Document:

Exhibit 4.3

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES
LAWS, BUT HAS BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF
INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE 1933 ACT, AND UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS
OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSACTION DOES NOT REQUIRE REGISTRATION OF THIS NOTE.

                        IN VIVO MEDICAL DIAGNOSTICS, INC.

                  December 22, 2004 North Inverness, Scotland

$250,000.00

                               8% PROMISSORY NOTE

     Pursuant to the terms of this 8% Promissory Note (the "Note"), In Vivo
Medical Diagnostics, Inc., a Colorado corporation (the "Company"), for value
received, hereby promises to pay to Nite Capital, L.P. or its registered assigns
(the "Holder") on the earlier of (i) June 22, 2005 or (ii) the date subsequent
to the date of this Note that the Company enters into any financing or
financings of any type aggregating $1,500,000 or more (the "Maturity Date"), at
the principal offices of the Company, the principal sum Two Hundred Fifty
Thousand Dollars ($250,000) in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, and interest on the outstanding principal sum, such
interest to be computed at the rate of eight percent (8%) per annum. Principal
and accrued interest shall be payable on the Maturity Date in like coin or
currency to the Holder hereof at the office of the Company as hereinafter set
forth, provided that any payment otherwise due on a Saturday, Sunday or legal
Bank holiday may be paid on the following business day. In the event that for
any reason whatsoever any interest or other consideration payable with respect
to this Note shall be deemed to be usurious by a court of competent jurisdiction
under the laws of the State of New York or the laws of any other state governing
the repayment hereof, then so much of such interest or other consideration as
shall be deemed to be usurious shall be held by the holder as security for the
repayment of the principal amount hereof and shall otherwise be waived.

     1. Transfers of Note to Comply with the 1933 Act
     ------------------------------------------------

     The Holder agrees that this Note may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except as follows: (1) to a person whom
the Note may legally be transferred without registration and without delivery of
a current prospectus under the 1933 Act with respect thereto and then only
against receipt of an agreement of such person to comply with the provisions of
this Section 1 with respect to any resale or other disposition of the Note; or
(2) to any person upon delivery of a prospectus then meeting the requirements of
the 1933 Act relating to such securities and the offering thereof for such sale
or disposition, and thereafter to all successive assignees.

<PAGE>

     2. Prepayment; Conversion
     -------------------------

     (a)  The principal amount of this Note may be prepaid by the Company, in
          whole or in part without premium or penalty, at any time. In the event
          the Company intends to prepay any or all of the outstanding principal
          or interest on this Note, the Company must provide written notice to
          the Holder at least 10 days prior to the proposed prepayment date
          ("Prepayment Date").

     (b)  In the event that the Company, subsequent to the date of this Note,
          enters into any financing or financings of any type aggregating
          $1,000,000, then and in such event the Company shall be required to
          make a partial prepayment (a "Partial Prepayment") of $175,000 of the
          principal amount of this Note and the pro rata share of interest
          accrued to date on such portion the Note. In addition, in the event
          that the Company, subsequent to the date of this Note, enters into any
          financing or financings of any type aggregating more than $1,000,000
          but less than $1,500,000, then and in such event the amount of the
          Partial Prepayment shall be increased on a pro-rata basis (up to the
          full principal amount of this Note and the pro rata share of interest
          accrued to date on the Note in the case of a financing totaling at
          least $1,500,000). The Company shall be required to notify the Holder
          in writing of any financing which results in the Company being
          required to prepay the Note, in whole or in part, prior to June 22,
          2005, and to make such payment within three business days after the
          Company receives the proceeds of such financing.

     (c)  Upon any prepayment of the entire principal amount of this Note, all
          accrued, but unpaid interest shall be paid to the Holder on the date
          of prepayment. In the event the Company prepays any portion of the
          principal or interest on this Note, the Holder shall deliver this Note
          to the Company and the Company shall issue a new Note to the Holder
          evidencing the reduction of principal or interest.

     3. Covenants of Company
     -----------------------

     The Company covenants and agrees that, so long as any principal of, or
interest on, this Note shall remain unpaid, unless the Holder shall otherwise
consent in writing, it will comply with the following terms:

     (a)  Reporting Requirements. The Company will furnish to the Holder:

          (i)  as soon as possible, and in any event within five (5) days after
               obtaining knowledge of the occurrence of (A) an "Event of
               Default," as hereinafter defined, (B) an event which, with the
               giving of notice or the lapse of time or both, would constitute
               an Event of Default, or (C) a material adverse change in the
               condition or operations, financial or otherwise, of the Company,
               taken as whole, the written statement of the Chief Executive
               Officer or the Chief Financial Officer of the Company, setting
               forth the details of such Event of Default, event or material
               adverse change and the action which the Company proposes to take
               with respect thereto;

                                        2
<PAGE>

          (ii) promptly after the sending or filing thereof, copies of all
               financial statements, reports, certificates of its Chief
               Executive Officer, Chief Financial Officer or accountants and
               other information which the Company or any subsidiary sends to
               any holders (other than the Notes) of its securities;

          (iii) promptly after the commencement thereof, notice of each action,
               suit or proceeding before any court or other governmental
               authority or other regulatory body or any arbitrator as to which
               there is a reasonable possibility of a determination that would
               (A) materially impact the ability of the Company or any
               subsidiary to conduct its business, (B) materially and adversely
               affect the business, operations or financial condition of the
               Company taken as a whole, or (C) impair the validity or
               enforceability of the Notes or the ability of the Company to
               perform its obligations under the Notes;

          (iv) in accordance with the provisions of Section 2(b) of this Note,
               of any subsequent financing which will trigger a mandatory
               prepayment obligation of the Company. . (b) Compliance with Laws.
               The Company will comply, in all material respects with all
               applicable laws, rules, regulations and orders, except to the
               extent that noncompliance would not have a material adverse
               effect upon the business, operations or financial condition of
               the Company taken as a whole.

     (c)  Preservation of Existence. The Company will maintain and preserve, and
          cause each subsidiary, if any, to maintain and preserve, its
          existence, and become or remain duly qualified and in good standing in
          each jurisdiction in which the failure to be so qualified would have a
          material adverse effect on the business, operations or financial
          condition of the Company, taken as a whole.

     (d)  Maintenance of Properties. The Company will maintain and preserve, all
          of its properties which are necessary in the proper conduct of its
          business in good working order and condition, ordinary wear and tear
          excepted, and comply, at all times with the provisions of all leases
          to which it is a party as lessee or under which it occupies property,
          so as to prevent any forfeiture or material loss thereof or
          thereunder.

     (e)  Maintenance of Insurance. The Company will maintain, with responsible
          and reputable insurers, insurance with respect to its properties and
          business, in such amounts and covering such risks, as is carried
          generally in accordance with sound business practice by companies in
          similar businesses in the same localities in which the Company is
          situated.

     (f)  Keeping of Records and Books of Account. The Company will keep
          adequate records and books of account, with complete entries made in
          accordance with generally accepted accounting principles, reflecting
          all of its financial and other business transactions.

                                        3
<PAGE>

     (g)  Compliance with the Securities Exchange Act of 1934. The Company shall
          comply in all respects with the requirements of the Securities
          Exchange Act of 1934, including the filing of all reports due
          thereunder.

     (h)  Reservation of Common Stock. The Company further covenants and agrees
          that the Company will use its best efforts to at all times have
          authorized and reserved, free from preemptive rights, a sufficient
          number of shares of its common stock to provide for the conversion of
          this Note in full. As of the date hereof, the Company does not have
          any shares reserved or available for reservation for the conversion of
          this Note.

     4. Events of Default and Remedies
     ---------------------------------

     (a)  Any one or more of the following events which shall have occurred and
          be continuing shall constitute an event of default ("Event of
          Default"):

          (i)  Default in the payment of interest upon this Note, as and when
               the same shall become due; or

          (ii) Default in the payment of the principal of this Note, as and when
               the same shall become due; or

          (iii) The Company shall fail to perform or observe any affirmative
               covenant contained in this Note or the subscription agreement
               executed by the Company and the Holder as of the date hereof and
               such Default, if capable of being remedied, shall not have been
               remedied ten (10) days after written notice thereof shall have
               been given by the Holder to the Company; or

          (iv) The Company or any subsidiary (A) shall institute any proceeding
               or voluntary case seeking to adjudicate it bankrupt or insolvent,
               or seeking dissolution, liquidation, winding up, reorganization,
               arrangement, adjustment, protection, relief or composition of it
               or its debts under any law relating to bankruptcy, insolvency or
               reorganization or relief of debtors, or seeking the entry of any
               order for relief or the appointment of a receiver, trustee,
               custodian or other similar official for such the Company or any
               subsidiary or for any substantial part of its property, or shall
               consent to the commencement against it of such a proceeding or
               case, or shall file an answer in any such case or proceeding
               commenced against it consenting to or acquiescing in the
               commencement of such case or proceeding, or shall consent to or
               acquiesce in the appointment of such a receiver, trustee,
               custodian or similar official; (B) shall be unable to pay its
               debts as such debts become due, or shall admit in writing its
               inability to apply its debts generally; (C) shall make a general
               assignment for the benefit of creditors; or (D) shall take any
               action to authorize or effect any of the actions set forth above
               in this subsection 3 (iv); or

                                        4
<PAGE>

          (v)  Any proceeding shall be instituted against the Company seeking to
               adjudicate it a bankrupt or insolvent, or seeking dissolution,
               liquidation, winding up, reorganization, arrangement, adjustment,
               protection, relief of debtors, or seeking the entry of an order
               for relief or the appointment of a receiver, trustee, custodian
               or other similar official for the Company or for any substantial
               part of its property, and either such proceeding shall not have
               been dismissed or shall not have been stayed for a period of
               sixty (60) days or any of the actions sought in such proceeding
               (including, without limitation, the entry of any order for relief
               against it or the appointment of a receiver, trustee, custodian
               or other similar official for it or for any substantial part of
               its property) shall occur; or

          (vi) One or more final judgments or orders for the payment of money in
               excess of $100,000 in the aggregate shall be rendered against the
               Company, and either (A) enforcement proceedings shall have been
               commenced by any creditor upon any such judgment or order, or (B)
               there shall be any period of thirty (30) days during which
               enforcement of any such judgment or order shall not be
               discharged, stayed or fully satisfied; or

     (b)  If an Event of Default described above has occurred, then the Holder
          may either

          (i)  without further notice to the Company, declare the principal
               amount of this Note at the time outstanding, together with
               accrued unpaid interest thereon, and all other amounts payable
               under this Note to be forthwith due and payable, whereupon such
               principal, interest and all such amounts shall become and be
               forthwith due and payable; or

          (ii) in the case of an event of default described in Section 4(a)(i)
               or (ii) hereof which continues for at least three business days,
               elect to convert all of the principal and interest owing on this
               Note into shares of the Company's common stock, subject to the
               restrictions contained herein. The conversion price per share
               shall be fifty percent (50%) of the average of the three lowest
               closing prices for the Common Stock on the NASD OTC Bulletin
               Board (or such other principal market or exchange where the
               Common Stock is listed or traded at the time of conversion) for
               the ten days immediately preceding the Maturity Date. Such
               election to convert shall be evidenced by completion of the
               conversion notice attached hereto and delivery of such notice to
               the Company within five business days of (i) the Holder's receipt
               of a notice from the Company pursuant to Section 2 that a
               prepayment is due, or (ii) the Maturity Date. The Holder's right
               to convert the obligations due under this Note to common stock
               shall supercede the Company's right to repay such obligations in
               cash, subject to the restrictions contained herein.

