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                                                                   EXHIBIT 10.09

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE
LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

                             Avatech Solutions, Inc.
                              10% SUBORDINATED NOTE

$25,000                                                   Owings Mills, Maryland
                                                            ______________, 1998

         Avatech Solutions, Inc., a Delaware corporation (the "Company"), the
principal office of which is located at 11403A Cronhill Drive, Owings Mills,
Maryland 21117, for value received, hereby promises to pay to
_________________________________, or his registered assigns, the sum of
Twenty-Five Thousand Dollars ($25,000), or such lesser amount as shall then
equal the outstanding principal amount hereof. Any unpaid accrued interest
hereon, as set forth below, shall be due and payable on the earlier to occur of
(i) the maturity date, which is October ___, 2003, or (ii) when declared due and
payable by the Holder upon the occurrence of an Event of Default (as defined
below). Payment for all amounts due hereunder shall be made by mail to the
registered address of the Holder. This Note is one of an issue of the Company's
10% Subordinated Notes in the aggregate principal amount of up to $1,600,000.00.

         The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:

         1. Definitions. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:

                  (i) "Company" includes any corporation which shall succeed to
         or assume the obligations of the Company under this Note.

                  (ii) "Holder," when the context refers to a holder of this
         Note, shall mean any person who shall at the time be the registered
         holder of this Note.

         2. Interest. The Company shall pay simple interest at the rate of ten
percent (10%) per annum on the principal of this Note outstanding during the
period beginning on the date of issuance of this Note and ending on the date
that the principal amount of this Note becomes due and payable.

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Interest shall be payable on the calendar quarter, commencing on January 1, 1999
until maturity or earlier prepayment.

         3. Events of Default. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default"), the
Holder of the Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company:

                  (i) Default in the payment of the principal and unpaid accrued
         interest of this Note when due and payable if such default is not cured
         by the Company within ten (10) days after the Holder has given the
         Company written notice of such default; or

                  (ii) The institution by the Company of proceedings to be
         adjudicated as bankrupt or insolvent, or the consent by it to
         institution of bankruptcy or insolvency proceedings against it or the
         filing by it of a petition or answer or consent seeking reorganization
         or release under the federal Bankruptcy Act, or any other applicable
         federal or state law, or the consent by it to the filing of any such
         petition or the appointment of a receiver, liquidator, assignee,
         trustee or other similar official of the Company, or of any substantial
         part of its property, or the making by it of an assignment for the
         benefit of creditors, or the taking of corporate action by the Company
         in furtherance of any such action; or

                  (iii) If, within sixty (60) days after the commencement of an
         action against the Company (and service of process in connection
         therewith on the Company) seeking any bankruptcy, insolvency,
         reorganization, liquidation, dissolution or similar relief under any
         present or future statute, law or regulation, such action shall not
         have been resolved in favor of the Company or all orders or proceedings
         thereunder affecting the operations or the business of the Company
         stayed, or if the stay of any such order or proceeding shall thereafter
         be set aside, or if, within sixty (60) days after the appointment
         without the consent or acquiescence of the Company of any trustee,
         receiver or liquidator of the Company or of all or any substantial part
         of the properties of the Company, such appointment shall not have been
         vacated; or

                  (iv) Any declared default of the Company under any Senior
         Indebtedness (as defined below) that gives the holder thereof the right
         to accelerate such Senior Indebtedness, and such Senior Indebtedness is
         in fact accelerated by the holder.

         4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all of the Company's Senior
Indebtedness, as hereinafter defined.

                  4.1 Senior Indebtedness. As used in this Note, the term
"Senior Indebtedness" shall mean the principal of and unpaid accrued interest
on: (i) all indebtedness of the Company to banks, commercial finance lenders,
insurance companies or other financial institutions regularly engaged in the
business of lending money, which is for money borrowed by the Company (whether
or not secured), and (ii) any such indebtedness or any debentures, notes or
other evidence of

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indebtedness issued in exchange for or to refinance such Senior Indebtedness, or
any indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor.

