhold or collect from Grantee an amount
sufficient to satisfy such tax obligations.

     8.   Exercise of Award.
          -----------------

          (a)  Procedure for Exercise; Rights as a Stockholder.
               -----------------------------------------------

               (i)   Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement.

               (ii)  An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to pay
the purchase price as provided in Section 7 (b) (v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Award. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in the Award Agreement or Section 10, below.

          (b)  Exercise of Award Following Termination of Continuous Service.
               -------------------------------------------------------------

               (i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided in the
Award Agreement.

               (ii)  Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on the
last day of the specified period or the last day of the original term of the
Award, whichever occurs first.

     9.   Conditions Upon Issuance of Shares.
          ----------------------------------

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

                                       10
<PAGE>

          (b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award 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 by any
Applicable Laws.

     10.  Adjustments Upon Changes in Capitalization. Subject to any required
          ------------------------------------------
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares, or
similar event affecting the Shares, (ii) any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other transaction with respect to Common Stock to which Section 424(a) of the
Code applies or any similar transaction; provided, however that 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 Administrator and its determination shall be final, binding and conclusive.
Except as the Administrator determines, 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 hereof shall be made with respect to,
the number or price of Shares subject to an Award.

     11.  Corporate Transactions Related Entity Dispositions. Except as may be
          --------------------------------------------------
provided in an Award Agreement:

          (a) Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Plan shall terminate. However, all such Awards
shall not terminate if they are, in connection with the Corporate Transaction,
assumed by the successor corporation or Parent thereof.

          (b) Effective upon the consummation of a Related Entity Disposition,
for purposes of the Plan and all Awards, the Continuous Service of each Grantee
who is at the time engaged primarily in service to the Related Entity involved
in such Related Entity Disposition shall be deemed to terminate and each Award
of such Grantee which is at the time outstanding under the Plan shall be
exercisable in accordance with the terms of the Award Agreement evidencing such
Award. However, such Continuous Service shall be not to deemed to terminate if
such Award is, in connection with the Related Entity Disposition, assumed by the
successor entity or its parent.

     12.  Effective Date and 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. Subject to Applicable Laws, Awards may be
granted under the Plan upon its becoming effective.

                                       11

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