Document:

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                                                                    EXHIBIT 4.03

                  2000 Non-Employee Directors Stock Option Plan

    1.   Purpose. The purpose of the PLATO Learning, Inc. 2000 Nonemployee
Directors Stock Option Plan (the "Plan") is to attract and retain highly
qualified people who are not employees of PLATO Learning, Inc. (the "Company")
or any of its subsidiaries to serve as Nonemployee Directors of the Company, and
to encourage Nonemployee Directors to own shares of the Company's Common Stock,
$.01 par value (the "Stock").

    2.   Administration. Grants of Options under the Plan shall be made in the
manner provided in Section 5. All questions of interpretation of the Plan or of
any options issued hereunder shall be determined by a committee (the
"Compensation Committee") consisting of two or more members appointed by the
Board of Directors of the Company (the "Board").

    3.   Eligibility. Only a member of the Board who is not an employee of the
Company or any of its subsidiaries (a "Nonemployee Director") shall be eligible
to participate in the Plan.

    4.   Shares Available for Options.

         4.1. Available Shares. "Option" shall mean an option granted under the
provisions of Section 5 of this Plan to purchase Stock. "Date of Grant" shall
mean the date of grant of an Option. The Company intends that Options shall
constitute nonqualified stock options (and not incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")). Subject to adjustment under Section 4.2, Options may be granted under
the Plan in respect of a maximum of 200,000 shares of Stock. Shares subject to
an Option that expires or terminates unexercised shall again be available for
Options hereunder to the extent of such expiration or termination. Shares issued
under the Plan may consist in whole or in part of authorized but unissued shares
or treasury shares.

         4.2. Adjustments. In the event of any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, combination or
exchanges of shares, or any other similar change affecting the Stock, an
appropriate adjustment to reflect any such change shall be made in the total
number and class of shares for which Options may be granted and the number and
class of shares and the price per share of any Option theretofore granted to the
extent unexercised. Such adjustment shall be as determined by the Compensation
Committee; provided that any such computation shall be rounded to the nearest
whole share and no such modification shall require the issuance of fractional
shares.

    5.   Stock Options. Each Option granted under the Plan shall be approved by
the entire Board or the Compensation Committee, and evidenced by a written
agreement in such form as the Compensation Committee shall approve, and shall be
subject to Section 4 and the following terms and conditions:

         5.1. Terms and Conditions. The exercise price for each share of Stock
subject to the Option shall be the Fair Market Value of a share of Stock on the
Date of Grant of such Option, and the Option shall become exercisable according
to the schedule approved by the Board (or the Compensation Committee) and set
forth in the Option agreement. Except as otherwise provided in Section 5.3, each
Option shall terminate ten years from the Date of Grant.

         5.2. Exercise of Options. An option, or portion thereof, shall be
exercised by delivery of a written notice of exercise to the Secretary of the
Company and payment of the full purchase price (the "Exercise Price") for the
shares being purchased pursuant to the Option. The Exercise Price may be paid
either (1) in cash, (2) in shares of Stock already owned by the Nonemployee
Director who is granted an Option (including any other person entitled to
exercise the Option, the "Optionee") and to which the Optionee has good title,
free and clear of all liens and encumbrances, or partly in cash and partly in
such shares of Stock, (3) by authorizing the Company to retain whole shares of
Stock which would otherwise be issuable upon exercise of the Option having a
fair market value determined as of the date of

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exercise, (4) in cash submitted by a broker-dealer to whom the Optionee has
submitted an irrevocable notice of exercise, or (5) a combination of (1), (2)
and (3); provided that the method of paying the Exercise Price shall be in
compliance with Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder. The value of
shares delivered in payment of the Exercise Price shall be their Fair Market
Value as of the date of exercise of the Option. Payments in cash may be made by
the delivery of a check payable to the order of the Company. Subject to Section
6, upon receipt of notice and payment, the Company shall promptly issue and
deliver to the Optionee (or other person entitled to exercise the Option) a
certificate or certificates for the number of shares as to which the exercise is
made. An Option may not be exercised for fractional shares of Stock.

         5.3. Termination of Service. If the initial grantee of the Option (the
"Grantee") terminates service as a Director of the Company for any reason after
serving at least five years, the Option shall, to the extent vested, continue to
be exercisable until it terminates in accordance with Section 5.1. If the
Grantee terminates service as a Director of the Company after service for less
than five years, the Option shall, to the extent vested, continue to be
exercisable until it terminates in accordance with Section 5.1 or, if earlier,
(1) one year after the Grantee terminates service as a result of death or
disability; or (2) 90 days after the Grantee terminates service for any reason
other than death or disability. Any portion of an Option which is not vested
upon termination of service as a Director of the Company for any reason shall be
forfeited. The rights of the Nonemployee Director may be exercised by such
Director's guardian or legal representative in the case of disability or death.

         5.4. Fair Market Value. "Fair Market Value," for all purposes under the
Plan, shall mean the closing price of a share of Stock on the NASDAQ National
Market System for the date in question. If no sales of shares of Stock were made
on such date, the closing price of a share of Stock as reported for the
preceding day on which a sale of shares of Stock occurred shall be used.

    6.   Tax Withholding. The Company shall be entitled, if necessary or
desirable, to withhold from any Optionee from any amounts due and payable by the
Company to such Optionee (or secure payment from such Optionee in lieu of
withholding) the amount of any withholding or other tax due from the Optionee
with respect to any shares of Stock issuable under the Plan. The Optionee may
satisfy any withholding tax obligation by (1) a cash payment to the Company; (2)
delivery of previously-owned shares of Stock and to which the Optionee has good
title, free and clear of all liens and encumbrances; or (3) by authorizing the
Company to retain shares of Stock which would otherwise be issuable upon
exercise of the Option.

    7.  Transferability and Exercisability. Options granted under the Plan shall
not be transferable or assignable other than (1) by will or the laws of descent
and distribution; (2) by gift or other transfer to any trust or estate in which
the original option recipient or such recipient's spouse or other immediate
relative has a substantial beneficial interest, or to a spouse or other
immediate relative, provided that any such transfer is permitted by Rule 16b-3
of the Exchange Act as in effect when such transfer occurs and the Board does
not rescind this provision prior to such transfer; or (3) pursuant to a domestic
relations order (as defined by the Code). However, any Option so transferred
shall continue to be subject to all the terms and conditions contained in the
instrument evidencing such Option.

    If so permitted by the Compensation Committee, an Optionee may designate a
beneficiary or beneficiaries to exercise the rights of the Optionee and receive
any distribution under the Plan upon the death of the Optionee.

    8. Legal Requirements. Notwithstanding any other provision of the Plan,
the Company shall not be obligated to offer or sell any shares of Stock upon
exercise of an Option unless the shares to be issued upon such exercise are at
that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act") and the offer and sale
of such shares are otherwise in compliance with all applicable federal and state
securities laws and the requirements of any stock exchange or similar agency on
which the Company's securities may then be listed or quoted. The Company shall
have no obligation to register the securities covered by this Plan under the
federal securities laws or take any other steps as may be necessary to enable
the securities covered by this Plan to be offered

                                      -2-

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and sold under federal or other securities laws. Upon exercising all or any
portion of an Option, an Optionee may be required to furnish representations or
undertakings deemed appropriate by the Company to enable the offer and sale of
the shares of Stock upon exercise of the Option or subsequent transfers of any
interest in such shares to comply with the Securities Act and other applicable
securities laws. Certificates evidencing shares of Stock issued pursuant to
Options shall bear any legend required by, or useful for the purposes of
compliance with, applicable securities laws, this Plan or the agreements
evidencing the Options.