     (c)  The Company covenants that in case the principal of, and accrued
          interest on, the Note becomes due and payable by declaration or
          otherwise, then the Company will pay in cash, or in Common Stock of
          the Company if required under this Agreement, to the Holder of this
          Note, the whole amount that then shall have become due and payable on
          this Note for principal or interest, as the case may be, and in
          addition thereto, such further amount as shall be sufficient to cover
          the costs and expenses of collection, including reasonable fees and
          disbursements of the Holder's legal counsel if no conversion of the
          Note to Common Stock of the Company has been made. In case the Company
          shall fail forthwith to pay such amount, the Holder may commence an
          action or proceeding at law or in equity for the collection of the
          sums so due and unpaid, and may prosecute any such action or
          proceeding to judgment or final decree against Company or other
          obligor upon this Note, wherever situated, the monies adjudicated or
          decreed to be payable.

                                        5
<PAGE>

     5. Miscellaneous
     ----------------

     (a)  This Note has been issued by the Company pursuant to authorization of
          the Board of Directors of the Company.

     (b)  The Company may consider and treat the entity in whose name this Note
          shall be registered as the absolute owner thereof for all purposes
          whatsoever (whether or not this Note shall be overdue) and the Company
          shall not be affected by any notice to the contrary. Subject to the
          limitations herein stated, the registered owner of this Note shall
          have the right to transfer this Note by assignment, and the transferee
          thereof shall, upon his registration as owner of this Note, become
          vested with all the powers and rights of the transferor. Registration
          of any new owners shall take place upon presentation of this Note to
          the Company at its principal offices, together with a duly
          authenticated assignment. In case of transfer by operation of law, the
          transferee agrees to notify the Company of such transfer and of his
          address, and to submit appropriate evidence regarding the transfer so
          that this Note may be registered in the name of the transferee. This
          Note is transferable only on the books of the Company by the holder
          hereof, in person or by attorney, on the surrender hereof, duly
          endorsed. Communications sent to any registered owner shall be
          effective as against all holders or transferees of the Note not
          registered at the time of sending the communication.

     (c)  Payments of principal and interest shall be made as specified above to
          the registered owner of this Note. No interest shall be due on this
          Note for such period of time that may elapse between the maturity of
          this Note and its presentation for payment.

     (d)  The Holder shall not, by virtue, hereof, be entitled to any rights of
          a shareholder in the Company, whether at law or in equity, and the
          rights of the Holder are limited to those expressed in this Note.

     (e)  Upon receipt by the Company of evidence reasonably satisfactory to it
          of the loss, theft, destruction or mutilation of this Note, and (in
          the case of loss, theft or destruction) of reasonably satisfactory
          indemnification, and upon surrender and cancellation of this Note, if
          mutilated, the Company shall execute and deliver a new Note of like
          tenor and date.

     (f)  This Note shall be construed and enforced in accordance with the laws
          of the State of New York. The Company and the Holder hereby consent to
          the jurisdiction of the Courts of the State of New York and the United
          States District Courts situated therein in connection with any action
          concerning the provisions of this Note instituted by the Holder
          against the Company.

     (g)  All communications under this Agreement shall be in writing and shall
          be mailed by first class mail, postage prepaid, or telegraphed or
          telexed with confirmation of receipt or delivered by hand or by
          overnight delivery service,

                                        6
<PAGE>

          If to the Company, at:

                            In Vivo Diagnostics, Inc.
                            The Green House
                            Beechwood Business Park,
                            North Inverness, Scotland IV2 3BL

          or at such other address as it may have furnished in writing to the
          Holder, or

          If to the Holder, to the address of such Holder as it appears in the
          stock ledger of the Company.

          Any notice so addressed, when mailed by registered or certified mail
          shall be deemed to be given three days after so mailed, when
          telegraphed or telexed shall be deemed to be given when transmitted,
          or when delivered by hand or overnight shall be deemed to be given
          when delivered.

     IN WITNESS WHEREOF, In Vivo Medical Diagnostics, Inc.caused this Note to be
signed in its name by its Chief Executive Officer.

                                IN VIVO MEDICAL DIAGNOSTICS, INC

                                 By:
                                    -----------------------------------------

                                        7
<PAGE>

                              NOTICE OF CONVERSION

     (To be executed by the Registered Holder in order to convert the Note)

     The undersigned hereby elects to convert all of the principal and interest
due on the Note issued by In Vivo Medical Diagnostics, Inc., into Shares of
Common Stock according to the conditions set forth in Section 4(b)(ii) of such
Note, as of the date written below. The undersigned further affirms that as of
the date hereof, the representations and warranties made by the undersigned in
the subscription agreement of even date with the promissory note being
converted, are true and correct as if such representations and warranties were
made as of the date hereof.

Date of Conversion:_____________________________________________________________

Conversion Price:  $____________per share

Shares To Be Delivered:_________________________________________________________

Signature:______________________________________________________________________

Print Name:_____________________________________________________________________

Address:________________________________________________________________________

        ________________________________________________________________________

                                        8Exhibit 10.1

 

 

AXS-One
Inc.

1998
Stock Option Plan

(as
amended by the stockholders on June 13, 2001 and June 9, 2004)

 

ARTICLE I

PURPOSE

 

The purpose of the AXS-One
Inc. 1998 Stock Option Plan (the “Plan”) is to enhance the profitability and
value of AXS-One Inc. (the “Company”) and its Affiliates for the benefit of the
Company’s stockholders by enabling the Company: 
(i) to offer employees and Consultants of the Company and its
Affiliates, stock based incentives and other equity interests in the Company, thereby
creating a means to raise the level of stock ownership by employees and
Consultants in order to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company’s
stockholders, and (ii) to make equity based awards to Non-Employee Directors of
the Company thereby attracting, retaining and rewarding such Non-Employee
Directors and strengthening the mutuality of interests between such individuals
and the Company’s stockholders.

 

ARTICLE II

DEFINITIONS

 

For purposes of this Plan,
the following terms shall have the following meanings:

 

6.1                                 “Acquisition
Events” shall have the meaning set forth in Section 4.2(d).

 

6.2                                 “Affiliate”
shall mean other than the Company, (i) any Subsidiary; (ii) any corporation in
an unbroken chain of corporations beginning or ending with the Company which
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain; (iii) any
corporation, trade or business (including, without limitation, a partnership or
limited liability company) which is controlled 50% or more (whether by
ownership of stock, assets or an equivalent ownership interest or voting
interest) by the Company or one of its Affiliates; or (iv) any other entity,
approved by the Committee as an Affiliate under the Plan, in which the Company
or any of its Affiliates has a material equity interest.

 

6.3                                 “Award”
shall mean any award under this Plan of any Stock Option, Stock Appreciation Right
or Restricted Stock.  All Awards shall be
confirmed by, and subject to the terms of, a written agreement executed by the
Company and the Participant.

 

6.4                                 “Board”
shall mean the Board of Directors of the Company.

 

1

 

6.5                                 “Cause”
shall mean, with respect to a Participant’s Termination of Employment or
Termination of Consultancy:  (i) in the
case where there is no employment agreement, consulting agreement, change in
control agreement or similar agreement in effect between the Company or an
Affiliate and the Participant at the time of the relevant grant or Award, or
where there is an employment agreement, consulting agreement, change in control
agreement or similar agreement in effect at the time of the relevant grant or
Award but such agreement does not define “cause” (or words of like import),
termination due to a Participant’s dishonesty, fraud, insubordination, willful
misconduct, refusal to perform services (for any reason other than illness or
incapacity) or materially unsatisfactory performance of his or her duties for
the Company or an Affiliate; or (ii) in the case where there is an employment
agreement, consulting agreement, change in control agreement or similar
agreement in effect between the Company or an Affiliate and the Participant at
the time of the relevant grant or Award that defines “cause” (or words of like
import); provided, that with regard to any agreement that conditions “cause” on
occurrence of a change in control, such definition of “cause” shall not apply
until a change in control actually takes place and then only with regard to a
termination thereafter.  A Participant
shall be deemed to be terminated for “cause” if the Participant, following his
or her Termination of Employment or Termination of Consultancy, engages in any “competitive
activity” with the Company or its Affiliates, as determined by the Committee,
in its sole discretion. With respect to a Participant’s Termination of
Directorship, “cause” shall mean an act or failure to act that constitutes “cause”
for removal of a director under applicable Delaware law.

 

6.6                                 “Code”
shall mean the Internal Revenue Code of 1986, as amended.  Any reference to any section of the Code
shall also be a reference to any successor provision.

 

6.7                                 “Committee”
shall mean a committee or subcommittee of the Board appointed from time to time
by the Board, which committee or subcommittee shall consist of two or more
non-employee directors, each of whom is intended to be, to the extent required
by Rule 16b-3 and Section 162(m) of the Code, a “non-employee director” as
defined in Rule 16b-3 and an “outside director” as defined under Section 162(m)
of the Code and an “independent director” as defined under Amex Rule 121A.  Notwithstanding anything herein to the
contrary, the Board shall act as the Committee under this Plan with respect to
any grants of Non-Qualified Stock Options to Non-Employee Directors (whether
discretionary or automatic).  To the
extent that no Committee exists which has the authority to administer this
Plan, the functions of the Committee shall be exercised by the Board.  If for any reason the appointed Committee
does not meet the requirements of Rule 16b-3, Section 162(m) of the Code
or applicable stock exchange rules), such noncompliance with the requirements
of Rule 16b-3, Section 162(m) of the Code or applicable stock exchange
rules shall not affect the validity of Awards, grants, interpretations or other
actions of the Committee.

 

6.8                                 “Common
Stock” shall mean the common stock, $.01 par value per share, of the Company.

 

6.9                                 “Company”
shall mean AXS-One Inc., a Delaware corporation.

 

6.10                           “Consultant”
shall mean any adviser or consultant to the Company or its Affiliates who is
eligible pursuant to Section 5.1 to be granted Stock Options and Stock
Appreciation Rights under this Plan.