                  4.2 Default on Senior Indebtedness. If there should occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshalling of the assets and
liabilities of the Company, or if this Note shall be declared due and payable
upon the occurrence of an Event of Default with respect to any Senior
Indebtedness, then (i) no amount shall be paid by the Company in respect of the
principal of or interest on this Note at the time outstanding, unless and until
the principal of and interest on the Senior Indebtedness then outstanding shall
be paid in full, and (ii) no claim or proof of claim shall be filed with the
Company by or on behalf of the Holder of this Note that shall assert any right
to receive any payments in respect of the principal of and interest on this
Note, except subject to the payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding. If there occurs an event of
default that has been declared in writing with respect to any Senior
Indebtedness, or in the instrument under which any Senior Indebtedness is
outstanding, permitting the holder of such Senior Indebtedness to accelerate the
maturity thereof, then, unless and until such event of default shall have been
cured or waived or shall have ceased to exist, or all Senior Indebtedness shall
have been paid in full, no payment shall be made in respect of the principal of
or interest on this Note, unless within three (3) months after the happening of
such event of default, the maturity of such Senior Indebtedness shall not have
been accelerated.

                  4.3 Effect of Subordination. Subject to the rights, if any, of
the holders of Senior Indebtedness under this Section 4 to receive cash,
securities or other properties otherwise payable or deliverable to the Holder of
this Note, nothing contained in this Section 4 shall impair, as between the
Company and the Holder, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder the principal hereof and interest hereon
as and when the same become due and payable, or shall prevent the Holder of this
Note, upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.

                  4.4 Subrogation. Subject to the payment in full of all Senior
Indebtedness and until this Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the extent of
payments or distributions previously made to such holders of Senior Indebtedness
pursuant to the provisions of Section 4.2 above) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness. No
such payments or distributions applicable to the Senior Indebtedness shall, as
between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on
account of this Note; and for the purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which the Holder would be
entitled except for the provisions of this Section 4 shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness.

                  4.5 Undertaking. By its acceptance of this Note, the Holder
agrees to execute and deliver such documents as may be reasonably requested from
time to time by the Company or

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the lender of any Senior Indebtedness in order to implement the foregoing
provisions of this Section 4.

         5. Prepayment. Upon twenty (20) days' prior written notice to the
Holder, the Company may at any time prepay in whole or in part the principal
sum, plus accrued interest to date of payment, of this Note.

         6. Assignment. Subject to the restrictions on transfer described in
Section 8 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
personal and legal representatives, and transferees of the parties.

         7. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and holders of all
then outstanding Notes.

         8. Transfer of this Note. With respect to any offer, sale or other
disposition of this Note, the Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such Holder's counsel, to the effect that such offer, sale or other
distribution may be effected without registration or qualification (under any
federal or state law then in effect). Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such Holder that such Holder may sell or
otherwise dispose of this Note or such securities, all in accordance with the
terms of the notice delivered to the Company. If a determination has been made
pursuant to this Section 8 that the opinion of counsel for the Holder is not
reasonably satisfactory to the Company, the Company shall so notify the Holder
promptly after such determination has been made. Each Note thus transferred and
each certificate representing the securities thus transferred shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.

         9. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.

         10. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when personally delivered or when deposited in the mail or telegraphed in the
manner set forth above and shall be deemed to have been received when delivered.

         11. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or

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any other matters or any rights whatsoever as a stockholder of the Company; and
no dividends or interest shall be payable or accrued in respect of this Note or
the interest represented hereby.

         12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, excluding that body of law
relating to conflict of laws.

         13. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be issued this ____ day
of _______________, 1998.

                                    AVATECH SOLUTIONS, INC.

                                    By:_____________________________________
                                       Ronald C. Diegelman, President
                                       and Chief Operating Officer

Name of Holder:_____________________

Address:____________________________

____________________________________

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           Do not detach this warrant without consulting the Company.