    It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act. Therefore,
if any Plan provision should be found to not be in compliance with Rule 16b-3,
that provision shall be deemed null and void, and in all events the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3.

    9. Effective Date; Duration; Suspension and Amendment. The Plan shall
become effective upon approval by the Board and the shareholders of the Company.
The Plan shall terminate automatically on the tenth anniversary of the effective
date unless terminated earlier by the Board. The Board may suspend the Plan at
any time. The Board may amend or terminate the Plan at any time, but such
amendment or termination shall not affect Options already granted and such
Options shall remain in full force and effect as if the Plan had not been
terminated. No shares of Stock shall be issued or sold under this Plan after the
termination of the Plan, except upon exercise of Options granted before
termination. Any shares of Stock authorized under Section 4 of the Plan (or any
amendment thereof) with respect to which an Option is not granted prior to
termination of the Plan, or with respect to which an Option is terminated,
forfeited or canceled after termination of the Plan, shall automatically be
transferred to any subsequent stock option plan for Nonemployee Directors of the
Company.

    10. Limitation of Rights. Neither the Plan nor the granting of any Option
hereunder shall constitute an agreement or understanding that the Company will
retain a Nonemployee Director for any period of time or at any particular rate
of compensation. The holder of an Option shall not thereby have any rights as a
stockholder until the holder receives shares of Stock upon exercise of such
Option.

    11. Unfunded Plan. Unless otherwise determined by the Compensation
Committee, the Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company and any Optionee or other person. To
the extent any person holds any rights by virtue of an Option granted under the
Plan, such rights shall be no greater than the rights of an unsecured general
creditor of the Company.

    12. Governing Law. The validity, construction and effect of the Plan and
any actions taken or relating to the Plan shall be determined in accordance with
the laws of the State of Illinois and applicable federal law.

                                      -3-Exhibit 4.3.1

                            LIGHTHOUSE HOLDINGS, INC.

                             1999 STOCK OPTION PLAN

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                            LIGHTHOUSE HOLDINGS, INC.
                             1999 STOCK OPTION PLAN
                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I......................................................................4

ARTICLE II.....................................................................4

ARTICLE III....................................................................8
         3.1 Committee Structure...............................................8
         3.2 Committee Authority...............................................8

ARTICLE IV....................................................................10
         4.1 Number of Shares.................................................10
         4.2 Release of Shares................................................10
         4.3 Restrictions on Shares...........................................10
         4.4 Stockholder Rights...............................................10
         4.5 Anti-Dilution....................................................11
         4.6 No Registration Rights...........................................11

ARTICLE V.....................................................................11

ARTICLE VI....................................................................12
         6.1 General..........................................................12
         6.2 Grant............................................................12
         6.3 Terms and Conditions.............................................12
         6.4 Exercisability...................................................14
         6.5 Cashing Out of Option............................................16

ARTICLE VII...................................................................16
         7.1 Transfer of Shares...............................................16
         7.2 Limited Transfer During Offering.................................17
         7.3 Committee Discretion.............................................17
         7.4 No Company Obligation............................................17

ARTICLE VIII..................................................................17

ARTICLE IX....................................................................18
         9.1 Amendments and Termination.......................................18
         9.2 Unfunded Status of Plan..........................................19
         9.3 General Provisions...............................................19
         9.4 Mitigation of Excise Tax.........................................20
         9.5 Rights with Respect to Continuance of Employment.................20
         9.6 Options in Substitution for Options Granted by Other Corporations20
         9.7 Procedure for Adoption...........................................21
         9.8 Procedure for Withdrawal.........................................21
         9.9 Withholding......................................................21
         9.10 Delay...........................................................21
         9.11 Headings........................................................21
         9.12 Severability....................................................21
         9.13 Successors and Assigns..........................................22
         9.14 Entire Option Agreement.........................................22
         9.15 Other Company Plans.............................................22

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                            LIGHTHOUSE HOLDINGS, INC.

                             1999 STOCK OPTION PLAN

                                    ARTICLE I

                                  ESTABLISHMENT

         The  Lighthouse  Holdings,  Inc.  1999  Stock  Option  Plan  is  hereby
established  by  Lighthouse  Holdings,  Inc. to promote  its  overall  financial
objectives by allowing certain directors,  officers, employees and other persons
to  participate  in its long-term  growth.  This Plan and the grant of Incentive
Stock Options hereunder is expressly  conditioned upon the approval of this Plan
by the holders of a majority of the Company's  stock entitled to vote on matters
submitted to the Company's  shareholders to the extent  required,  and solely to
insure that any Incentive  Stock Option granted  hereunder will qualify as such.
This Plan is adopted by the Company effective as of [January 1, 1999].

                                   ARTICLE II

                                   DEFINITIONS

         For purposes of this Plan, the following terms are defined as set forth
below:

         "Affiliate"  means,  with  respect  to  the  Company,  any  individual,
corporation,    partnership,    association,    joint-stock   company,    trust,
unincorporated  association  or other entity that (i) directly or  indirectly is
controlled by, controls or is under common control with the Company or (ii) from
time to time is otherwise designated as an "Affiliate" for purposes hereunder by
the Committee.

         "Board"  means the Board of Directors  of the Company or the  Executive
Committee thereof.

         "Cause"  means any act or  omission  that  permits  the  Company  or an
Affiliate to terminate a written agreement or arrangement  between a Participant
and the Company or such  Affiliate  for "cause" as defined in such  agreement or
arrangement,  or if there is no such agreement or arrangement (or "cause" is not
defined  therein),  then Cause shall mean any act or omission (i) that  violates
the Company's or an Affiliate's  established  practices,  policies or guidelines
applicable  to  a  Participant,   (ii)  that  constitutes   willful  misconduct,
dishonesty or fraud, (iii) that constitutes  competing with the Company,  either
directly or indirectly,  including accepting employment with a competitor of the
Company within three (3) months of termination of Participant's  employment with
the Company for any reason or (iv) that is  materially  detrimental  to the best
interests  of the  Company  or any  Affiliate.  The  determination  of Cause for
purposes of this Plan shall be made in the sole and absolute  discretion  of the
Committee  and shall not be  construed to be an admission of cause for any other
purpose.

         "Code"  means the  Internal  Revenue  Code of 1986,  as amended,  final
Treasury Regulations thereunder and any subsequent Internal Revenue Code.

         "Commission"  means  the  Securities  and  Exchange  Commission  or any
successor agency.

         "Committee"  means the  person  or  persons  appointed  by the Board to
administer this Plan, as further described in Section 3.1 below.

         "Common Stock" means shares of the Company's Class B Non-Voting  Common
Stock, $0.0001 par value, whether presently or hereafter issued, any other stock
or security  resulting from adjustment thereof as described in Section 4.5 below
or the common stock of any  successor to the Company that is  designated  by the
Committee as "Common Stock" for the purpose of this Plan.