 

2

 

6.11                           “Disability”
shall mean total and permanent disability, as defined in Section 22(e)(3)
of the Code.

 

6.12                           “Effective
Date” shall mean the effective date of this Plan as defined in Article XV.

 

6.13                           “Eligible
Employee” shall mean any employee of the Company or its Affiliates who is
eligible pursuant to Section 5.1 to be granted Stock Options and Stock
Appreciation Rights under this Plan. 
Notwithstanding the foregoing, with respect to the grant of Incentive
Stock Options, Eligible Employee shall mean any employee of the Company or any
Affiliate described in Section 2.2(i) or (ii) who is eligible pursuant to Section 5.2
to be granted Incentive Stock Options under this Plan.

 

6.14                           “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

6.15                           “Fair
Market Value” for purposes of this Plan, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, shall
mean, as of any date, the last sales price reported for the Common Stock on the
applicable date:  (i) as reported on the
principal national securities exchange on which it is then traded or the Nasdaq
Stock Market, Inc. or (ii) if not traded on any such national securities
exchange or the Nasdaq Stock Market, Inc., as quoted on an automated quotation
system sponsored by the National Association of Securities Dealers.  If the Common Stock is not readily tradable
on a national securities exchange, the Nasdaq Stock Market, Inc., or any
automated quotation system sponsored by the National Association of Securities
Dealers, its Fair Market Value shall be set in good faith by the
Committee.  For purposes of the exercise
of any Stock Appreciation Right the applicable date shall be the date a notice
of exercise is received by the Committee or, if not a day on which the
applicable market is open, the next day that it is open.

 

6.16                           “Incentive
Stock Option” shall mean any Stock Option awarded under this Plan intended to
be and designated as an “incentive stock option” within the meaning of Section 422
of the Code.

 

6.17                           “Limited
Stock Appreciation Right” shall mean an Award made pursuant to Section 7.5
of this Plan which may be a Tandem Stock Appreciation Right or a Non-Tandem
Stock Appreciation Right.

 

6.18                           “Non-Employee
Director” shall mean any director of the Company who is not an employee of the
Company or any Affiliate and who is eligible pursuant to Section 5.3 to be
granted Stock Options under Article IX.

 

6.19                           “Non-Qualified
Stock Option” shall mean any Stock Option awarded under this Plan that is not
an Incentive Stock Option.

 

6.20                           “Non-Tandem
Stock Appreciation Right” shall mean a Stock Appreciation Right entitling the
holder to receive an amount in cash or stock equal to the excess of:  (i) the Fair Market Value of a share of
Common Stock as of the date such right is exercised, over (ii) the aggregate
exercise price of such right, otherwise than on surrender of a Stock Option.

 

3

 

6.21                           “Participant”
shall mean any Eligible Employee, Consultant or Non-Employee Director to whom
an Award has been made under this Plan.

 

6.22                           “Performance
Goal” means the performance goals described on Exhibit A, attached hereto.

 

6.23                           “Reference
Stock Option” shall have the meaning set forth in Section 7.1.

 

6.24                           “Restricted
Stock” means an award of Common Stock under this Plan that is subject to Article VIII.

 

6.25                           “Restriction
Period” shall have the meaning set forth in Section 8.1.

 

6.26                           “Retirement”
with respect to a Participant’s Termination of Employment or Termination of
Consultancy shall mean a Termination of Employment or Termination of
Consultancy without Cause from the Company and an Affiliate by a Participant
who has attained:  (i) at least age 65;
or (ii) such earlier date after age 55 as approved by the Committee, in its
sole discretion, with regard to such Participant.  With respect to a Participant’s Termination
of Directorship, Retirement shall mean the failure to stand for reelection or
the failure to be reelected after a Participant has attained age 65.

 

6.27                           “Rule
16b-3” shall mean Rule 16b-3 under Section 16(b) of the Exchange Act as
then in effect or any successor provisions.

 

6.28                           “Section 162(m)
of the Code” shall mean the exception for performance-based compensation under Section 162(m)
of the Code and any Treasury regulations thereunder.

 

6.29                           “Stock
Appreciation Right” or “SAR” shall mean the right pursuant to an Award granted
under Article VII.

 

6.30                           “Stock
Option” or “Option” shall mean any Option to purchase shares of Common Stock
granted to Eligible Employees or Consultants pursuant to Article VI or
granted to Non-Employee Directors pursuant to Article VI or IX.

 

6.31                           “Subsidiary”
shall mean any subsidiary corporation of the Company within the meaning of Section 424(f)
of the Code.

 

6.32                           “Tandem
Stock Appreciation Right” shall mean a Stock Appreciation Right entitling the
holder to surrender to the Company all (or a portion) of a Stock Option in
exchange for an amount in cash or stock equal to the excess of:  (i) the Fair Market Value, on the date such
Stock Option (or such portion thereof) is surrendered, of the Common Stock
covered by such Stock Option (or such portion thereof), over (ii) the aggregate
exercise price of such Stock Option (or such portion thereof).

 

6.33                           “Ten
Percent Stockholder” shall mean a person owning stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or
its Subsidiaries or its parent corporations, as defined in Section 424(e)
of the Code.

 

4

 

6.34                           “Termination
of Consultancy” shall mean, with respect to a Consultant, that the Consultant
is no longer acting as a Consultant to the Company and its Affiliates.  In the event an entity shall cease to be an
Affiliate, there shall be deemed a Termination of Consultancy of any individual
who is not otherwise a Consultant of the Company or another Affiliate at the
time the entity ceases to be an Affiliate.

 

6.35                           “Termination
of Directorship” shall mean, with respect to a Non-Employee Director, that the
Non-Employee Director has ceased to be a director of the Company.

 

6.36                           “Termination
of Employment” shall mean:  (i) a
termination of service of a Participant from the Company and its Affiliates; or
(ii) when an entity which is employing a Participant ceases to be an Affiliate,
unless the Participant thereupon becomes employed by the Company or another
Affiliate.

 

6.37                           “Transfer”
or “Transferred” shall mean anticipate, alienate, attach, sell, assign, pledge,
encumber, charge or otherwise transfer.

 

ARTICLE III

ADMINISTRATION

 

6.38                           The
Committee.  This Plan shall be
administered and interpreted by the Committee. 
Notwithstanding anything herein to the contrary, the Board shall act as
the Committee under this Plan into respect to any discretionary grants of
Non-Qualified Stock Options to Non-Employee Directors.

 

6.39                           Awards.  The Committee or the Board, as applicable,
shall have full authority to grant, pursuant to the terms of this Plan
(including Article V hereof) Stock Options to Participants and Stock
Appreciation Rights and Restricted Stock to Eligible Employees and Consultants
and to otherwise administer this Plan. 
In particular, the Committee or the Board, as applicable, shall have the
authority:

 

(a)                                  to
select the Participants to whom Stock Options may from time to time be granted
hereunder and the Eligible Employees and Consultants to whom Stock Appreciation
Rights and Restricted Stock may from time to time be granted hereunder;

 

(b)                                 to
determine whether and to what extent Stock Options are to be granted hereunder
to one or more Participants and Stock Appreciation Rights and Restricted Stock
are to be granted hereunder to one or more Eligible Employees or Consultants;

 

(c)                                  to
determine, in accordance with the terms of this Plan, the number of shares of
Common Stock to be covered by each Award to a Participant hereunder;

 

(d)                                 to
determine the terms and conditions, not inconsistent with the terms of this
Plan, of any Award granted hereunder to a Participant (including, but not
limited to, the exercise or purchase price (if any), any restriction or
limitation, any vesting schedule or acceleration thereof or any forfeiture
restrictions or waiver thereof, regarding any Stock Option, Stock Appreciation
Right or Restricted Stock, and the shares of Common

 

5

 

Stock relating thereto, based on such
factors, if any, as the Committee or the Board, as applicable, shall determine,
in its sole discretion);

 

(e)                                  to
determine whether and under what circumstances a Stock Option may be settled in
cash and/or Common Stock under Section 6.3(d);

 

(f)                                    to the
extent permitted by law, to determine whether, to what extent and under what
circumstances to provide loans (which may be on a recourse basis and shall bear
interest at the rate the Committee shall provide) to Eligible Employees and
Consultants in order to exercise Options under this Plan;

 

(g)                                 to
determine whether a Stock Appreciation Right shall be a Tandem Stock
Appreciation Right or Non-Tandem Stock Appreciation Right;

 

(h)                                 to
determine whether to require a Participant, as a condition of the granting of
any Award, to not sell or otherwise dispose of shares acquired pursuant to the
exercise of an Option or as an Award for a period of time as determined by the
Committee or the Board, as applicable, in its sole discretion, following the
date of the acquisition of such Option or Award;

 

(i)                                     to
modify, extend or renew an Award, subject to Sections 6.3(f) and 12.1 herein,
provided, however, that if an Award is modified, extended or renewed and
thereby deemed to be the issuance of a new Award under the Code or the
applicable accounting rules, the exercise price of an Award may continue to be
the original exercise price even if less than the Fair Market Value of the
Common Stock at the time of such modification, extension or renewal; and

 

(j)                                     to
offer to buy out an Option previously granted, based on such terms and
conditions as the Committee or the Board, as applicable, shall establish and
communicate to the Participant at the time such offer is made.

 

6.40                           Guidelines.  Subject to Article XII hereof, the
Committee or the Board, as applicable, shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and practices governing this
Plan and perform all acts, including the delegation of its administrative
responsibilities, as it shall, from time to time, deem advisable; to construe
and interpret the terms and provisions of this Plan and any Award issued under
this Plan (and any agreements relating thereto); and to otherwise supervise the
administration of this Plan.  The
Committee or the Board, as applicable, may correct any defect, supply any
omission or reconcile any inconsistency in this Plan or in any agreement
relating thereto in the manner and to the extent it shall deem necessary to
carry this Plan into effect, but only to the extent any such action would be
permitted under the applicable provisions of both Rule 16b-3 and Section 162(m)
of the Code.  The Committee or the Board,
as applicable, may adopt special guidelines and provisions for persons who are
residing in, or subject to, the taxes of, countries other than the United
States to comply with applicable tax and securities laws.  To the extent applicable, this Plan is
intended to comply with the applicable requirements of Rule 16b-3 and Section 162(m)
of the Code and shall be limited, construed and interpreted in a manner so as
to comply therewith.

 

6

 

6.41                           Decisions
Final.  Any decision,
interpretation or other action made or taken in good faith by or at the
direction of the Company, the Board, or the Committee (or any of its members)
arising out of or in connection with this Plan shall be within the absolute
discretion of the Company, the Board or the Committee, as the case may be, and
shall be final, binding and conclusive on the Company and its Affiliates and
all employees and Participants and their respective heirs, executors,
administrators, successors and assigns.