No. W- ______                                                       1,000 Shares
                             Avatech Solutions, Inc.
                             A Delaware Corporation
                     Common Stock, Par Value $.01 per share
                             Stock Purchase Warrant

         This warrant is issued to the registered holder of $25,000 principal
amount of the 10% Subordinated Notes (individually, a "Note" and collectively,
the "Notes"), of Avatech Solutions, Inc., a Delaware corporation (the
"Company"), dated as of ___________________, 1998, bearing (except for the
prefix letter "W") the same designating number as noted above and to which Note
this warrant pertains or such registered holder's nominees. The Note is one of
an issue of Notes of the Company with an aggregate principal amount of up to
$1,600,000.00.

         The bearer of this warrant is entitled, upon presentation of the Note
(if the Note is then outstanding) and upon surrender of this warrant at the
offices of the Company, to subscribe for, purchase and receive one thousand
(1,000) shares of the Company's Common Stock for a purchase price of Five
Dollars and Seventy-five Cents ($5.75) per share provided, however, no
fractional shares will be issued. Upon such payment, the Company agrees to cause
to be issued in the name of the registered holder, or his or her nominees, a
certificate or certificates duly representing the shares so purchased.

         In the event of the declaration and payment of share dividends by the
Company on its Common Stock, or any split-up of the Common Stock, or
recapitalization of the Company which changes the issued and outstanding shares
of Common Stock, additional shares of the Company may be deliverable to the
holder of this warrant upon the exercise of it without additional consideration,
or the exercise price per share may be adjusted in the appropriate manner.

         The purchase privilege herein contained shall expire on _____________,
20___. If the Note to which this warrant is attached shall be prepaid, the
purchase privilege shall nevertheless continue until said date.

         Nothing contained in this warrant shall affect or limit the Note to
which it pertains.

         Dated as of ___________, 1998.

                                       Avatech Solutions, Inc.

                                       By:__________________________________
                                          Ronald C. Diegelman, President
                                          and Chief Operating Officer<PAGE>

                                                                   EXHIBIT 10.10

                             AVATECH SOLUTIONS, INC.

                             1998 STOCK OPTION PLAN

         1. PURPOSE. The purpose of this plan (the "Plan") is to secure for
Avatech Solutions, Inc., a Delaware corporation (the "Company"), and its
shareholders, the benefits arising from capital stock ownership by employees,
officers, and directors of the Company, and its subsidiary corporations, who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include all present and
future subsidiaries of the Company as defined in Sections 424(e) and 424(f) of
the Internal Revenue Code of 1986, as amended from time to time (the "Code").
Those provisions of the Plan which make express reference to Section 422 shall
apply only to Incentive Stock Options (as that term is defined in the Plan).

         2  TYPES OF OPTIONS AND ADMINISTRATION.

                  2.1 TYPES OF OPTIONS. Options granted pursuant to the Plan may
be either (a) incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code; or (b) Non-Statutory Options which are
not intended to meet the requirements of Section 422 of the Code ("Non-Statutory
Options").

                  2.2. ADMINISTRATION.

                           2.2.1. The Plan will be  administered by the Board of
Directors of the Company (or any committee thereof appointed pursuant to Section
2.2.2), whose construction and interpretation of the terms and provisions of the
Plan shall be final and conclusive. The Board of Directors may, in its sole
discretion, grant options to purchase shares of the Company's Common Stock
("Common Stock"), establish a vesting schedule, and issue shares upon exercise
of such options as provided in the Plan. The Board shall have authority, subject
to the express provisions of the Plan, to construe the respective option
agreements and the Plan, to prescribe, amend, and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
option agreements, which need not be identical, and to make all other
determinations which are, in the judgment of the Board of Directors, necessary
or desirable for the administration of the Plan. The Board of Directors may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any option agreement in the manner and to the extent that it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. No director or person acting pursuant to authority
delegated by the Board of Directors shall be liable for any action or
determination under the Plan made in good faith.

                           2.2.2. The Board of Directors may, to the full extent
permitted by or

<PAGE>

consistent with applicable laws or regulations and Section 2.2.1 of this Plan
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.