         "Company" means Lighthouse Holdings, Inc., a Delaware corporation,  any
successor or assignee  corporation or corporations into which the Company may be
merged,  changed or  consolidated,  any  corporation  for whose  securities  the
securities of the Company shall be exchanged, or any assignee of or successor to
substantially all of the assets of the Company.

         "Disability"  means  any  situation  that  permits  the  Company  or an
Affiliate to terminate a written agreement or arrangement  between a Participant
and the  Company  or such  Affiliate  due to  "disability"  as  defined  in such
agreement or  arrangement,  or if there is no such agreement or arrangement  (or
"disability" is not defined therein), then Disability shall mean (i) a mental or
physical  illness that entitles the  Participant  to receive  benefits under any
long term  disability  plan of the  Company  or any  Affiliate  under  which the
Participant  is  covered or (ii) a mental or  physical  illness  that  renders a
Participant  totally and permanently  incapable of performing the  Participant's
duties  for the  Company  or an  Affiliate.  Notwithstanding  the  foregoing,  a
Disability  shall  not  qualify  under  this  Plan if it is the  result of (a) a
willfully  self-inflicted injury or willfully  self-induced  sickness, or (b) an
injury or disease contracted,  suffered,  or incurred,  while participating in a
criminal  offense.  The  determination  of Disability  for purposes of this Plan
shall be made in the sole and absolute discretion of the Committee and shall not
be construed to be an admission of disability for any other purpose.

         "Exchange Act" means the  Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

         "Fair  Market  Value"  means the average of the  closing  prices of the
sales of the Company's  common stock on all  securities  exchanges on which such
common  stock may at the time be listed,  or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such  exchanges  at the end of such day,  or,  if on any day such  common
stock is not so listed,  the average of the  representative bid and asked prices
quoted in the  NASDAQ  System as of 4:00 p.m.,  New York time,  or if on any day
such common stock is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic  over-the-counter market
as reported  by the  National  Quotation  Bureau,  Incorporated,  or any similar
successor  organization,  in  each  such  case  averaged  over  a  period  of 21
consecutive  business  days  consisting  of the day as of which the Fair  Market
Value is being  determined  and the 20  consecutive  business days prior to such
day.  If at any time the  Company's  shares  are not listed on any  exchange  or
quoted in the NASDAQ  System or the  over-the-counter  market,  the Fair  Market
Value will be the fair value of such common stock  determined  in the good faith
judgment of the Board. Such  determination of the fair value of the common stock
shall be made without  giving effect to any discount for lack of  liquidity,  or
any premium or discount  for the ability or lack  thereof of a holder to control
or  exert  a  controlling   influence  on  the  affairs  of  the  Company.  Such
determination also shall assume that all options,  warrants and other securities
exchangeable  for,  convertible into or exercisable  for, the Company's  capital
stock have been so exchanged, converted or exercised.

         "Incentive Stock Option" means any Option intended to be and designated
as an "incentive stock option" within the meaning of Section 422 of the Code.

         "Nonqualified  Stock  Option"  means any Option other than an Incentive
Stock Option.

         "Option"  means  an  option  granted  under  this  Plan  and an  Option
Agreement, as more particularly described in Article VI below.

         "Option Agreement" means any and all agreement(s) entered into pursuant
to this Plan pursuant to which an Option is granted to a Participant.

         "Option  Period"  means the period  during which the Option shall be or
become  exercisable  in accordance  with an Option  Agreement  and/or Article VI
below.

         "Option  Price"  means the price at which Common Stock may be purchased
upon the exercise of an Option as provided in an Option Agreement and subject to
Section 6.3 below.

         "Participant"   means  (i)  a  person  who  satisfies  the  eligibility
conditions  of  Article V below and to whom an Option  has been  granted  by the
Committee under this Plan, (ii) an appointed  Representative of a Participant or
former  spouse,  (iii)  a  trust  for  the  benefit  of  the  Participant,   the
Participant's  parents,  spouse  or  descendants,  or (iv) a  custodian  under a
uniform  gifts  to  minors  act  or  similar  statute  for  the  benefit  of the
Participant's descendants, in each case to the extent permitted by the Committee
and  consistent  with  Rule  16b-3.  Notwithstanding  the  foregoing,  the  term
"Termination  of  Employment"  shall mean the  Termination  of Employment of the
original Participant and not such Representative, trust or custodian.

         "Plan" means the  Lighthouse  Holdings,  Inc. 1999 Stock Option Plan as
herein set forth and as may be amended from time to time.

         "Public  Offering"  means the initial public  offering of shares of the
Company's common stock under the Securities Act.

         "Representative"  means (i) the person or entity lawfully acting as the
executor or administrator of a Participant's  estate,  (ii) the person or entity
lawfully  acting as the guardian or temporary  guardian of a Participant,  (iii)
the person or entity that is the beneficiary of a Participant  upon or following
such  Participant's  death,  or (iv)  any  person  to whom an  Option  has  been
permissibly  transferred  pursuant to a domestic relations order;  provided that
only one of the  foregoing  shall be a  Representative  at any  point in time as
determined  under  applicable law and as recognized by the Committee in its sole
and absolute discretion.

         "Rule 16b-3" means Rule 16b-3,  as promulgated  under the Exchange Act,
as amended from time to time, or any successor thereto.

         "Securities Act" means the Securities Act of 1933, as amended,  and the
rules and regulations promulgated thereunder.

         "Subsidiary"  means any person or entity of which  securities  or other
ownership  interests  representing more than 50% of the ordinary voting power or
equity  interests of such person or entity are at the time owned or  controlled,
directly or indirectly, by the Company.

         "Termination  of Employment"  means the occurrence of any act or event,
whether pursuant to a written employment  agreement or otherwise,  that actually
or  effectively  causes  or  results  in a  person  ceasing  to be  an  officer,
independent contractor, director or employee of the Company or of any Affiliate,
or to be an officer, independent contractor,  director or employee of any entity
that  provides  services to the  Company or any  Affiliate,  including,  without
limitation,  death, Disability,  dismissal with or without Cause or resignation.
In addition,  Termination  of  Employment  shall be deemed to have occurred with
respect to an employee of an  Affiliate if such  Affiliate  shall cease to be an
Affiliate  and the  Participant  shall  not  immediately  thereafter  become  an
employee of the Company or another Affiliate.

         In addition,  certain other terms used herein have definitions given to
them in the first place in which they are used.

                                   ARTICLE III

                                 ADMINISTRATION

         3.1 Committee Structure. This Plan shall be administered by a Committee
comprised  of three or more  members  of the  Board  (or such  other  number  as
determined  by the Board),  at least one of which  shall be the Chief  Executive
Officer of the  Company for so long as he or she shall be a member of the Board.
On and after a Public Offering,  the Committee shall be comprised of such number
of  "disinterested  persons" as is  necessary to meet the  requirements  of Rule
16b-3  and such  number  of  "outside  directors"  as is  necessary  to meet the
requirements  of Section 162(m) of the Code. A member of the Committee shall not
be eligible to receive any grant of an Option  hereunder,  or any grant or award
of any equity  securities  pursuant to any other plan of the Company or any plan
of an Affiliate,  for one year prior to, during and for one year  following such
member's service on the Committee, unless the grant of such Option and the terms
and  conditions  thereof  shall be  approved by a majority of the members of the
full Board meeting the criteria set forth in the immediately preceding sentence.
A member of the Committee  shall not exercise any discretion  respecting  awards
to, or decisions affecting,  himself or herself under this Plan. At all meetings
of the Committee, members entitled to cast a majority of the votes of the entire
Committee shall  constitute a quorum for the transaction of business and the act
of members  entitled to cast a majority  of the votes  present at any meeting at
which there is a quorum shall be the act of the Committee.  The Committee  shall
in all respects be subject to the provisions of the Company's  charter documents
and bylaws  pertaining  to  committees  of the Board.  The  Committee may be the
Compensation Committee, or any other committee, of the Board, provided that such
committee otherwise meets the criteria set forth for the Committee hereunder.