 

6.42                           Reliance
on Counsel.  The Company, the
Board or the Committee may consult with legal counsel, who may be counsel for
the Company or other counsel, with respect to its obligations or duties
hereunder, or with respect to any action or proceeding or any question of law,
and shall not be liable with respect to any action taken or omitted by it in
good faith pursuant to the advice of such counsel.

 

6.43                           Procedures.  If the Committee is appointed, the Board
shall designate one of the members of the Committee as chairman and the
Committee shall hold meetings, subject to the By-Laws of the Company, at such
times and places as the Committee shall deem advisable.  A majority of the Committee members shall
constitute a quorum.  All determinations
of the Committee shall be made by a majority of its members.  Any decision or determination reduced to
writing and signed by all the Committee members in accordance with the By-Laws
of the Company shall be fully as effective as if it had been made by a vote at
a meeting duly called and held.  The
Committee may keep minutes of its meetings and may make such rules and
regulations for the conduct of its business as it shall deem advisable.

 

6.44                           Designation
of Consultants/Liability.

 

(a)                                  The
Committee or the Board, as applicable, may designate employees of the Company
and professional advisors to assist the Committee or the Board, as applicable,
in the administration of this Plan and may grant authority to officers to grant
Awards and/or execute agreements or other documents on behalf of the Committee
or the Board, as applicable.

 

(b)                                 The
Committee or the Board, as applicable, may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of this
Plan and may rely upon any opinion received from any such counsel or consultant
and any computation received from any such consultant or agent.  Expenses incurred by the Committee or Board
in the engagement of any such counsel, consultant or agent shall be paid by the
Company.  The Board, its directors, the
Committee, its members and any person designated pursuant to Section 3.7(a)
shall not be liable for any action or determination made in good faith with
respect to this Plan.  To the maximum
extent permitted by applicable law, no officer of the Company or member or
former member of the Committee or of the Board shall be liable for any action
or determination made in good faith with respect to this Plan or any Award
granted under it.  To the maximum extent
permitted by applicable law and the Certificate of Incorporation and By-Laws of
the Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and held
harmless by the Company against any cost or expense (including reasonable fees
of counsel reasonably acceptable to the Company) or liability (including any
sum paid in settlement

 

7

 

of a claim with the approval of the
Company), and advanced amounts necessary to pay the foregoing at the earliest
time and to the fullest extent permitted, arising out of any act or omission to
act in connection with this Plan, except to the extent arising out of such
officer’s, member’s or former member’s own fraud or bad faith.  Such indemnification shall be in addition to
any rights of indemnification the officers, directors or members or former
officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or any Affiliate.  Notwithstanding anything else herein, this
indemnification will not apply to the actions or determinations made by an
individual with regard to Awards granted to him under this Plan.

 

ARTICLE IV

SHARE AND OTHER LIMITATIONS

 

4.1                                 Shares.

 

(a)                                  General Limitation. 
The aggregate number of shares of Common Stock which may be issued or
used for reference purposes under this Plan shall not exceed 5,000,000 shares
(subject to any increase or decrease pursuant to Section 4.2) which may be
either authorized and unissued Common Stock or Common Stock held in or acquired
for the treasury of the Company, of which a maximum of 300,000 may be issued
for Restricted Stock granted under this Plan. 
If any Option or Stock Appreciation Right granted under this Plan
expires, terminates or is canceled for any reason without having been exercised
in full, the number of shares of Common Stock underlying any unexercised Stock
Appreciation Right or Option shall again be available for the purposes of
Awards under this Plan.  If a Tandem
Stock Appreciation Right or a Limited Stock Appreciation Right granted in
tandem with an Option is granted under this Plan, such grant shall only apply
once against the maximum number of shares of Common Stock which may be issued
under this Plan.  If Restricted Stock is
forfeited for any reason, the number of forfeited shares of Restricted Stock
shall again be available for the purposes of Awards under the Plan.  In addition, to the extent permitted under
Code Section 422 and the Treasury Regulations thereunder with respect to
Incentive Stock Options, in determining the number of shares of Common Stock
available for Awards, if Common Stock has been delivered or exchanged by a
Participant as full or partial payment to the Company, or for withholding, in
connection with the exercise of a Stock Option or the vesting or transfer of
Restricted Stock or the number shares of Common Stock otherwise deliverable has
been reduced for withholding, the number of shares of Common Stock exchanged as
payment in connection with the exercise or for withholding or reduced shall
again be available under this Plan.  To
the extent permitted under Code Section 422 and the Treasury Regulations
thereunder, any shares of Common Stock that are issued by the Company, and any
awards that are granted through the assumption of, or in substitution for,
outstanding awards previously granted by an acquired entity shall not be
counted against the shares of Common Stock available for issuance under this
Plan other than with regard to determining the number of shares available for
Incentive Stock Options.

 

(b)                                 Individual Participant Limitations.  The maximum number of shares of Common Stock
subject to Awards which may be granted under this Plan during any

 

8

 

calendar year of the Company to each
Eligible Employee shall be 500,000 shares (subject to any increase or decrease
pursuant to Section 4.2) other than with regard to the calendar year in
which an Eligible Employee initially commences employment with the Company and
its Affiliates.  With respect to the
calendar year in which an Eligible Employee initially commences employment with
the Company and its Affiliates, but only with regard to such Eligible Employee,
the maximum number of shares of Common Stock subject to Awards which may be
granted under this Plan shall be 1,000,000 shares (subject to any increase or
decrease pursuant to Section 4.2). 
If a Tandem Stock Appreciation Right or Limited Stock Appreciation Right
is granted in tandem with an Option it shall apply against the Eligible
Employee’s individual share limitations for both Stock Appreciation Rights and
Options.  To the extent that shares of
Common Stock for which Awards are permitted to be granted to a Participant
pursuant to Section 4.1(b) during a calendar year of the Company are not
covered by a grant of an Award in the Company’s calendar year, such shares of
Common Stock shall be available for grant or issuance to the Participant in any
subsequent calendar year during the term of this Plan.

 

4.2                                 Changes.

 

(a)                                  The
existence of this Plan and the Awards granted hereunder shall not affect in any
way the right or power of the Board or the stockholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or other change
in the Company’s capital structure or its business, any merger or consolidation
of the Company, or Affiliates, any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the authorization or
issuance of additional shares of Common Stock, the dissolution or liquidation
of the Company or Affiliates, any sale or transfer of all or part of its assets
or business or any other corporate act or proceeding.

 

(b)                                 In the
event of any change in the capital structure or business of the Company by
reason of any stock dividend or extraordinary dividend, stock split or reverse
stock split, recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, distribution with respect to its outstanding
Common Stock or capital stock other than Common Stock, reclassification of its
capital stock, any sale or transfer of all or part of the Company’s assets or
business, or any similar change affecting the Company’s capital structure or
business and the Committee or the Board, as applicable, determines an
adjustment is appropriate under this Plan, then the aggregate number and kind
of shares which thereafter may be issued under this Plan, the number and kind
of shares or other property (including cash) to be issued upon exercise of an
outstanding Award or under other Awards granted under this Plan and the
purchase or exercise price thereof shall be appropriately adjusted consistent
with such change in such manner as the Committee or the Board, as applicable,
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under this Plan or as otherwise
necessary to reflect the change, and any such adjustment determined by the
Committee or the Board, as applicable, in good faith shall be binding and
conclusive on the Company and all Participants and employees and their
respective heirs, executors, administrators, successors and assigns.

 

9

 

(c)                                  Fractional
shares of Common Stock resulting from any adjustment in Options or Awards
pursuant to Section 4.2(a) or (b) shall be aggregated until, and
eliminated by rounding-down for fractions less than one-half and rounding-up
for fractions equal to or greater than one-half.  No cash settlements shall be made with
respect to fractional shares eliminated by rounding.  Notice of any adjustment shall be given by
the Committee or the Board, as applicable, to each Participant whose Option or
Award has been adjusted and such adjustment (whether or not such notice is
given) shall be effective and binding for all purposes of this Plan.

 

(d)                                 In the
event of a merger or consolidation in which the Company is not the surviving
entity or in the event of any transaction that results in the acquisition of
all or substantially all of the Company’s outstanding Common Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of all or substantially all of the Company’s
assets (all of the foregoing being referred to as “Acquisition Events”), then
the Committee may, in its sole discretion, terminate all outstanding Options and
Stock Appreciation Rights of Eligible Employees and Consultants, effective as
of the date of the Acquisition Event, by delivering notice of termination to
each such Participant at least 30 days prior to the date of consummation of the
Acquisition Event; provided, that during the period from the date on which such
notice of termination is delivered to the consummation of the Acquisition
Event, each such Participant shall have the right to exercise in full all of
his or her Options and Stock Appreciation Rights that are then outstanding
(whether vested or not vested) but contingent on the occurrence of the
Acquisition Event, and, provided that, if the Acquisition Event does not take
place within a specified period after giving such notice for any reason whatsoever,
the notice and exercise shall be null and void. 
If an Acquisition Event occurs, to the extent the Committee does not
terminate the outstanding Options and Stock Appreciation Rights pursuant to
this Section 4.2(d), then the provisions of Section 4.2(b) shall
apply.  This provision shall not apply to
any Options granted to Non-Employee Directors.

 

4.3                                 Purchase
Price.  Notwithstanding any
provision of this Plan to the contrary, if authorized but previously unissued
shares of Common Stock are issued under this Plan, such shares shall not be
issued for a consideration which is less than as permitted under applicable
law.

 

ARTICLE V

ELIGIBILITY

 

5.1                                 All
employees, prospective employees and Consultants of the Company and its
Affiliates are eligible to be granted Non-Qualified Stock Options, Stock
Appreciation Rights and Restricted Stock under this Plan.  Eligibility shall be determined by the
Committee in its sole discretion.

 

5.2                                 All
employees of the Company and its Affiliates described in Section 2.2(i) or
(ii) are eligible to be granted Incentive Stock Options under this Plan.  Eligibility shall be determined by the
Committee in its sole discretion.  The
vesting and exercise of Awards granted to

 

10

 

prospective
employees and Consultants are conditioned upon such individual actually
becoming an employee or Consultant.

 

5.3                                 Non-Employee
Directors of the Company are eligible to receive automatic awards of
Non-Qualified Stock Options in accordance with Article IX of this Plan and
discretionary awards of Non-Qualified Stock Options under Article VI of
this Plan.  Eligibility for discretionary
awards of Non-Qualified Stock Options shall be determined by the Board in its
sole discretion.  The vesting and
exercise of Awards granted to prospective employees and Consultants are
conditioned upon such individual actually becoming an employee or Consultant.

 

ARTICLE IV

STOCK OPTIONS

 

6.1                                 Options.  Each Stock Option granted hereunder shall be
one of two types:  (i) an Incentive Stock
Option intended to satisfy the requirements of Section 422 of the Code, or
(ii) a Non-Qualified Stock Option.

