Document:

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                                                                   Exhibit 10.02

                                NETEGRITY, INC.
                             1997 STOCK OPTION PLAN

1. Purpose of the Plan.

This stock option plan (the "Plan") is intended to provide incentives:

         (a) to the officers and other employees of NeTegrity, Inc. (the
         "Company") and any present or future subsidiaries of the Company by
         providing them with opportunities to purchase stock in the Company
         pursuant to options granted hereunder which qualify as "incentive stock
         options" under Section 422 of the Internal Revenue Code of 1986, as
         amended (the "Code") ("ISO" or "ISOs"); and

         (b) to officers, employees, consultants and directors of the Company
         and any present or future subsidiaries by providing them with
         opportunities to purchase stock in the Company pursuant to options
         granted hereunder which do not qualify as ISOs ("Non-Qualified Option"
         or "Non-Qualified Options"). As used herein, the terms "parent" and
         "subsidiary" mean "parent corporation" and "subsidiary corporation,"
         respectively, as those terms are defined in Section 424 of the Code and
         the Treasury Regulations promulgated thereunder (the "Regulations").

2. Stock Subject to the Plan.

         (a) The initial maximum number of shares of common stock, par value
$.01 per share, of the Company ("Common Stock") available for stock options
granted under the Plan through the end of the Company's fiscal year ending
December 31, 1997 shall be 500,000 shares of Common Stock. The maximum number of
shares of Common Stock available for grants shall be subject to adjustment in
accordance with Section 11 thereof. Shares issued under the Plan may be
authorized but unissued shares of Common Stock or shares of Common Stock held in
treasury.

         (b) To the extent that any stock option shall lapse, terminate, expire
or otherwise be cancelled without the issuance of shares of Common Stock, the
shares of Common Stock covered by such option(s) shall again be available for
the granting of stock options.

         (c) Common Stock issuable under the Plan may be subject to such
restrictions on transfer, repurchase rights or other restrictions as shall be
determined by the Committee (as defined in Section 3 below).

3. Administration of the Plan.

         (a) The Plan shall be administered by a committee (the "Committee")
consisting of two or more members of the Company's Board of Directors. The Board
of Directors may from time to time appoint a member or members of the Committee
in substitution for or in addition to the member or members then in office and
may fill vacancies on the Committee however caused. The Committee shall choose
one of its members as Chairman and shall hold meetings at such times and places
as it shall deem advisable. A majority of the members of the Committee shall
constitute a quorum and any action may be taken by a majority of those present
and voting at any meeting. Any action may also be taken without the necessity of
a meeting by a written instrument signed by a majority of the Committee. The
decision of the Committee as to all questions of interpretation and application
of the Plan shall be final, binding and conclusive on all persons. The Committee
shall have the authority to adopt, amend and rescind such rules and regulations
as, in its opinion, may be

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advisable in the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement granted hereunder in the manner and to the extent it shall
deem expedient to carry the Plan into effect and shall be the sole and final
judge of such expediency. No Committee member shall be liable for any action or
determination made in good faith. Prior to the date of the registration of an
equity security of the Company under Section 12 of the Exchange Act, the Plan
may be administered by the Board of Directors and in such event all references
in this Plan to the Committee shall be deemed to mean the Board of Directors.

         (b) Subject to the terms of the Plan, the Committee shall have the
authority to (i) determine the employees of the Company and its subsidiaries
(from among the class of employees eligible under Section 4 to receive ISOs) to
whom ISOs may be granted, and to determine (from the class of individuals
eligible under Section 4 to receive Non-Qualified Options) to whom Non-Qualified
Options may be granted; (ii) determine the time or times at which options may be
granted; (iii) determine the option price of shares subject to each option which
price shall not be less than the minimum price specified in Section 6; (iv)
determine whether each option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to Section 9) the time or times when each option shall
become exercisable and the duration of the exercise period; (vi) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to options and the nature of such restrictions; and (vii) determine the
size of any Options under the Plan, taking into account the position or office
of the optionee with the Company, the job performance of the optionee and such
other factors as the Committee may deem relevant in the good faith exercise of
its independent business judgment.

4. Eligibility.

         Options designated as ISOs may be granted only to officers and other
employees of the Company or any subsidiary. Non-Qualified Options may be granted
to any officer, employee, consultant or director of the Company or of any of its
subsidiaries.

         In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Committee shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Committee may deem relevant.

         No option designated as an ISO shall be granted to any employee of the
Company or any subsidiary if such employee owns, immediately prior to the grant
of an option, stock representing more than 10% of the voting power or more than
10% of the value of all classes of stock of the Company or a parent or a
subsidiary, unless the purchase price for the stock under such option shall be
at least 110% of its fair market value at the time such option is granted and
the option, by its terms, shall not be exercisable more than five years from the
date it is granted. In determining the stock ownership under this paragraph, the
provisions of Section 424(d) of the Code shall be controlling. In determining
the fair market value under this paragraph, the provisions of Section 6 hereof
shall apply.