         3.2  Committee  Authority.  Subject to Section  3.1 above and the other
terms of this Plan, the Committee shall have the authority,  among other things,
to:

         (i) select  those  persons to whom  Options may be granted from time to
time;

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

         (iii) determine the amount of Common Stock underlying an Option;

         (iv) determine the terms and conditions of any Option  (including,  but
not limited to, the Option Period, the amount, form and manner of payment of the
Option  Price,   any  exercise   restriction  or  limitation  and  any  exercise
acceleration,  forfeiture  or waiver  regarding  any Option  and the  underlying
Common Stock);

         (v) adjust the terms and conditions,  at any time or from time to time,
of any Option or Option  Agreement,  subject to the  limitations  of Section 9.1
below;

         (vi) determine what securities law  requirements are applicable to this
Plan,  the Options  and the  issuance  of Common  Stock upon the  exercise of an
Option and to require that  appropriate  action be taken by a  Participant  with
respect to such requirements;

         (vii) cancel outstanding  Options,  with the consent of the Participant
or as otherwise provided in this Plan or an Option Agreement;

         (viii)  require  as a  condition  of the  exercise  of an Option or the
issuance  or  transfer  of  underlying  Common  Stock,  the  withholding  from a
Participant  of the  amount  of any  federal,  state  or  local  taxes as may be
necessary  in order for the Company or any other  employer to obtain a deduction
or as may be otherwise required by law;

         (ix) determine  whether and with what effect an individual has incurred
a Termination of Employment;

         (x)  determine  whether the Company or any other  person has a right or
obligation to purchase  Common Stock or Options from a  Participant  and, if so,
the terms and conditions of such purchase;

         (xi)  determine  the  restrictions  or  limitations  on the transfer of
Common Stock issued upon exercise of an Option; and

         (xii) to appoint  and  compensate  agents,  counsel,  auditors or other
specialists to aid it in the discharge of its duties hereunder.

         The Committee shall have the authority to adopt,  alter and repeal such
administrative rules,  guidelines and practices governing this Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of this
Plan and any Option  issued  under this Plan (and any Option  Agreement)  and to
otherwise  supervise the  administration of this Plan. The Committee's  policies
and procedures may differ with respect to Options granted at different times.

         Unless otherwise  specifically  provided herein, any determination made
by the  Committee  pursuant to the  provisions of this Plan shall be made in its
sole and absolute discretion,  and in the case of any determination  relating to
an  Option,  may be made at the time of the grant of the  Option  or,  unless in
contravention  of any express term of this Plan or an Option  Agreement,  at any
time thereafter.  All decisions made by the Committee pursuant to the provisions
of this Plan shall be final and binding on all persons,  including  the Company,
Affiliates and Participants.  Any determination  shall not be subject to de novo
review if challenged in court.

                                   ARTICLE IV

                            STOCK UNDERLYING OPTIONS

         4.1 Number of Shares.  Subject to  adjustment  under Section 4.5 below,
the total amount of Common Stock  reserved and available for  distribution  upon
the exercise of Options granted under this Plan shall be Three Hundred  Thousand
(300,000)  shares,  which shares will have been authorized for issuance upon the
approval of this Plan by the Company's shareholders. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.

         4.2 Release of Shares. If any Common Stock previously issuable upon the
exercise of an Option  ceases to be subject to such Option,  if any Common Stock
subject to any Option is forfeited,  if any Option otherwise  terminates without
the  issuance of any Common Stock being made to a  Participant  or if any shares
(whether  or not  restricted)  of Common  Stock are  received or retained by the
Company in  connection  with the  exercise  of and as  payment  for an Option or
pursuant to a repurchase  right of the Company set forth in an Option  Agreement
or  otherwise,  then any and all such  Common  Stock,  in the sole and  absolute
discretion of the Committee,  again may be made available for distribution  upon
the exercise of Options granted under this Plan.

         4.3  Restrictions  on Shares.  Common Stock issued upon  exercise of an
Option shall be subject to the terms and conditions specified herein and to such
other  terms,  conditions  and  restrictions  as the  Committee  in its sole and
absolute  discretion  may  determine  or provide in the  Option  Agreement.  The
Company  shall not be required to issue or deliver any  certificates  for Common
Stock,  cash  or  other  property  upon  exercise  of  an  Option  unless  (i) a
registration  statement  under the  Securities  Act is effective with respect to
such  issuance  or  delivery  or, in the  opinion of counsel  acceptable  to the
Committee,  an  exemption  under the  Securities  Act with  respect  thereto  is
available and (ii) any applicable  withholding  obligation is satisfied in order
for the  Company  or an  Affiliate  to obtain a  deduction  with  respect to the
exercise of an Option. The Company may cause any certificate representing Common
Stock to be  properly  marked  with a legend or other  notation  reflecting  the
limitations  on transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any person exercising
an Option to make such  representations,  take such  actions  and  furnish  such
information as it may consider  appropriate  in connection  with the issuance or
delivery of the Common  Stock in  compliance  with  applicable  law or otherwise
including,  without limitation,  becoming  signatories to the Investor Agreement
dated as of October 6, 1998 among the Company  and certain of its  stockholders,
and any other  agreements  among  the  Company's  investors  the  Committee  may
require.

         4.4  Stockholder   Rights.  No  person  shall  have  any  rights  of  a
stockholder as to Common Stock  underlying an Option until such Common Stock has
been  recorded  on the  Company's  official  stockholder  records as having been
issued or  transferred.  Subject to Section 4.3 above,  the  Company  will issue
Common Stock upon exercise of an Option within thirty (30) days  following  such
exercise  and the  Participant  will not be  treated  as a  stockholder  for any
purpose whatsoever prior to such issuance.  No adjustment shall be made for cash
dividends or other rights with respect to Common Stock if the applicable  record
date is prior to the date such Common Stock is recorded as issued or transferred
in the Company's official stockholder  records,  except as provided herein or in
an Option Agreement.