 

6.2                                 Grants.  The Committee shall have the authority to
grant to any Eligible Employee one or more Incentive Stock Options, Non-Qualified
Stock Options, or both types of Stock Options (in each case with or without
Stock Appreciation Rights).  To the
extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not so qualify,
shall constitute a separate Non-Qualified Stock Option.  The Committee shall have the authority to
grant to any Consultant one or more Non-Qualified Stock Options (with or
without Stock Appreciation Rights).  The
Board shall have the authority to grant to any Non-Qualified Director a
Non-Qualified Stock Option. 
Notwithstanding any other provision of this Plan to the contrary or any
provision in an agreement evidencing the grant of an Option to the contrary,
any Option granted to an Employee of an Affiliate (other than one described in Section 2.2(i)
or (ii)), a Non-Employee Director or a Consultant shall be a Non-Qualified
Stock Option.

 

6.3                                 Terms
of Options.  Options granted
under this Plan shall be subject to the following terms and conditions, and
shall be in such form and contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee or the Board, as
applicable, shall deem desirable:

 

(a)                                  Option Exercise Price. 
The exercise price per share of Common Stock subject to a Stock Option
granted under this Article VI shall be determined by the Committee or the
Board, as applicable, at the time of grant but shall not be less than 100% of
the Fair Market Value of a share of Common Stock at the time of grant;
provided, however, that if an Incentive Stock Option is granted to a Ten
Percent Stockholder, the exercise price per share shall be no less than 110% of
the Fair Market Value of the Common Stock.

 

(b)                                 Option Term. 
The term of each Stock Option shall be fixed by the Committee or the
Board, as applicable, but no Stock Option shall be exercisable more

 

11

 

than 10 years after the date the Option
is granted, provided, however, the term of an Incentive Stock Option granted to
a Ten Percent Stockholder may not exceed five years.

 

(c)                                  Exercisability. 
Stock Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Committee or the Board,
as applicable, at the time of grant.  If
the Committee or the Board provides, in its discretion, that any Stock Option
is exercisable subject to certain limitations (including, without limitation,
that it is exercisable only in installments or within certain time periods),
the Committee or the Board, as applicable, may waive such limitations on the
exercisability at any time at or after the time of grant in whole or in part
(including, without limitation, that the Committee or the Board, may waive the
installment exercise provisions or accelerate the time at which Options may be
exercised), based on such factors, if any, as the Committee or the Board shall
determine, in its sole discretion.

 

(d)                                 Method of Exercise. 
Subject to whatever installment exercise and waiting period provisions
apply under Section 6.3(c), Stock Options may be exercised in whole or in
part at any time during the Option term, by giving written notice of exercise
to the Company specifying the number of shares to be purchased.  Common Stock purchased pursuant to the
exercise of a Stock Option shall be paid for at the time of exercise as
follows:  (i) in cash or by check, bank
draft or money order payable to the order of Company; (ii) solely to the extent
permitted by applicable law, if the Common Stock is traded on a national
securities exchange, the Nasdaq Stock Market, Inc. or quoted on a national
quotation system sponsored by the National Association of Securities Dealers,
through the delivery of irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the purchase price; or (iii) on such
other terms and conditions as may be acceptable to the Committee or the Board,
as applicable, (which may include payment in full or part in the form of Common
Stock owned by the Participant for a period of at least 6 months (and for which
the Participant has good title free and clear of any liens and encumbrances)
based on the Fair Market Value of the Common Stock on the payment date as
determined by the Committee or the Board or the surrender of vested Options
owned by the Participant).  No shares of
Common Stock shall be issued until payment therefor, as provided herein, has
been made or provided for.

 

(e)                                  Incentive Stock Option Limitations.  To the extent that the aggregate Fair Market
Value (determined as of the time of grant) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by an Eligible
Employee during any calendar year under this Plan and/or any other stock option
plan of the Company or any Subsidiary or parent corporation (within the meaning
of Section 424(e) of the Code) exceeds $100,000, such Options shall be
treated as Options which are not Incentive Stock Options.  In addition, if an Eligible Employee does not
remain employed by the Company, any Subsidiary or parent corporation (within
the meaning of Section 424(e) of the Code) at all times from the time the
Option is granted until 3 months prior to the date of exercise (or such other
period as required by applicable law), such Option shall be treated as an
Option which is not an Incentive Stock Option.

 

Should the foregoing provision not be
necessary in order for the Stock Options to qualify as Incentive Stock Options,
or should any additional provisions be required, the

 

12

 

Committee may amend this
Plan accordingly, without the necessity of obtaining the approval of the
stockholders of the Company.

 

(f)                                    Form, Modification, Extension and Renewal of Options.  Subject to the terms and conditions and
within the limitations of this Plan, an Option shall be evidenced by such form
of agreement or grant as is approved by the Committee or the Board, as applicable,
and the Committee or the Board may modify, extend or renew outstanding Options
granted under this Plan (provided that the rights of a Participant are not
reduced without his consent), or accept the surrender of outstanding Options
(up to the extent not theretofore exercised) and authorize the granting of new
Options in substitution therefor (to the extent not theretofore
exercised).  Notwithstanding the
foregoing, an outstanding Option may not be modified to reduce the exercise
price thereof nor may a new Option at a lower price be substituted for a
surrendered Option (other than adjustments or substitutions in accordance with Section 4.2),
unless such action is approved by the stockholders of the Company.

 

(g)                                 Other Terms and Conditions.  Options may contain such other provisions,
which shall not be inconsistent with any of the foregoing terms of this Plan,
as the Committee or the Board, as applicable, shall deem appropriate including,
without limitation, permitting “reloads” such that the same number of Options
are granted as the number of Options exercised, shares used to pay for the
exercise price of Options or shares used to pay withholding taxes (“Reloads”).  With respect to Reloads, the exercise price
of the new Stock Option shall be the Fair Market Value on the date of the “reload”
and the term of the Stock Option shall be the same as the remaining term of the
Options that are exercised, if applicable, or such other exercise price and
term as determined by the Committee or the Board, as applicable.

 

ARTICLE VII

STOCK APPRECIATION RIGHTS

 

7.1                                 Tandem
Stock Appreciation Rights. 
A Tandem Stock Appreciation Right may be granted in conjunction with all
or part of any Stock Option (a “Reference Stock Option”) granted under Article VI
of this Plan.  In the case of a Tandem
Stock Appreciation Right which is granted in conjunction with a Non-Qualified
Stock Option, such rights may be granted either at or after the time of the
grant of such Reference Stock Option.  In
the case of a Tandem Stock Appreciation Right which is granted in conjunction
with an Incentive Stock Option, such rights may be granted only at the time of
the grant of such Reference Stock Option. 
Consultants shall not be eligible for a grant of Tandem Stock
Appreciation Rights granted in conjunction with all or part of an Incentive
Stock Option.

 

7.2                                 Terms
and Conditions of Tandem Stock Appreciation Rights.  Tandem Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
this Plan, as shall be determined from time to time by the Committee, including
Article X and the following:

 

13

 

(a)                                  Term.  A Tandem Stock
Appreciation Right or applicable portion thereof granted with respect to a
Reference Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the Reference Stock Option, except that, unless
otherwise determined by the Committee, in its sole discretion, at the time of
grant, a Tandem Stock Appreciation Right granted with respect to less than the
full number of shares covered by the Reference Stock Option shall not be
reduced until and then only to the extent the exercise or termination of the
Reference Stock Option causes the number of shares covered by the Tandem Stock
Appreciation Right to exceed the number of shares remaining available and
unexercised under the Reference Stock Option.

 

(b)                                 Exercisability. 
Tandem Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Reference Stock Options to which they
relate shall be exercisable in accordance with the provisions of Article VI
and this Article VII.

 

(c)                                  Method of Exercise. 
A Tandem Stock Appreciation Right may be exercised by an optionee by
surrendering the applicable portion of the Reference Stock Option.  Upon such exercise and surrender, the
Participant shall be entitled to receive an amount determined in the manner
prescribed in this Section 7.2 and the Reference Stock Option or part
thereof to which such Stock Appreciation Right is related shall be deemed to
have been exercised for the purpose of the limitation set forth in Article IV
of this Plan on the number of shares of Common Stock to be issued under this
Plan.  The Stock Options which have been
so surrendered, in whole or in part, shall no longer be exercisable to the
extent the related Tandem Stock Appreciation Rights have been exercised.

 

(d)                                 Payment.  Upon the exercise
of a Tandem Stock Appreciation Right a Participant shall be entitled to receive
an amount in cash and/or Common Stock (as chosen by the Committee in its sole
discretion) equal in value to the excess of the Fair Market Value of one share
of Common Stock over the exercise price per share specified in the Reference
Stock Option multiplied by the number of shares in respect of which the Tandem
Stock Appreciation Right shall have been exercised, with the Committee having
the right to determine the form of payment.

 

7.3                                 Non-Tandem
Stock Appreciation Rights. 
Non-Tandem Stock Appreciation Rights may also be granted without
reference to any Stock Options granted under Article VI of this Plan.

 

7.4                                 Terms
and Conditions of Non-Tandem Stock Appreciation Rights.  Non-Tandem Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
this Plan, as shall be determined from time to time by the Committee, including
Article X and the following:

 

(a)                                  Term.  The term of each
Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall
not be greater than 10 years after the date the right is granted.

 

14

 

(b)                                 Exercisability. 
Non-Tandem Stock Appreciation Rights shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by the
Committee at grant.  If the Committee
provides, in its discretion, that any such right is exercisable subject to
certain limitations (including, without limitation, that it is exercisable only
in installments or within certain time periods), the Committee may waive such
limitation on the exercisability at any time at or after grant in whole or in
part (including, without limitation, that the Committee may waive the
installment exercise provisions or accelerate the time at which rights may be
exercised), based on such factors, if any, as the Committee shall determine, in
its sole discretion.

 

(c)                                  Method of Exercise. 
Subject to whatever installment exercise and waiting period provisions
apply under subsection (b) above, Non-Tandem Stock Appreciation Rights may
be exercised in whole or in part at any time during its term, by giving written
notice of exercise to the Company specifying the number of Non-Tandem Stock
Appreciation Rights to be exercised.

 

(d)                                 Payment.  Upon the exercise
of a Non-Tandem Stock Appreciation Right a Participant shall be entitled to
receive, for each right exercised, an amount in cash and/or Common Stock (as
chosen by the Committee in its sole discretion) equal in value to the excess of
the Fair Market Value of one share of Common Stock on the date the right is
exercised over the Fair Market Value of one share of Common Stock on the date
the right was awarded to the Participant.