         3. ELIGIBILITY. Options may be granted to persons who are, at the time
of grant, employees, officers, or directors of the Company; PROVIDED, HOWEVER,
that the class of employees to whom Incentive Stock Options may be granted shall
be limited to all employees of the Company. A person who has been granted an
option may, if he or she is otherwise eligible, be granted additional options if
the Board of Directors shall so determine.

         4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided in Section
14 and Section 15 below, the maximum number of shares of Common Stock which may
be issued and sold under the Plan is Two Hundred Fifty Thousand (250,000) shares
of Common Stock. If an option granted under the Plan shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the Plan are
tendered to the Company in payment of the exercise price of an option granted
under the Plan, such tendered shares shall again be available for subsequent
option grants under the Plan; PROVIDED, HOWEVER, that in no event shall such
shares be made available for issuance to reporting persons or pursuant to
exercise of Incentive Stock Options.

         5. FORMS OF OPTION AGREEMENTS. As a condition to the grant of an option
under the Plan, each recipient of an option shall execute an option agreement in
such form not inconsistent with the Plan as may be approved by the Board of
Directors. Such option agreements may differ among recipients.

         6. PURCHASE PRICE.

                  6.1. GENERAL. Subject to Section 2.2.1 of this Plan, the
purchase price per share of stock deliverable upon the exercise of an option
shall be determined by the Board of Directors; PROVIDED, HOWEVER, that in the
case of an Incentive Stock Option, the exercise price shall not be less than
100% of the fair market value of such stock, as determined by the Board of
Directors, at the time of grant of such option, or less than 110% of such fair
market value in the case of options described in Section 11(b).

                  6.2. PAYMENT OF PURCHASE PRICE. Options granted under the Plan
may provide for the payment of the exercise price by delivery of cash or a check
to the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement: (a) by
delivery to the Company of shares of Common Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise price
of the options being exercised or (b) by any other means (including, without

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limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board). The fair market value of any shares
of the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an option shall be determined by the Board of
Directors.

         7. OPTION PERIOD. Each option and all rights thereunder shall expire on
such date as shall be set forth in the applicable option agreement, except that,
in the case of an Incentive Stock Option, such date shall not be later than ten
(10) years after the date on which the option is granted and, in all cases,
options shall be subject to earlier termination as provided in the Plan.

         8. EXERCISE OF OPTIONS. Each option granted under the Plan shall be
exercisable in three (3) equal annual installments from the date of grant;
provided, however, that the Board of Directors may, in individual cases, elect
to grant an option that shall be exercisable in full or in installments at such
time or times and during such period as shall be set forth in the agreement
evidencing such option, subject to the provisions of the Plan.

         9. NONTRANSFERABILITY OF OPTIONS. Options shall not be assignable or
transferable by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution, and,
during the life of the optionee, shall be exercisable only by the optionee.

         10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Except
as provided in Section 11(d) with respect to Incentive Stock Options, and
subject to the provisions of the Plan, the Board of Directors shall determine
the period of time during which an optionee may exercise an option following (a)
the termination of the optionee's employment or other relationship with the
Company (and such period may end on the day prior to such termination of
employment) or (b) the death or disability of the optionee. Such periods shall
be set forth in the agreement evidencing such option.

         11. INCENTIVE STOCK OPTIONS. Options granted under the Plan that are
intended to be Incentive Stock Options shall be subject to the following
additional terms and conditions:

                  (a) EXPRESS DESIGNATION. All Incentive Stock Options granted
under the Plan shall, at the time of grant, be specifically designated as such
in the option agreement covering such Incentive Stock Options.

                  (b) 10% SHAREHOLDER. If any employee to whom an Incentive
Stock Option is to be granted under the Plan is, at the time of the grant of
such option, the owner of stock possessing more than 10% of the total combined
voting power of all classes of stock of the

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<PAGE>

Company (after taking into account the attribution of stock ownership rules of
Section 424(d) of the Code), then the following special provisions shall be
applicable to the Incentive Stock Option granted to such individual:

                           (i)  The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and

                           (ii) The option exercise period shall not exceed five
years from the date of grant.