         4.5  Anti-Dilution.  In the event of (i) any  Company  stock  dividend,
stock split, combination or exchange of shares, recapitalization or other change
in the capital structure of the Company, corporate separation or division of the
Company  (including,  but not  limited to, a split-up,  spin-off,  split-off  or
distribution to Company  stockholders  other than a normal cash dividend),  (ii)
the sale by the Company of all or a substantial  portion of its assets (measured
on either a stand-alone or consolidated basis),  (iii) a reorganization,  rights
offering,  partial  or  complete  liquidation,   or  (iv)  any  other  corporate
transaction, Company stock offering or event involving the Company and having an
effect  similar  to  any  of  the  foregoing,  the  Committee  shall  adjust  or
substitute,  as the case may be, the Common  Stock  available  upon  exercise of
Options  to be  granted  hereunder,  the  Common  Stock  underlying  outstanding
Options,  the Option Price of outstanding Options and any other  characteristics
or terms of the Options as the Committee  shall deem necessary or appropriate to
account equitably for the effects of such changes to the Participants (including
the making of  distributions of property and/or cash to holders of Options as if
they had exercised  those Options that they would have been entitled to exercise
at the time of such distribution).

         4.6 No Registration Rights.  Unless otherwise  specifically provided in
an Option  Agreement,  no  registration  rights are granted  with respect to any
Common Stock which may be received pursuant to the exercise of an Option granted
under this Plan.

                                    ARTICLE V

                                   ELIGIBILITY

         Except as herein provided, officers, directors, employees,  independent
contractors  or  other  service  providers  of  the  Company  or  any  Affiliate
including,  without  limitation,  the  officers,  directors and employees of any
other entity which provides services to the Company or any Affiliate,  who shall
be in a position, in the opinion of the Committee,  to make contributions to the
growth,  management,  protection  and success of the Company and its  Affiliates
shall be  eligible  to  participate  in this Plan.  In making any  selection  of
persons to be granted Options and in determining  the terms of the Options,  the
Committee may give  consideration to the functions and  responsibilities  of the
person's  contribution  to the  Company  and its  Affiliates,  the  value of the
individual's  service to the Company and its  Affiliates  and such other factors
deemed  relevant  by the  Committee.  The  Committee,  in its sole and  absolute
discretion,  from  time to time may  designate  persons  otherwise  eligible  to
participate in this Plan as ineligible to so participate.

                                   ARTICLE VI

                                     OPTIONS

         6.1 General.  The Committee may grant Options at any time and from time
to time,  alone or in  addition  to other  Options,  as either  Incentive  Stock
Options or Nonqualified  Stock Options.  An Option shall entitle the Participant
to  receive  Common  Stock  upon  exercise  of  such  Option,   subject  to  the
Participant's   satisfaction  in  full  of  any   conditions,   restrictions  or
limitations  imposed in accordance  with this Plan or an Option  Agreement  (the
terms  and  provisions  of  which  may  differ  from  other  Option  Agreements)
including,  without  limitation,  the form and  manner of  payment of the Option
Price.  At no time shall any one Participant  hold Options  exercisable for more
than thirty  percent (30%) of the total Common Stock  reserved  pursuant to this
Plan for issuance upon exercise of Options.

         6.2  Grant.  The grant of each  Option  shall  occur as of the date the
Committee  determines  and  be  evidenced  by  an  Option  Agreement  in a  form
determined by the Committee, which shall embody the terms and conditions of such
Option and which shall be subject to the express terms and  conditions set forth
in this Plan.  Only a person who is a  common-law  employee  of the Company or a
subsidiary of the Company (as such terms are defined in Section 424 of the Code)
on the date of grant shall be eligible to be granted an Option which is intended
to be and is an  Incentive  Stock  Option.  To the extent that any Option is not
designated  as an  Incentive  Stock  Option  or even if so  designated  does not
qualify as an Incentive Stock Option,  it shall constitute a Nonqualified  Stock
Option.  Notwithstanding  anything in this Plan to the contrary, no term of this
Plan  relating to  Incentive  Stock  Options  shall be  interpreted,  amended or
altered,  nor shall any  discretion  or  authority  granted  under  this Plan be
exercised,  so as to  disqualify  this Plan  under  Section  422 of the Code or,
without the consent of the  Participant  affected,  to disqualify  any Incentive
Stock  Option  under  such  Section  422.  No  Options  shall  be  granted  to a
Participant  during any calendar year, if the Committee  believes Section 162(m)
of the Code may be  applicable to such  Participant  and if the exercise of such
Options would result in a loss of deductions under Section 162(m) of the Code.

         6.3 Terms and  Conditions.  Options  shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:

              (i) Option Period. The Option Period of each Option shall be fixed
by the Committee provided that no Nonqualified Stock Option shall be exercisable
for more than ten (10) years after the date the Option is  granted.  In the case
of an Incentive Stock Option, the Option Period shall not exceed (10) years from
the date of  grant  or,  in the case of an  individual  who owns  more  than ten
percent  (10%) of the  combined  voting  power of all stock of the  Company or a
corporation which is a parent corporation or any subsidiary of the Company (each
as defined in Section  424 of the Code),  five (5) years from the date of grant.
No Option shall be granted more than ten (10) years from the  effective  date of
this Plan.

              (ii) Option  Price.  The Option Price shall be  determined  by the
Committee.  If such Option is intended to qualify as an Incentive  Stock Option,
the  Option  Price per share  shall be not less than the Fair  Market  Value per
share on the date the Option is granted,  or where granted to an individual  who
owns or who is deemed to own stock possessing more than ten percent (10%) of the
combined  voting power of all stock of the Company or a  corporation  which is a
parent  corporation or any subsidiary of the Company (each as defined in Section
424 of the Code),  not less than one  hundred  ten  percent  (110%) of such Fair
Market Value per share.

              (iii)  Exercise.  Subject to Section 6.4 and  Article  VIII below,
Options shall be exercisable at such time or times and subject to such terms and
conditions  as shall be determined  by the  Committee.  The Committee may at any
time accelerate the  exercisability of any Option.  Exercises of Options held by
Participants  who are actually or  potentially  subject to Section  16(b) of the
Exchange Act shall comply with the "window period"  provisions of Rule 16b-3, to
the extent applicable.

              (iv) Method of Exercise. Subject to the provisions of this Article
VI, a Participant may exercise Options,  in whole or in part, at any time during
the Option  Period by the delivery to the Company of written  notice,  in a form
satisfactory  to the  Committee.  Such notice shall be accompanied by payment in
full of the  Option  Price by cash or check or such other form of payment as the
Company may accept. If approved by the Committee, payment in full or in part may
also be made (a) by delivering  Common Stock  already  owned by the  Participant
having a total  Fair  Market  Value on the  date of such  delivery  equal to the
Option Price;  (b) by the execution and delivery of a note or other  evidence of
indebtedness  (and  any  security  agreement  thereunder)  satisfactory  to  the
Committee  and  permitted  in  accordance  with  Section  6.3(v)  below;  (c) by
authorizing the Company to retain Common Stock which would otherwise be issuable
upon  exercise  of the Option  having a total Fair  Market  Value on the date of
delivery equal to the Option Price; (d) by the delivery of cash or the extension
of credit by a  broker-dealer  to whom the Participant has submitted a notice of
exercise or otherwise indicated an intent to exercise an Option (in each case in
accordance  with  Part  220,  Chapter  II,  Title  12 of  the  Code  of  Federal
Regulations,  so-called "cashless  exercise");  or (e) by any combination of the
foregoing.  In the case of an Incentive Stock Option,  the payment of the Option
Price in the form of already owned shares of Common Stock may be authorized only
at the time the Option is granted.  No Common  Stock shall be issued  until full
payment therefor has been made.