 

7.4                                 Limited
Stock Appreciation Rights. 
The Committee may, in its sole discretion, grant Limited Stock
Appreciation Rights.  Limited Stock
Appreciation Rights may be exercised only upon the occurrence of a Change in
Control or such other event as the Committee may, in its sole discretion,
designate at the time of grant or thereafter. 
Upon the exercise of Limited Stock Appreciation Rights, except as
otherwise provided in an Award agreement, the Participant shall receive in cash
or Common Stock, as determined by the Committee, an amount equal to the
amount:  (i) set forth in Section 7.2(d)
with respect to Tandem Stock Appreciation Rights, or (ii) set forth in Section 7.4(d)
with respect to Non-Tandem Stock Appreciation Rights.

 

ARTICLE VIII

RESTRICTED STOCK

 

8.1                                 Awards
of Restricted Stock. 
Restricted Stock may be issued to all eligible Participants pursuant to Section 5.1
of the Plan either alone or in addition to other Awards granted under the
Plan.  The Committee shall determine the
eligible Participants to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the purchase
price (if any) to be paid by the Participant (subject to Section 8.3), the
time or times at which such Awards may be subject to forfeiture (if any), the
vesting schedule (if any) and rights to acceleration thereof, and all
other terms and conditions of the Awards. 
The Committee may condition the grant or vesting of Restricted Stock
upon the attainment of specified performance targets (including, the
Performance Goals specified in Exhibit A hereto) or such other factors as the
Committee may determine, in its sole discretion, including to comply with the
requirements of Section 162(m) of the Code.  Unless otherwise determined by the

 

15

 

Committee,
the Participant shall not be permitted to transfer shares of Restricted Stock
awarded under this Plan during a period set by the Committee (if any) (the “Restriction
Period”) commencing with the date of such Award, as set forth in the applicable
Award agreement.

 

8.2                                 Objective
Performance Goals, Formulae or Standards.  Notwithstanding the foregoing, if the award
of Restricted Stock is intended to comply with the “performance based”
compensation exception under Section 162(m) of the Code and if the grant
of such Award or the lapse of restrictions is based on the attainment of
Performance Goals, the Committee shall establish the objective Performance
Goals and the applicable number of shares of Restricted Stock to be granted or
the applicable vesting percentage of the Restricted Stock applicable to each
Participant or class of Participants in writing prior to the beginning of the
applicable fiscal year or at such later date as otherwise determined by the
Committee and while the outcome of the Performance Goals are substantially
uncertain in accordance with Section 162(m) of the Code.  Such Performance Goals may incorporate
provisions for disregarding (or adjusting for) changes in accounting methods,
corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances.  The Performance Goals are set forth in
Exhibit A hereto.

 

8.3                                 Awards
and Certificates.  A Participant
selected to receive Restricted Stock shall not have any rights with respect to
such Award, unless and until such Participant has delivered a fully executed
copy of the Award agreement evidencing the Award to the Company and has
otherwise complied with the applicable terms and conditions of such Award.  Further, such Award shall be subject to the
following conditions:

 

(a)                                  Purchase
Price.  The purchase price
of Restricted Stock shall be determined by the Committee, but shall not be less
than as permitted under applicable law.

 

(b)                                 Acceptance.  Awards of Restricted Stock must be accepted
within a period of sixty (60) days (or such shorter period as the Committee may
specify at grant) after the grant date, by executing an Award agreement and by
paying whatever price (if any) the Committee has designated thereunder.

 

(c)                                  Legend.  Each Participant receiving Restricted Stock
shall be issued a stock certificate in respect of such shares of Restricted
Stock, unless the Committee elects to use another system, such as book entries
by the transfer agent, as evidencing ownership of Restricted Stock.  Such certificate shall be registered in the
name of such Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award, substantially in
the following form:

 

“The anticipation, alienation, attachment, sale,
transfer, assignment, pledge, encumbrance or charge of the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the AXS-One Inc. (the “Company”) 1998 Stock Option Plan, and an
Award agreement entered into between the registered owner and the Company dated
                     .  Copies of such Plan and Award agreement are
on file at the principal office of the Company.”

 

16

 

(d)                                 Custody.  The Committee may require that any stock
certificates evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock Award, the Participant shall have delivered a duly signed stock
power, endorsed in blank, relating to the Common Stock covered by such Award.

 

(e)                                  Rights
as Stockholder.  Except as provided
in this subsection and subsection (d) above and as otherwise
determined by the Committee, the Participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a holder of shares of Common
Stock of the Company including, without limitation, the right to receive any
dividends, the right to vote such shares and, subject to and conditioned upon
the full vesting of shares of Restricted Stock, the right to tender such
shares.  Notwithstanding the foregoing,
the payment of dividends shall be deferred until, and conditioned upon, the
expiration of the applicable Restriction Period, unless the Committee, in its sole
discretion, specifies otherwise at the time of the Award.

 

(f)                                    Lapse
of Restrictions.  If and when the
Restriction Period expires without a prior forfeiture of the Restricted Stock
subject to such Restriction Period, the certificates for such shares shall be
delivered to the Participant.  All
legends shall be removed from said certificates at the time of delivery to the
Participant except as otherwise required by applicable law.  Notwithstanding the foregoing, actual
certificates shall not be issued to the extent that book entry recordkeeping is
used.

 

(g)                                 Termination.  Unless otherwise determined by the Committee
at grant or thereafter, upon a Termination of Employment or Termination of
Consultancy for any reason during the relevant Restriction Period, all
Restricted Stock still subject to restriction shall be forfeited.

 

ARTICLE IX

NON-EMPLOYEE DIRECTOR STOCK OPTIONS

 

9.1                                 Options.  The terms of this Article IX shall apply
only to Options granted to Non-Employee Directors.

 

9.2                                 Grants.  Without further action by the Board or the
stockholders of the Company, each Non-Employee Director shall, subject to the
terms of this Plan, be granted:

 

(a)                                  Options
to purchase 20,000 shares of Common Stock as of the date the Non-Employee
Director begins service as a Non-Employee Director on the Board on or after the
Effective Date of this Plan, and

 

(b)                                 Options
to purchase 10,000 shares of Common Stock on the date of each annual
stockholders meeting of the Company, beginning with the 1998 annual
stockholders meeting, provided such Non-Employee Director has, as of each such
annual stockholders meeting, been a Non-Employee Director for at least 12
months and has not experienced a Termination of Directorship.

 

17

 

9.3                                 Non-Qualified
Stock Options.  Stock Options
granted under this Article IX shall be Non-Qualified Stock Options.

 

9.4                                 Terms
of Options.  Options granted
under this Article IX shall be subject to the following terms and
conditions and shall be in such form and contain such additional terms and
conditions, not inconsistent with terms of this Plan, as the Board shall deem
desirable:

 

(a)                                  Option Exercise Price. 
The Option exercise price per share of Common Stock subject to an Option
granted pursuant to Section 9.2 shall be equal to 100% of the Fair Market
Value of the share of Common Stock at the time of grant.

 

(b)                                 Exercisability. 
Except as otherwise provided herein, 25% of any Option granted under
this Article IX shall be exercisable on or after each of the four anniversaries
immediately following the date of grant. 
Notwithstanding the foregoing, all Options shall fully vest and become
exercisable upon a Change in Control.

 

(c)                                  Method of Exercise. 
A Non-Employee Director electing to exercise one or more Options shall give
written notice of exercise to the Company specifying the number of shares to be
purchased.  Common Stock purchased
pursuant to the exercise of a Stock Option shall be paid for at the time of
exercise as follows:  (i) in cash or by
check, bank draft or money order payable to the order of Company; (ii) solely
to the extent permitted by applicable law, if the Common Stock is traded on a
national securities exchange, the Nasdaq Stock Market, Inc. or quoted on a
national quotation system sponsored by the National Association of Securities
Dealers, through the delivery of irrevocable instructions to a broker to
deliver promptly to the Company an amount equal to the purchase price; or (iii)
on such other terms and conditions as may be acceptable to the Board (which may
include payment in full or part in the form of Common Stock owned by the
Participant for a period of at least 6 months (and for which the Participant
has good title free and clear of any liens and encumbrances) based on the Fair
Market Value of the Common Stock on the payment date as determined by the Board
or the surrender of vested Options owned by the Participant).  No shares of Common Stock shall be issued
until payment therefore, as provided herein, has been made or provided for.

 

(d)                                 Option Term. 
Except as otherwise provided herein, if not previously exercised each
Option shall expire upon the tenth anniversary of the date of the grant
thereof.

 

9.5                                 Termination
of Directorship.  The following rules
apply with regard to Options (including Options granted under Articles VI and
IX) upon the Termination of Directorship:

 

(a)                                  Termination of Directorship by reason of Death or Disability.  Except as otherwise provided herein, upon the
Termination of Directorship, on account of death or Disability, all then
outstanding Options shall fully vest and become exercisable and shall remain
exercisable by the Participant or, in the case of death, by the Participant’s
estate or by the person given authority to exercise such Options by his or her
will or by operation of law, at any time within a period of one year from the
date of such

 

18

 

Termination of Directorship, but in no
event beyond the expiration of the stated term of such Stock Option.

 

(b)                                 Otherwise Ceasing to be a Director Other than for Cause.  Except as otherwise provided herein, upon the
Termination of Directorship, on account of Retirement, resignation, failure to
stand for reelection or failure to be reelected or otherwise other than as set
forth in (b) below, all outstanding Options then exercisable and not exercised
by the Participant prior to such Termination of Directorship shall remain
exercisable, to the extent exercisable at the Termination of Directorship, at
any time within a period of one year from the date of such Termination of
Directorship, but in no event beyond the expiration of the stated term of such
Stock Option.

 

(c)                                  Cause.  Upon removal,
failure to stand for reelection or failure to be renominated for Cause, or if
the Company obtains or discovers information after Termination of Directorship
that such Participant had engaged in conduct that would have justified a
removal for Cause during such directorship, all outstanding Options of such
Participant shall immediately terminate and shall be null and void.

 

(d)                                 Cancellation of Options. 
Except as provided in (a) above, no Options that were not exercisable
during the period such person serves as a director shall thereafter become
exercisable upon a Termination of Directorship for any reason or no reason
whatsoever, and such Options shall terminate and become null and void upon a
Termination of Directorship.

 

9.6                                 Changes.

 

(a)                                  The
Awards to a Non-Employee Director under Articles VI and IX shall be subject to
Sections 4.2(a), (b) and (c) of this Plan and this Section 9.6, but shall
not be subject to Section 4.2(d).