                  (c) DOLLAR LIMITATION. For so long as the Code shall so
provide, options granted to any employee under the Plan (and any other incentive
stock option plans of the Company) that are intended to constitute Incentive
Stock Options shall not constitute Incentive Stock Options to the extent that
such options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.

                  (d) TERMINATION OF EMPLOYMENT. DEATH OR DISABILITY. No
Incentive Stock Option may be exercised unless, at the time of such exercise,
the optionee is, and has been continuously since the date of grant of his or her
option, employed by the Company, except that:

                           (i) an Incentive Stock Option may be exercised within
the period of three months after the date the optionee ceases to be an employee
of the Company (or within such lesser period as may be specified in the
applicable option agreement); PROVIDED, HOWEVER, that the agreement with respect
to such option may designate a longer exercise period, PROVIDED FURTHER that the
exercise after such three-month period shall be treated as the exercise of a
non-statutory option under the Plan;

                           (ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to be such an
employee, the Incentive Stock Option may be exercised by the person to whom it
is transferred by will or the laws of descent and distribution within the period
of three months after the date of death (or within such lesser period as may be
specified in the applicable option agreement); and

                           (iii) if the optionee becomes disabled (within the
meaning of Section 22(e)(3) of the Code or any successor provision thereto)
while in the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).

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<PAGE>

         For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no Incentive Stock Option may be
exercised after its expiration date.

         12. ADDITIONAL PROVISIONS.

                  12.1. INVESTMENT REPRESENTATIONS. The Company can require any
person to whom an option is granted, as a condition of exercising such option,
to give written assurances in substance and form satisfactory to the Company to
the effect that such person is acquiring the Common Stock subject to the option
for his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws, or with covenants or representations made by
the Company in connection with any public offering of its Common Stock.

                  12.2. COMPLIANCE WITH SECURITIES LAWS. Each option shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration, or qualification of the shares subject
to such option upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any other condition
is necessary as a condition of or in connection with, the issuance or purchase
of shares thereunder, such option may not be exercised, in whole or in part,
unless such listing, registration, qualification, consent, or approval, or
satisfaction of such condition shall have been effected or obtained upon
conditions acceptable to the Board of Directors. Nothing herein shall be deemed
to require the Company to apply for or to obtain such listing, registration, or
qualification, or to satisfy such condition.

                  12.3. VIOLATIONS OF LAW. The Company shall not be required to
sell or issue any shares of stock under any option if the sale or issuance of
such shares would constitute a violation by the individual exercising the option
or the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Specifically in connection with the Securities Act of 1933, as
amended (the "Act") the Company shall not be required to sell or issue such
shares unless the Company has received evidence satisfactory to it that the
holder of such option may acquire such shares pursuant to an exemption from
registration under such Act, and the shares of stock to be issued upon the
exercise of all or any portion of any option granted under the Plan shall be
issued on the condition that the optionee represents that the purchase of stock
upon such exercise shall be for investment purposes and not with a view to
resale, distribution, offering, transferring, mortgaging, pledging,
hypothecating or otherwise disposing of any such stock under the circumstances
which would constitute a public offering or distribution under the Act or the
securities laws of any state. No

                                      -5-
<PAGE>

shares of stock shall be issued upon the exercise of any option unless the
Company shall have received from the optionee a written statement satisfactory
to legal counsel for the Company containing the above representations, stating
that certificates representing such shares may bear a legend restricting their
transfer and stating that the Company's transfer agent or agents may be given
instructions to stop transfer of any certificate bearing such legend. Such
representation and restrictions provided for herein shall not be required if (i)
an effective registration statement for such shares under the Act and any
applicable state laws has been filed with the Securities and Exchange Commission
and with the appropriate agency or commission of any state whose laws apply to
the transaction, or (ii) an opinion of counsel satisfactory to the Company has
been delivered to the Company to the effect that registration is not required
under the Act or under the applicable securities laws of any state. Any
determination by the Committee regarding the foregoing shall be final, binding,
and conclusive. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an option or the issuance of shares
pursuant thereto to comply with any law or regulation or any governmental
authority.