              (v) Company Loan or Guarantee. Upon the exercise of any Option and
subject to the pertinent Option  Agreement and the sole and absolute  discretion
of the Committee, the Company may at the request of the Participant:

         (a)      lend to the  Participant,  with  recourse,  an amount equal to
                  such  portion  of  the  Option  Price  as  the  Committee  may
                  determine; or

         (b)      guarantee  a  loan   obtained  by  the   Participant   from  a
                  third-party for the purpose of tendering the Option Price.

The terms and conditions of any loan or guarantee,  including the term, interest
rate,  and  any  security  interest  thereunder,  shall  be  determined  by  the
Committee,  except that no extension of credit or guarantee  shall  obligate the
Company  for an amount to exceed the  lesser of (x) the  aggregate  Fair  Market
Value of the Common Stock on the date of exercise  less the  aggregate par value
of the Common Stock to be purchased upon the exercise of the Option,  or (y) the
amount  permitted  under  applicable  laws or the  regulations  and rules of the
Federal Reserve Board and any other governmental agency.

              (vi)  Non-transferability of Options. Except as provided herein or
in an Option Agreement, no Option shall be transferable by the Participant other
than by will or by the laws of descent and  distribution,  and all Options shall
be exercisable during the Participant's lifetime only by the Participant. If the
Committee adopts Securities Exchange Act Release 34-28869 of the Commission, the
Committee  may  permit  an  Option  to be  transferred  pursuant  to a  domestic
relations order which would be a "qualified domestic relations order" as defined
in Section 414 of the Code if such  Section 414 applied to the Option,  but only
to the extent  consistent with an Option's intended status as an Incentive Stock
Option.   If  the  Common   Stock  is  publicly   traded,   and  to  the  extent
transferability  is  permitted  by Rule 16b-3 and except as  otherwise  provided
herein or by an Option Agreement, every Option granted hereunder shall be freely
transferable but only if such transfer is exempt under Rule 16b-3.

         6.4      Exercisability.

              (i) Vesting.  Unless terminated or accelerated as set forth herein
or in an Option  Agreement,  Options shall be exercisable in accordance with the
following schedule:

                                                         Percentage of an Option
Grant Date Anniversary                                         Exercisable

Prior to the first anniversary                                      0%
of the date of grant

On or after the first anniversary                                  20%
of the date of grant

On or after the second anniversary                                 40%
of the date of grant

On or after the third anniversary                                  60%
of the date of grant

On or after the fourth anniversary                                 80%
of the date of grant

On or after the fifth anniversary                                 100%
of the date of grant

Notwithstanding the foregoing,  Options will not be deemed to be Incentive Stock
Options to the extent that the Fair Market Value of the Options  exercisable for
the first time by a Participant during any calendar year under the Plan (and all
plans of the Company or any Subsidiary) exceed $100,000.

         [Discuss  acceleration on (i) death or Disability,  (ii) Approved Sale,
(iii) Termination of Employment without Cause or (iv) Public Offering]

              (ii) Termination by Reason of Death.  Unless otherwise provided in
an Option  Agreement or determined by the Committee,  if a Participant  incurs a
Termination  of Employment  due to death,  then any  unexpired  and  unexercised
Option held by such Participant shall thereafter be exercisable (but only to the
extent such Option is otherwise exercisable on the date of death) only until the
earlier of (a) the six month  anniversary of the date of such death,  or (b) the
expiration of the Option Period.

              (iii)  Termination  by  Reason  of  Disability.  Unless  otherwise
provided in an Option Agreement or determined by the Committee, if a Participant
incurs a Termination of Employment  due to a Disability,  then any unexpired and
unexercised   Option  held  by  such  Participant   shall  thereafter  be  fully
exercisable (but only to the extent such Option is otherwise  exercisable on the
date of  determination  of Disability) by the Participant only until the earlier
of (a) the six month anniversary of the date of determination of Disability,  or
(b) the  expiration  of the Option  Period.  A  Participant's  death at any time
following a  Termination  of Employment  due to Disability  shall not affect the
foregoing.  If, upon  Termination  of  Employment  by reason of  Disability,  an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code,  such Option will thereafter
be treated as a Nonqualified Stock Option.

              (iv) Other  Termination.  Unless  otherwise  provided in an Option
Agreement or determined by the Committee,  if a Participant incurs a Termination
of  Employment  due to  dismissal of the  Participant  without  Cause,  then any
unexpired and unexercised  Option held by such  Participant  shall thereafter be
fully  exercisable (but only to the extent such Option is otherwise  exercisable
on  the  date  of  determination  of  such  Termination  of  Employment)  by the
Participant  only until the  earlier of (a) the three month  anniversary  of the
date of Termination of Employment or (b) the expiration of the Option Period. If
the Participant  incurs a Termination of Employment that is either  voluntary on
the part of the Participant or is due to a dismissal of Participant  with Cause,
the Option (whether vested or unvested) shall terminate  immediately and, to the
extent not exercised prior to such Termination of Employment, shall no longer be
exercisable in whole or in part. The death or Disability of a Participant  after
a Termination of Employment otherwise provided in this subsection (iv) shall not
extend  the time  otherwise  permitted  to  exercise  an Option  or  affect  the
termination of an Option.

         6.5 Cashing Out of Option.  On receipt of written  notice of  exercise,
the  Committee  may elect to cash out all or any part the Option to be exercised
by paying the  Participant  an  amount,  in cash or Common  Stock,  equal to the
excess of the Fair  Market  Value of the  Common  Stock  that is  subject to the
exercise  over the Option  Price of such  Common  Stock.  Cash outs  relating to
Options held by Participants who are actually or potentially  subject to Section
16(b) of the Exchange Act shall comply with the "window  period"  provisions  of
Rule 16b-3, to the extent applicable.

                                   ARTICLE VII

              PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER OPTIONS

         7.1 Transfer of Shares. The Common Stock received pursuant to an Option
shall at all times be subject to those transfer and repurchase  restrictions set
forth in the Option  Agreement and  otherwise set forth herein;  provided that a
Participant may at any time make a transfer of Common Stock received pursuant to
the exercise of an Option to his or her parents, spouse or descendants or to any
trust for the benefit of the  foregoing or to a custodian  under a uniform gifts
to minors act or similar  statute  for the  benefit of any of the  Participant's
descendants.  Any transfer of Common Stock received  pursuant to the exercise of
an Option shall not be permitted or valid unless and until the transferee agrees
to be bound by the provisions of this Plan, and any provision  respecting Common
Stock under the Option  Agreement,  provided that  "Termination  of  Employment"
shall  continue  to refer  to the  Termination  of  Employment  of the  original
Participant.

         7.2  Limited  Transfer  During  Offering.  If  there  is  an  effective
registration  statement  under the Securities Act pursuant to which Common Stock
shall be offered for sale in an underwritten  offering, a Participant shall not,
during the period requested by the underwriters  managing the registered  public
offering,  effect any public sale or distribution of shares received directly or
indirectly pursuant to an exercise of an Option.