 

(b)                                 If the
Company shall not be the surviving corporation in any merger or consolidation,
or if the Company is to be dissolved or liquidated, then, unless the surviving
corporation assumes the Options or substitutes new Options which are determined
by the Board in its sole discretion to be substantially similar in nature and
equivalent in terms and value for Options then outstanding, upon the effective
date of such merger, consolidation, liquidation or dissolution, any unexercised
Options shall expire without additional compensation to the holder thereof;
provided, that, the Board shall deliver notice to each Non-Employee Director at
least 30 days prior to the date of consummation of such merger, consolidation,
dissolution or liquidation which would result in the expiration of the Options
and during the period from the date on which such notice of termination is
delivered to the consummation of the merger, consolidation, dissolution or
liquidation, such Participant shall have the right to exercise in full
effective as of such consummation all Options that are then outstanding
(without regard to limitations on exercise otherwise contained in the Options)
but contingent on occurrence of the merger, consolidation, dissolution or
liquidation, and, provided that, if the contemplated transaction does not take
place within a 90 day period after giving such

 

19

 

notice for any reason whatsoever, the
notice, accelerated vesting and exercise shall be null and void and, if and
when appropriate, new notice shall be given as aforesaid.

 

ARTICLE X

NON-TRANSFERABILITY AND TERMINATION OF

EMPLOYMENT/CONSULTANCY PROVISIONS APPLICABLE TO
STOCK OPTIONS

AND STOCK APPRECIATION RIGHTS

 

10.1                           Except
as otherwise provided in this Section 10.1, no Stock Option or Stock
Appreciation Right shall be Transferred by the Participant otherwise than by
will or by the laws of descent and distribution.  All Stock Options and all Stock Appreciation
Rights shall be exercisable, during the Participant’s lifetime, only by the
Participant.  Tandem Stock Appreciation
Rights may be Transferred, to the extent permitted above, only with the
underlying Stock Option.  No Award shall,
except as otherwise specifically provided by law or herein, be Transferred in
any manner, and any attempt to Transfer any such Award shall be void, and no
such Award shall in any manner be used for the payment of, subject to, or
otherwise encumbered by or hypothecated for the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such Award, nor
shall it be subject to attachment or legal process for or against such
person.  Notwithstanding the foregoing,
the Committee may determine at the time of grant or thereafter, that a
Non-Qualified Stock Option granted pursuant to Article VI (other than a
Non-Qualified Stock Option granted to a Non-Employee Director) that is
otherwise not transferable pursuant to this Article X is transferable in
whole or part and in such circumstances, and under such conditions, as
specified by the Committee.

 

10.2                           Termination
of Employment or Termination of Consultancy.  The following rules apply with regard to
Options and SARs upon the Termination of Employment or Termination of
Consultancy of a Participant, unless otherwise determined by the Committee at
grant or, if no rights of the Participant (or his estate in the event of death)
are reduced, thereafter:

 

(a)                                  Termination by Reason of Death.  If a Participant’s Termination of Employment
or Termination of Consultancy is by reason of his death, any Stock Option or
SAR held by such Participant may be exercised, to the extent exercisable at the
Participant’s Termination of Employment or Termination of Consultancy, by the
Participant’s estate or by the person given authority to exercise such Options
by his or her will or by operation of law, at any time within a period of one
year from the date of such death, but in no event beyond the expiration of the stated
term of such Stock Option or SAR.

 

(b)                                 Termination by Reason of Disability or Retirement.  If a Participant’s Termination of Employment
or Termination of Consultancy is by reason of his Disability or Retirement, any
Stock Option or SAR held by such Participant may be exercised, to the extent
exercisable at the Participant’s Termination of Employment or Termination of
Consultancy, by the Participant, at any time within a period of one year from
the date of such Termination of Employment or Termination of Consultancy, but
in no event beyond the expiration of the stated term of such Stock Option or
SAR; provided, however, that, if the Participant dies within such exercise
period, any unexercised Stock

 

20

 

Option or SAR held by such Participant
shall thereafter be exercisable by the Participant’s estate or by the person
given authority to exercise such Options by his or her will or by operation of
law, to the extent to which it was exercisable at the time of death, for a
period of one year (or such other period as the Committee may specify at grant
or, if no rights of the Participant’s estate are reduced, thereafter) from the
date of such death, but in no event beyond the expiration of the stated term of
such Stock Option or SAR.

 

(c)                                  Involuntary Termination Without Cause.  If a Participant’s Termination of Employment
or Termination of Consultancy is by involuntary termination without Cause, any
Stock Option or SAR held by such Participant may be exercised, to the extent
exercisable at termination, by the Participant at any time within a period of
90 days from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option or SAR.

 

(d)                                 Voluntary Termination by the Participant.  If a Participant’s Termination of Employment
or Termination of Consultancy is a voluntary termination by the Participant and
occurs prior to, or more than 90 days after, the occurrence of an event which
would be grounds for Termination of Employment or Termination of Consultancy
for Cause (without regard to any notice or cure period requirements), any Stock
Option or SAR held by such Participant may be exercised, to the extent
exercisable at termination, by the Participant at any time within a period of
30 days from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option or SAR.

 

(e)                                  Termination for Cause. 
If a Participant’s Termination of Employment or Termination of
Consultancy is:  (i) for Cause, or (ii) a
voluntary termination (as provided in subsection (d) above) within 90 days
after an event which would be grounds for a Termination of Employment or
Termination of Consultancy for Cause, any Stock Option or SAR held by such
Participant shall thereupon terminate and expire as of the date of termination.

 

10.3                           Termination
Repayment.  Notwithstanding
anything else in this Plan to the contrary, in the event (i) a Participant’s
Termination of Employment or Termination of Consultancy occurs not more than 3
months after the exercise of a Stock Option or SAR or vesting of Restricted
Stock, or (ii) a Participant engages in a competitive activity as
determined by the Committee in its sole discretion after the exercise of a
Stock Option or SAR or vesting of Restricted Stock, the Committee may, in its
sole discretion, require the Participant to pay the Company an amount in cash,
for each share with respect to which the Option or SAR was exercised or to
which the Restricted Stock vested, equal to the difference between:  (i) the Fair Market Value of the Common Stock
on the date of such termination or determination, as applicable, and (ii) the
exercise price or purchase price (as applicable) for each such share.

 

21

 

ARTICLE XI

CHANGE IN CONTROL PROVISIONS

 

11.1                           Benefits.  In the event of a Change in Control of the
Company (as defined below), except as otherwise provided by the Committee upon
the grant of an Award to an Eligible Employee or Consultant, the Participant
shall be entitled to the following benefits:

 

(a)                                  Subject
to paragraph (b) below with regard to Options granted to Eligible Employees and
Consultants, all outstanding Awards granted prior to the Change in Control
shall be fully vested and immediately exercisable (as applicable) in their
entirety.  The Committee or the Board (as
applicable), in its sole discretion, may provide for the purchase of any such
Stock Options by the Company for an amount of cash equal to the excess of the
Change in Control Price (as defined below) of the shares of Common Stock
covered by such Stock Options, over the aggregate exercise price of such Stock
Options.  For purposes of this Section 11.1,
Change in Control Price shall mean the higher of:  (i) the highest price per share of Common
Stock paid in any transaction related to the Change in Control of the Company,
or (ii) the highest Fair Market Value per share of Common Stock at any time
during the 60 day period preceding the Change in Control.

 

(b)                                 Notwithstanding
anything to the contrary herein, unless the Committee provides otherwise at the
time an Option is granted to an Eligible Employee or Consultant hereunder or
thereafter, no acceleration of exercisability shall occur with respect to such
Option if the Committee reasonably determines in good faith, prior to the
occurrence of the Change in Control, that the Options shall be honored or
assumed, or new rights substituted therefor (each such honored, assumed or
substituted option hereinafter called an “Alternative Option”), by a
Participant’s employer (or the parent or an subsidiary of such employer), or,
in the case of a Consultant, by the entity (or its parent or subsidiary) which
retains the Consultant, immediately following the Change in Control, provided
that any such Alternative Option must meet the following criteria:

 

(1)                                  the Alternative Option must be based on stock
which is traded on an established securities market, or which will be so traded
within 30 days of the Change in Control;

 

(2)                                  the Alternative Option must provide such
Participant with rights and entitlements substantially equivalent to or better
than the rights, terms and conditions applicable under such Option, including,
but not limited to, an identical or better exercise schedule; and

 

(3)                                  the Alternative Option must have economic
value substantially equivalent to the value of such Option (determined at the
time of the Change in Control).

 

For purposes of Incentive Stock Options, any
assumed or substituted Option shall comply with the requirements of Treasury
regulation Section 1.425-1 (and any amendments thereto).

 

(c)                                  Notwithstanding
anything else herein, the Committee may, in its sole discretion, provide for
accelerated vesting of an Option (other than a grant to a Non-Employee

 

22

 

Director pursuant to Article IX
hereof), Stock Appreciation Right or Restricted Stock, upon a Termination of
Employment or Termination of Consultancy during the Pre-Change in Control
Period.  Unless otherwise determined by
the Committee, the Pre-Change in Control Period shall be the 180 day period
prior to a Change in Control.

 

11.2                           Change
in Control.  A “Change in
Control” shall be deemed to have occurred:

 

(a)                                  upon
any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange
Act (other than the Company, any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or any company owned, directly
or indirectly, by the stockholders of the Company in substantially the same proportions
as their ownership of Common Stock of the Company), becoming the owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company’s then outstanding securities (including, without limitation,
securities owned at the time of any increase in ownership);

 

(b)                                 during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in paragraph (a), (c), or (d) of this section)
or a director whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than the Board whose election by the Board or nomination for election by
the Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
the two year period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority of the
Board;

 

(c)                                  upon
the merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 50% of the combined
voting power of the Company’s then outstanding securities shall not constitute
a Change in Control of the Company; or

 

(d)                                 upon
the stockholder’s of the Company approval of a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets other than the sale of all or
substantially all of the assets of the Company to a person or persons who
beneficially own, directly or indirectly, at least 50% or more of the combined
voting power of the outstanding voting securities of the Company at the time of
the sale.

 

23

 

ARTICLE XII

TERMINATION OR AMENDMENT OF PLAN

 

12.1                           Termination
or Amendment.  Notwithstanding any
other provision of this Plan, the Board or the Committee may at any time, and
from time to time, amend, in whole or in part, any or all of the provisions of
this Plan (including any amendment deemed necessary to ensure that the Company
may comply with any regulatory requirement referred to in this Article XII),
or suspend or terminate it entirely, retroactively or otherwise; provided,
however, that, unless otherwise required by law or specifically provided
herein, the rights of a Participant with respect to Awards granted prior to
such amendment, suspension or termination, may not be impaired without the
consent of such Participant and, provided further, without the approval of the
stockholders of the Company in accordance with the laws of the State of
Delaware or applicable rules of any exchange or system on which the Company’s
securities are listed or traded, to the extent required by the applicable
provisions of Rule 16b-3 or Section 162(m) of the Code, or with respect to
Incentive Stock Options, Section 422 of the Code, no amendment may be made
which would:  (i) increase the aggregate
number of shares of Common Stock that may be issued under this Plan; (ii)
increase the maximum individual Participant limitations for a fiscal year under
Section 4.1(b); (iii) change the classification of employees and
Consultants eligible to receive Awards under this Plan; (iv) decrease the
minimum exercise price of any Stock Option or SAR; or (v) extend the maximum
option term under Section 6.3(b).