                  12.4 RESTRICTION ON TRANSFER OF STOCK The certificate or
certificates for Common Stock issued upon the exercise of an option shall bear
the following legend:

                           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                           REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
                           AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
                           OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
                           HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
                           ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
                           COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL
                           THAT SUCH REGISTRATION IS NOT REQUIRED.

                           THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
                           ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
                           CONTAINED IN THE COMPANY'S 1998 STOCK OPTION PLAN AND
                           IN AN OPTION AGREEMENT, A COPY OF WHICH WILL BE
                           FURNISHED UPON REQUEST BY THE ISSUER. UNDER THE
                           PROVISIONS OF THE PLAN AND THE AGREEMENT, THE HOLDER
                           OF THE SHARES OF STOCK REPRESENTED BY THIS
                           CERTIFICATE HAS NO RIGHT TO

                                      -6-
<PAGE>

                           REQUIRE THE COMPANY TO REGISTER THE SECURITIES
                           REPRESENTED HEREBY.

         13. RIGHTS AS A SHAREHOLDER. The holder of an option shall have no
rights as a shareholder with respect to any shares covered by the option
(including, without limitation any rights to receive dividends or non-cash
distributions with respect to such shares) or to inspect books and records until
the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.

         14. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED
TRANSACTIONS.

                  14.1. GENERAL. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar transaction, (a) the outstanding shares of
Common Stock are increased, decreased, or exchanged for a different number or
kind of shares or other securities of the Company or (b) additional shares or
new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i) the
maximum number and kinds of shares reserved for issuance under the Plan, (ii)
the number and kind of shares or other securities subject to any then
outstanding options under the Plan, and (iii) the price for each share subject
to any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 14 if such
adjustment would cause the Plan to fail to comply with Section 422 of the Code.

                  14.2. BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments
under this Section 14 will be made by the Board of Directors, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be
issued under the Plan on account of any such adjustments.

         15. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION. ETC.

                  15.1. GENERAL. In the event of a consolidation or merger or
sale of all or substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for securities, cash, or other
property of any other corporation or business entity or in the event of a
liquidation of the Company, the Board of Directors of the Company, or the board
of directors of any corporation assuming the obligations of the Company, may, in
its discretion, take any one or more of the following actions, as to outstanding
options: (a) provide that such options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), PROVIDED that any such options substituted for Incentive
Stock Options shall meet the requirements of Section 424(a) of the Code, (b)
upon written notice to the

                                      -7-
<PAGE>

optionees, provide that all unexercised options will terminate immediately prior
to the consummation of such transaction unless exercised by the optionee within
a specified period following the date of such notice, (c) in the event of a
merger under the terms of which holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (i) the Merger Price times the number
of shares of Common Stock subject to such outstanding options (to the extent
then exercisable at prices not in excess of the Merger Price) and (ii) the
aggregate exercise price of all such outstanding options in exchange for the
termination of such options, and (d) provide that all or any outstanding options
shall become exercisable in full immediately prior to such event.

                  15.2. SUBSTITUTE OPTIONS. The Company may grant options under
the Plan in substitution for options held by employees of another corporation
who become employees of the Company, or a subsidiary of the Company, as the
result of a merger or consolidation of the employing corporation with the
Company or a subsidiary of the Company, or as a result of the acquisition by the
Company, or one of its subsidiaries, of property or stock of the employing
corporation. The Company may direct that substitute options be granted on such
terms and conditions as the Board of Directors considers appropriate in the
circumstances.

         16. NO SPECIAL EMPLOYMENT RIGHT. Nothing contained in the Plan or in
any option shall confer upon any optionee any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment "at will"
or pursuant to the terms of any applicable employment agreement or to increase
or decrease the compensation of the optionee.