         7.3  Committee  Discretion.  The Committee may in its sole and absolute
discretion  include in any  Option  Agreement  an  obligation  that the  Company
purchase a  Participant's  Common Stock  received upon the exercise of an Option
(including the purchase of any unexercised  Options which have not expired),  or
may obligate a  Participant  to sell Common Stock to the Company upon such terms
and  conditions  as the  Committee  may  determine  in  its  sole  and  absolute
discretion and set forth in an Option Agreement.  The provisions of this Article
VII shall be construed by the Committee in its sole and absolute discretion, and
shall be subject to such other terms and  conditions  as the  Committee may from
time  to time  determine.  Notwithstanding  any  provision  in this  Plan to the
contrary, upon determination by the Committee,  the Company may assign its right
to purchase Common Stock pursuant to this Article VII, whereupon the assignee of
such right shall have all the rights, duties and obligations of the Company with
respect to purchase of Common Stock.

         7.4 No Company Obligation.  None of the Company, any Affiliate,  or the
Committee  shall have any duty or  obligation  to  affirmatively  disclose  to a
record or beneficial holder of Common Stock or an Option,  and such holder shall
have no right to be advised of, any material  information  regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Option or the  Company's  purchase  of Common  Stock or an Option
from such holder in accordance with the terms hereof.

                                  ARTICLE VIII

                                  APPROVED SALE

         Upon the  consummation  of an  Approved  Sale (as defined  below),  any
unexpired and  unexercised  Options [shall be immediately  vested,  and], to the
extent  not  exercised  as of the  consummation  of the  Approved  Sale,  may be
repurchased by the Company in connection  with such Approved Sale. The amount to
be paid for the  repurchase  of such  Options  shall be equal to the  difference
resulting from  subtracting  the Option Price from the price per share of Common
Stock the  Participant  would have  received in the Approved Sale if such Option
had been  exercised  prior to the  Approved  Sale,  multiplied  by the number of
Options repurchased.  In addition,  the form and timing of such payment shall be
the same as the  Participant  would have  received in the Approved  Sale if such
Options had been exercised prior to the Approved Sale.

         In the event of an  Approved  Sale of the  Company,  Participant  shall
consent to and raise no objection to the Approved Sale, and if the Approved Sale
is structured as a sale of stock, if required,  Participant  shall agree to sell
the Option  Shares  (and all other  shares of the  capital  stock of the Company
owned by  Participant)  on the  terms  and  conditions  approved  by the  Board.
Participant  shall take all necessary and desirable  actions in connection  with
the  consummation  of the Approved  Sale. The  obligations  of Participant  with
respect to an Approved  Sale are subject to the  satisfaction  of the  following
condition:  upon the  consummation  of the Approved  Sale, all holders of Common
Stock will receive the same form and amount of consideration per share of Common
Stock,  or if any such holders in their  capacity as holders of Common Stock are
given an option as to the form and amount of consideration  to be received,  all
holders  will be given the same  option.  Participant  and any other  holders of
shares of Common  Stock shall bear their pro rata share  (based on the number of
shares sold) of the costs of any sale of shares of Common  Stock  pursuant to an
Approved  Sale to the extent  such  costs are  incurred  for the  benefit of all
holders  of  Common  Stock  and are not  otherwise  paid by the  Company.  Costs
incurred by holders of Common Stock (including  Participant) on their own behalf
will  not be  considered  costs  of a  transaction  hereunder.  As used  herein,
"Approved  Sale" means a Change in Control or Fundamental  Change (as such terms
are defined in the Company's Amended and Restated  Certificate of Incorporation)
that is approved by the Board.

                                   ARTICLE IX

                                  MISCELLANEOUS

         9.1  Amendments  and  Termination.  The  Board  may  amend,  alter,  or
discontinue   this  Plan  at  any  time,   but  no   amendment,   alteration  or
discontinuation  shall be made that would (i) impair the rights of a Participant
under a Option theretofore granted without the Participant's consent,  except to
the extent such an amendment  would cause this Plan to qualify for the exemption
provided by Rule 16b-3 or (ii) disqualify this Plan from the exemption  provided
by Rule 16b-3. In addition, no such amendment shall be made without the approval
of a majority  of the  Company's  stockholders  to the extent  such  approval is
required by law or agreement.

         The  Committee  may amend  this Plan at any time  provided  that (a) no
amendment  shall  impair  the  rights  of  any  Participant   under  any  Option
theretofore  granted without the Participant's  consent,  (b) no amendment shall
disqualify  this Plan from the  exemption  provided by Rule  16b-3,  and (c) any
amendment shall be subject to the approval or rejection of the Board.

         The  Committee  may amend the terms of any Option or Option  Agreement,
provided  that no such  amendment  shall  impair the  rights of any  Participant
without the Participant's  consent,  except an amendment made to cause this Plan
or an Option to qualify for the exemption  provided by Rule 16b-3. The Committee
may also  substitute  new  Options for  previously  granted  Options,  including
previously granted Options having higher Option Prices, but no such substitution
shall be made that would  impair the rights of  Participants  under such  Option
theretofore granted without the Participant's consent.

         Subject to the above  provisions,  the Board  shall have  authority  to
amend  this  Plan to take into  account  changes  in law and tax and  accounting
rules,  as well as other  developments  and to grant  Options  which qualify for
beneficial treatment under such rules without stockholder approval.

         9.2  Unfunded  Status  of Plan.  It is  intended  that  this Plan be an
"unfunded"  plan for  incentive  and deferred  compensation.  The  Committee may
authorize the creation of trusts or other  arrangements  to meet the obligations
created  under this Plan to deliver  Common Stock or make  payments;  so long as
(unless the  Committee  otherwise  determines)  the  existence of such trusts or
other arrangements is consistent with the "unfunded" status of this Plan.

         9.3      General Provisions.

              (i)   Representation.   The  Committee  may  require  each  person
purchasing or receiving  shares  pursuant to an Option to represent to and agree
with the Company in writing that such person is acquiring  the shares  without a
view to the distribution or transfer  thereof.  The certificates for such shares
may include any legend  which the  Committee  deems  appropriate  to reflect any
restrictions on transfer.

              (ii) No  Additional  Obligation.  Nothing  contained  in this Plan
shall  prevent the Company or an Affiliate  from  adopting  other or  additional
compensation  arrangements  for its  employees,  directors  or other  persons or
entities eligible to participate in this Plan.

              (iii)  Withholding.  A  Participant  shall pay to the  Company (or
other entity identified by the Committee),  or make arrangements satisfactory to
the Company (or other entity identified by the Committee)  regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld  with  respect to such  amount  required in order for the Company or an
Affiliate  to obtain a current  deduction,  immediately  upon the request of the
Company.  Unless otherwise determined by the Committee,  withholding obligations
may be settled  with Common  Stock,  including  Common Stock that is part of the
Option  that  gives  rise  to the  withholding  requirement  provided  that  any
applicable requirements under Section 16 of the Exchange Act are satisfied.  The
obligations  of the Company under this Plan shall be conditional on such payment
or  arrangements,  and the  Company  and its  Affiliates  shall,  to the  extent
permitted  by law,  have the right to deduct  any such  taxes  from any  payment
otherwise due to the Participant.

              (iv) Representation. The Committee shall establish such procedures
as it deems  appropriate for a Participant to designate a Representative to whom
any  amounts  otherwise  payable  the  Participant  are  to be  paid  upon  such
Participant's death.