 

The Committee (and in the
case of awards of Stock Options to Non-Employee Directors, the Board) may amend
the terms of any Award theretofore granted, prospectively or retroactively,
but, subject to Article IV or as otherwise specifically provided herein,
no such amendment or other action by the Committee (or the Board) shall impair
the rights of any Participant without the Participant’s consent.

 

ARTICLE XIII

UNFUNDED PLAN

 

13.1                           Unfunded
Status of Plan.  This Plan is
intended to constitute an “unfunded” plan for incentive and deferred
compensation.  With respect to any
payments as to which a Participant has a fixed and vested interest but which
are not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company.

 

ARTICLE XIV

GENERAL PROVISIONS

 

14.1                           Legend.  The Committee or the Board, as applicable,
may require each person receiving shares pursuant to an Award under this Plan
to represent to and agree with the Company in writing that the Participant is
acquiring the shares without a view to distribution thereof.  In addition to any legend required by this
Plan, the certificates for such shares may include any legend which the
Committee or the Board, as applicable, deems appropriate to reflect any
restrictions on Transfer.

 

24

 

All certificates for shares
of Common Stock delivered under this Plan shall be subject to such stock
transfer orders and other restrictions as the Committee or the Board, as
applicable, may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed or any national securities association system
upon whose system the Common Stock is then quoted, any applicable Federal or
state securities law, and any applicable corporate law, and the Committee or
the Board, as applicable, may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

 

14.2                           Other
Plans.  Nothing contained
in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is required;
and such arrangements may be either generally applicable or applicable only in
specific cases.

 

14.3                           No
Right to Employment/Consultancy/Directorship.  Neither this Plan nor the grant of any Award
hereunder shall give any Participant or other employee or Consultant any right
with respect to continuance of employment or consultancy by the Company or any
Affiliate, nor shall they be a limitation in any way on the right of the
Company or any Affiliate by which an employee is employed or consultant retained
to terminate his employment or consultancy, as applicable, at any time.  Neither this Plan nor the grant of any Option
hereunder shall impose any obligations on the Company to retain any Participant
as a director nor shall it impose on the part of any Participant any obligation
to remain as a director of the Company.

 

14.4                           Withholding
of Taxes.  The Company shall
have the right to deduct from any payment to be made to a Participant, or to
otherwise require, prior to the issuance or delivery of any shares of Common
Stock or the payment of any cash hereunder, payment by the Participant of, any
Federal, state or local taxes required by law to be withheld.

 

The Committee shall permit
any such withholding obligation with regard to an Eligible Employee or Consultant
to be satisfied by reducing the number of shares of Common Stock otherwise
deliverable or by delivering shares of Common Stock already owned.  Any fraction of a share of Common Stock
required to satisfy such tax obligations shall be disregarded and the amount
due shall be paid instead in cash by the Participant.

 

14.5                           Listing
and Other Conditions.

 

(a)                                  As
long as the Common Stock is listed on a national securities exchange or system
sponsored by a national securities association, the issue of any shares of
Common Stock pursuant to an Award shall be conditioned upon such shares being
listed on such exchange or system. 
Notwithstanding the foregoing, the grant of an Award hereunder is not
intended to be conditional and the Company shall have no obligation to issue
such shares unless and until such shares are so listed; provided, however, that
any delay in the issuance of such shares shall be based solely on a reasonable
business decision and the right to exercise any Option with respect to such
shares shall be suspended until such listing has been effected.

 

25

 

(b)                                 If at
any time counsel to the Company shall be of the opinion that any sale or
delivery of shares of Common Stock pursuant to an Award is or may in the
circumstances be unlawful or result in the imposition of excise taxes on the
Company under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended, or
otherwise with respect to shares of Common Stock or Awards, and the right to
exercise any Option shall be suspended until, in the opinion of said counsel,
such sale or delivery shall be lawful or will not result in the imposition of
excise taxes on the Company.

 

(c)                                  Upon
termination of any period of suspension under this Section 14.5, any Award
affected by such suspension which shall not then have expired or terminated
shall be reinstated as to all shares available before such suspension and as to
shares which would otherwise have become available during the period of such
suspension, but no such suspension shall extend the term of any Option.

 

14.6                           Governing
Law.  This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).

 

14.7                           Construction.  Wherever any words are used in this Plan in
the masculine gender they shall be construed as though they were also used in
the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so
apply.  To the extent applicable, this
Plan shall be limited, construed and interpreted in a manner so as to comply
with Section 162(m) of the Code and the applicable requirements of Rule
16b-3; however, noncompliance with Section 162(m) of the Code and Rule
16b-3 shall have no impact on the effectiveness of an Award under this Plan.

 

14.8                           Other
Benefits.  No Award payment
under this Plan shall be deemed compensation for purposes of computing benefits
under any retirement plan of the Company or its subsidiaries or affiliates nor
affect any benefits under any other benefit plan now or subsequently in effect
under which the availability or amount of benefits is related to the level of
compensation.

 

14.9                           Costs.  The Company shall bear all expenses included
in administering this Plan, including expenses of issuing Common Stock pursuant
to any Awards hereunder.

 

14.10                     No
Right to Same Benefits. 
The provisions of Awards need not be the same with respect to each
Participant, and such Awards to individual Participants need not be the same in
subsequent years.

 

14.11                     Death/Disability.  The Committee or the Board, as applicable,
may in its discretion require the transferee of a Participant’s Award to supply
the Company with written notice of the Participant’s death or Disability and to
supply the Company with a copy of the will (in the case of the Participant’s
death) or such other evidence as the Committee or the Board, as

 

26

 

applicable,
deems necessary to establish the validity of the Transfer of an Award.  The Committee or the Board, as applicable,
may also require that the transferee agree in writing to be bound by all of the
terms and conditions of this Plan.

 

14.12                     Severability
of Provisions.  If any provision of
this Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and this Plan
shall be construed and enforced as if such provisions had not been included.

 

14.13                     Headings
and Captions.  The headings and
captions herein are provided for reference and convenience only, shall not be
considered part of this Plan, and shall not be employed in the construction of
this Plan.

 

ARTICLE XV

EFFECTIVE DATE OF PLAN

 

This Plan was originally
adopted by the Board effective as of April 21, 1998 (the “Effective Date”),
subject to and conditioned upon the approval of this Plan by the stockholders
of the Company in accordance with the requirements of the laws of the State of
Delaware and any applicable exchange requirements.  The Board amended the Plan in March 2001,
subject to stockholder approval (which was obtained at the 2001 annual
stockholders’ meeting), to increase the number of shares of Common Stock
available under the Plan.  The Board
approved the amendment and restatement of the Plan as set forth herein, on April 29,
2004, subject to stockholder approval to: (i) provide for the discretionary
grant of Restricted Stock to eligible Participants; (ii) increase the number of
shares of Common Stock available hereunder; (iii) increase the annual limit on
the number of shares of Common Stock that may be granted to Participants; and
(iv) permit prospective employees and Consultants to participate in the Plan,
subject to such individual actually becoming an employee or Consultant.

 

ARTICLE XVI

TERM OF PLAN

 

No Award shall be granted
pursuant to this Plan on or after the tenth anniversary of the Effective Date,
but Awards granted prior to such tenth anniversary may extend beyond that date.

 

ARTICLE XVII

NAME OF PLAN

 

This Plan shall be known as
the AXS-One Inc. 1998 Stock Option Plan, as amended.

 

27

 

EXHIBIT
A

 

PERFORMANCE
GOALS

 

Performance Goals
established for purposes of the grant and/or vesting of Restricted Stock
intended to be “performance-based” under Section 162(m) of the Code shall
be based on one or more of the following (“Performance Goals”): (i) the
attainment of certain target levels of, or a specified increase in, enterprise
value or value creation targets of the Company (or any subsidiary, division,
other operational unit of the Company or administrative department); (ii) the
attainment of certain target levels of, or a percentage increase in after-tax
or pre-tax profits of the Company, including without limitation that
attributable to continuing and/or other operations of the Company (or in either
case a subsidiary, division, other operational unit or administrative department
of the Company); (iii) the attainment of certain target levels of, or a
specified increase in, operational cash flow of the Company (or a subsidiary,
division, other operational unit or administrative department of the Company);
(iv) the attainment of a certain level of reduction of, or other specified
objectives with regard to limiting the level of increase in all or a portion
of, the Company’s bank debt or other long-term or short-term public or private
debt or other similar financial obligations of the Company, which may be
calculated net of cash balances and/or other offsets and adjustments as may be
established by the Committee; (v) the attainment of a specified percentage
increase in earnings per share or earnings per share from continuing operations
of the Company (or a subsidiary, division, other operational unit or
administrative department of the Company); (vi) the attainment of certain
target levels of, or a specified percentage increase in, net sales, revenues,
net income or earnings before income tax or other exclusions of the Company (or
a subsidiary, division, other operational unit or administrative department of
the Company); (vii) the attainment of certain target levels of, or a specified
increase in, return on capital employed (including, without limitation, return
on invested capital or return on committed capital of the Company (or any
subsidiary, division, other operational unit or administrative department of
the Company); (viii) the attainment of certain target levels of, or a percentage
increase in, after-tax or pre-tax return on stockholder equity of the Company
(or any subsidiary, division, other operational unit or administrative
department of the Company); (ix) the attainment of certain target levels of, or
a percentage increase in, market share; (x) the attainment of certain target
levels in the fair market value of the shares of the Company’s Common Stock;
(xi) the growth in the value of an investment in the Company’s Common Stock
assuming the reinvestment of dividends; (xii)  the attainment of a certain level
of, reduction of, or other specified objectives with regard to limiting the
level of or increase in, all or a portion of controllable expenses or costs or
other expenses or costs of the Company, subsidiary, parent, division,
operational unit or administrative department; or (xiii) the attainment of
certain target levels of, or a specified increase in, economic value added
targets based on a cash flow return on investment formula.

 

In addition, such
Performance Goals may be based upon the attainment of specified levels of
Company (or subsidiary, division, other operational unit or administrative
department of the Company) performance under one or more of the measures
described above relative to the performance of other corporations.  To the extent permitted under Section 162(m)
of the Code, but only to the extent permitted under Section 162(m) of the
Code (including, without limitation, compliance with any requirements for
stockholder approval), the Committee may: (i) designate

 

28

 

additional
business criteria on which the Performance Goals may be based or
(ii) adjust, modify or amend the aforementioned business criteria.

 

29

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