         17. OTHER EMPLOYEE BENEFITS. Except as to plans which by their terms
include such amounts as compensation, the amount of any compensation deemed to
be received by an employee as a result of the exercise of an option or the sale
of shares received upon such exercise will not constitute compensation with
respect to which any other employee benefits of such employee are determined,
including, without limitation, benefits under any bonus, pension,
profit-sharing, life insurance, or salary continuation plan, except as otherwise
specifically determined by the Board of Directors.

         18. AMENDMENT OF THE PLAN.

                  18.1. PROCESS TO AMEND PLAN. The Board of Directors may at any
time, and from time to time, modify or amend the Plan in any respect, except
that if at any time the approval of the shareholders of the Company is required
under Section 422 of the Code or any successor provision with respect to
Incentive Stock Options, or under other applicable law, the Board of Directors
may not effect such modification or amendment without such approval.

                                      -8-
<PAGE>

                  18.2. EFFECT OF AMENDMENT AND CONSENT OF OPTIONEES. The
termination or any modification or amendment of the Plan shall not, without the
consent of an optionee, affect his or her rights under an option previously
granted to him or her. With the consent of the optionee affected, the Board of
Directors may amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board of Directors shall have the right to amend or modify
the terms and provisions of the Plan and of any outstanding Incentive Stock
Options granted under the Plan to the extent necessary to qualify any or all
such options for such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded incentive stock options under
Section 422 of the Code.

         19. WITHHOLDING. The Company shall have the right to deduct from
payments of any kind otherwise due to the optionee any federal, state, or local
taxes of any kind required by law to be withheld with respect to any shares
issued upon exercise of options under the Plan. Subject to the prior approval of
the Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (a) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (b) by delivering to the Company shares
of Common Stock already owned by the optionee. The shares so delivered or
withheld shall have a fair market value equal to such withholding obligation.
The fair market value of the shares used to satisfy such withholding obligation
shall be determined by the Company as of the date that the amount of tax to be
withheld is to be determined. Any optionee who has made an election pursuant to
this Section 19 may only satisfy his or her withholding obligation with shares
of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements.

         20. CANCELLATION AND NEW GRANT OF OPTIONS, ETC. The Board of Directors
shall have the authority to effect, at any time and from time to time, with the
consent of any affected optionees, (a) the cancellation of any or all
outstanding options under the Plan and the grant in substitution therefor of new
options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the canceled options or (b) the
amendment of the terms of any and all outstanding options under the Plan to
provide an option exercise price per share which is higher or lower than the
then-current exercise price per share of such outstanding options.

         21. EFFECTIVE DATE AND DURATION OF THE PLAN.

                  21.1 EFFECTIVE DATE. The Plan shall become effective when
adopted by the Board of Directors, but no option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, i.e., on or
before February 2, 1999, options previously granted under the Plan shall not
vest and shall terminate and no options shall be granted thereafter. Amendments
to the Plan not requiring

                                      -9-
<PAGE>

shareholder approval shall become effective when adopted by the Board of
Directors; amendments requiring shareholder approval (as provided in Section 18)
shall become effective when adopted by the Board of Directors, but no option
granted after the date of such amendment shall become exercisable (to the extent
that such amendment to the Plan was required to enable the Company to grant such
option to a particular person) unless and until such amendment shall have been
approved by the Company's shareholders. If such shareholder approval is not
obtained within twelve months of the Board's adoption of such amendment, any
options granted on or after the date of such amendment shall terminate to the
extent that such amendment was required to enable the Company to grant such
option to a particular optionee. Subject to this limitation, options may be
granted under the Plan at any time after the effective date and before the date
fixed for termination of the Plan.

                  21.2. TERMINATION. The Plan shall terminate upon the close of
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board of Directors, i.e., on April 3, 2008. Options outstanding
on such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.

         22. PROVISION FOR FOREIGN PARTICIPANTS. The Board of Directors may,
without amending the Plan, modify awards or options granted to participants who
are foreign nationals or employed outside the United States to recognize
differences in laws, rules, regulations or customs of such foreign jurisdictions
with respect to tax, securities, currency, employee benefit, or other matters.

Adopted by the Board of Directors on April 2, 1998.

                                      -10-

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