              (v)  Governing  Law.  This Plan and all  Options  made and actions
taken  hereunder  and  under  any  Option  Agreement  shall be  governed  by and
construed in accordance  with the laws of the State of Delaware  (other than its
law respecting  choice of law).  This Plan shall be construed to comply with all
applicable law, and to avoid liability to the Company, any Affiliate, any member
of the Committee, any member of the Board or any Participant, including, without
limitation, liability under Section 16(b) of the Exchange Act.

              (vi)  Offset.  Any amounts  owed to the Company or an Affiliate by
the  Participant of whatever  nature may be offset by the Company from the value
of any Common  Stock,  cash or other thing of value under this Plan or an Option
Agreement to be transferred  to the  Participant,  and no Common Stock,  cash or
other thing of value under this Plan or an Option Agreement shall be transferred
unless and until all disputes  between the Company and the Participant have been
fully and finally  resolved  and the  Participant  has waived all claims to such
against the Company or an Affiliate.

         9.4  Mitigation  of Excise Tax.  If any payment or right  accruing to a
Participant  under this Plan  (without the  application  of this  Section  9.4),
either  alone  or  together  with  other  payments  or  rights  accruing  to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute  payment"  (as defined in Section 280G of the Code and  regulations
thereunder),  such  payment or right shall be reduced to the  largest  amount or
greatest  right that will  result in no  portion of the amount  payable or right
accruing  under this Plan being  subject to an excise tax under  Section 4999 of
the Code or being  disallowed as a deduction under Section 280G of the Code. The
determination of whether any reduction in the rights or payments under this Plan
is to apply shall be made by the Committee in good faith after consultation with
the Participant,  and such determination  shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee in
making such  determination  and  providing the  necessary  information  for this
purpose.  The foregoing  provisions of this Section 9.4 shall apply with respect
to any person only if after  reduction  for any  applicable  federal  excise tax
imposed by Section 4999 of the Code and federal  income tax imposed by the Code,
the Total Payments  accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of this
Plan and after reduction for only federal income taxes.

         9.5 Rights with Respect to Continuance of Employment. Nothing contained
herein  shall be deemed to alter the  relationship,  contractual  or  otherwise,
between the Company or an Affiliate and a Participant.  Nothing contained herein
shall be construed to constitute a contract of employment between the Company or
an Affiliate and a Participant. Neither the Company nor any Affiliate shall have
any obligation to retain the Participant in its employ or service as a result of
this Plan. There shall be no inference as to the length of employment or service
hereby,  and the Company or an  Affiliate  reserves the same rights to terminate
the  Participant's  employment  or service as  existed  prior to the  individual
becoming a Participant in this Plan.

         9.6 Options in Substitution for Options Granted by Other  Corporations.
Options  may be granted  under this Plan from time to time in  substitution  for
awards held by employees,  directors or service providers of other  corporations
who are  about to become  employees,  directors,  or  service  providers  of the
Company  or an  Affiliate  as the  result  of a merger or  consolidation  of the
employing  corporation  with the Company or an Affiliate,  or the acquisition by
the Company or an Affiliate of the assets of the employing  corporation,  or the
acquisition  by  the  Company  or  Affiliate  of  the  stock  of  the  employing
corporation,  as the result of which it becomes a designated employer under this
Plan. The terms and conditions of the Options so granted may vary from the terms
and  conditions set forth in this Plan at the time of such grant as the majority
of the members of the Committee may deem appropriate to conform,  in whole or in
part,  to the  provisions  of the  awards in  substitution  for  which  they are
granted.

         9.7  Procedure  for  Adoption.  Any  Affiliate  of the  Company  may by
resolution of such Affiliate's board of directors, with the consent of the Board
and subject to such  conditions as may be imposed by the Board,  adopt this Plan
for  the  benefit  of  its  employees  as of the  date  specified  in the  board
resolution.

         9.8 Procedure for Withdrawal. Any Affiliate which has adopted this Plan
may, by resolution of its board of directors,  with the consent of the Board and
subject  to such  conditions  as may be  imposed  by the  Board,  terminate  its
adoption of this Plan as of the date specified in the board resolution.

         9.9 Withholding.  If the Participant  disposes of Common Stock acquired
pursuant to an Incentive  Stock  Option in any  transaction  considered  to be a
disqualifying  transaction  under the Code,  the  Participant  must give written
notice of such transfer and the Company shall have the right to deduct any taxes
required  by law to be  withheld  from  any  amounts  otherwise  payable  to the
Participant.

         9.10 Delay.  If at any time a Participant  is subject to  "short-swing"
liability  under  Section 16 of the Exchange  Act, any time period  provided for
under  this Plan or an Option  Agreement  to the extent  necessary  to avoid the
imposition  of liability  shall be suspended  and delayed  during the period the
Participant would be subject to such liability, but not more than six (6) months
and one (1) day and not to exceed the Option Period.  The Company shall have the
right to suspend or delay any time  period  described  in this Plan or an Option
Agreement if the  Committee  shall  determine  that the action may  constitute a
violation  of any law or result in liability  under any law to the  Company,  an
Affiliate or a stockholder of the Company until such time as the action required
or permitted  shall not  constitute a violation of law or result in liability to
the Company,  an Affiliate or a stockholder of the Company.  The Committee shall
have the  discretion to suspend the  application  of the provisions of this Plan
required  solely to comply with Rule 16b-3 if the Committee shall determine that
Rule 16b-3 does not apply to this Plan.

         9.11  Headings.  The headings  contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.

         9.12  Severability.  If any provision of this Plan shall for any reason
be held to be invalid or  unenforceable,  such  invalidity  or  unenforceability
shall not effect any other provision hereby, and this Plan shall be construed as
if such invalid or unenforceable provision were omitted.

         9.13  Successors  and Assigns.  This Plan shall inure to the benefit of
and be binding upon each  successor and assign of the Company.  All  obligations
imposed upon a  Participant,  and all rights  granted to the Company  hereunder,
shall be  binding  upon  the  Participant's  heirs,  legal  representatives  and
successors.

         9.14  Entire  Option  Agreement.  This  Plan and the  Option  Agreement
constitute  the entire  agreement  with respect to the subject matter hereof and
thereof,  provided that in the event of any inconsistency  between this Plan and
the Option Agreement, the terms and conditions of this Plan shall control.

         9.15 Other Company Plans.  Nothing  contained  herein shall prevent the
Company from  establishing  other incentive  plans in which  Participants in the
Plan may also participate. No Option granted under this Plan shall be considered
as compensation in calculating any insurance, pension or other benefit for which
a Participant is eligible unless any such insurance, pension or other benefit is
granted under a plan that expressly  provides that compensation  under this Plan
(and  specifying  the  type  of  such  compensation)   shall  be  considered  as
compensation  under such plan,  or except where the Board  expressly  determines
that  inclusion  of an Option  or any  portion  of an  Option  should be made to
accurately reflect  competitive  compensation  practices or to recognize that an
Option  has  been  granted  in lieu of a  portion  of  competitive  annual  cash
compensation.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
         IN WITNESS WHEREOF, the undersigned has executed this Plan effective as
of [January 1, 1999].

                                         LIGHTHOUSE HOLDINGS, INC.

                                         By:/s/Terence M. Graunke
                                            ------------------------------------
                                            Terence M. Graunke, Chief Executive
                                            Officer

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