5. Option Agreement.

         Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be

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subject to the terms and conditions of the Plan. The Agreement may contain such
other terms, provisions and conditions which are not inconsistent with the Plan
as may be determined by the Committee, provided that options designated as ISOs
shall meet all of the conditions for ISOs as defined in Section 422 of the Code.
The date of grant of an option shall be as determined by the Committee. More
than one option may be granted to an individual.

6. Option Price.

         The option price or prices of shares of the Company's Common Stock for
options designated as Non-Qualified Options shall be as determined by the
Committee, but in no event shall the option price be less than the minimum legal
consideration required therefor under the laws of the State of Delaware or the
laws of any jurisdiction in which the Company or its successors in interest may
be organized. The option price or prices of shares of the Company's Common Stock
for ISOs shall be the fair market value of such Common Stock at the time the
option is granted as determined by the Committee in accordance with the
Regulations promulgated under Section 422 of the Code. If such shares are then
listed on any national securities exchange, the fair market value shall be the
mean between the high and low sales prices, if any, on such exchange on the
business day immediately preceding the date of the grant of the option or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales prices on the nearest date before and the nearest date
after the date of grant in accordance with Treasury Regulations Section
25.2512-2. If the shares are not then listed on any such exchange, the fair
market value of such shares shall be the mean between the high and low sales
prices, if any, as reported in the National Association of Securities Dealers
Automated Quotation System National Market System ("NASDAQ/NMS") for the
business day immediately preceding the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales on the nearest date before and the nearest date after
the date of grant in accordance with Treasury Regulations Section 25.2512-2. If
the shares are not then either listed on any such exchange or quoted in
NASDAQ/NMS, the fair market value shall be the mean between the average of the
"Bid" and the average of the "Ask" prices, if any, as reported in the National
Daily Quotation Service for the business day immediately preceding the date of
the grant of the option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales prices on the nearest
date before and the nearest date after the date of grant in accordance with
Treasury Regulations Section 25.2512-2. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Committee.

7. Manner of Payment; Manner of Exercise.

         (a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised, or (iii)
any combination of (i) and (ii), provided, however, that payment of the exercise
price by delivery of shares of Common Stock of the Company owned by such
optionee may be made only under such circumstances and on such terms as may from
time to time be established by the Committee. The fair market value of any
shares of the Company's Common Stock which may be delivered upon exercise of an
option shall be determined by the Committee in accordance with Section 6 hereof.
With the consent of the Committee, payment may also be made by delivery of a
properly executed exercise notice to the Company, together with a copy of
irrevocable instruments to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.

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         (b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, after ten business days from the
date of receipt of the notice by the Company, as shall be designated in such
notice, or at such time, place and manner as may be agreed upon by the Company
and the person or persons exercising the option.

8. Exercise of Options.

         Subject to the provisions of paragraphs 9 through 11, each option
granted under the Plan shall be exercisable as follows:

         (a) Vesting. The Option shall not be exercisable until the anniversary
of the date of grant, after which the option shall be exercisable in accordance
with the option agreement evidencing the grant thereof.

         (b) Full Vesting of Installments. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of the
option, unless otherwise specified by the Committee.

         (c) Partial Exercise. Each option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.

         (d) Acceleration of Vesting. The Committee shall have the right to
accelerate the date of exercise of any installment or any option; provided that
the Committee shall not, without the consent of an optionee, accelerate the
exercise date of any installment of any option granted to any employee as an ISO
if such acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code.

9. Term of Options; Exercisability.

         (a) Term. Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
may be provided in the Agreement.

         (b) Exercisability. Except as otherwise provided in the Agreement, an
option granted to an employee optionee who ceases to be an employee of the
Company or one of its subsidiaries shall be exercisable only to the extent that
the right to purchase shares under such option has accrued and is in effect on
the date such optionee ceases to be an employee of the Company or one of its
subsidiaries.

10. Options Not Transferable.

         The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution, or (solely with respect to
Non-Qualified Options) pursuant to a qualified domestic relations order, as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder, and any such option shall be

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exercisable during the lifetime of such optionee only by him. Any option granted
under the Plan shall be null and void and without effect upon the bankruptcy of
the optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, divorce, except as provided above with respect to
Non-Qualified Options, trustee process or similar process, whether legal or
equitable, upon such option.

11. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to options granted to him or her hereunder shall
be adjusted as hereinafter provided, unless otherwise specifically provided in
the written agreement between the optionee and the Company relating to such
option:

         (a) Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.

         (b) Consolidations or Mergers. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding options, either (i)
make appropriate provision for the continuation of such options by substituting
on an equitable basis for the shares then subject to such options the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition; or (ii) upon written notice to the optionees,
provide that all options must be exercised, to the extent then exercisable,
within a specified number of days of the date of such notice, at the end of
which period the options shall terminate; or (iii) terminate all options in
exchange for a cash payment equal to the excess of the fair market value of the
shares subject to such options (to the extent then exercisable) over the
exercise price thereof.

         (c) Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (b) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an option shall be entitled to receive
for the purchase price paid upon such exercise the securities he would have
received if he had exercised his option prior to such recapitalization or
reorganization.

         (d) Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.

         (e) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.

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         (f) Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.

         (g) Fractional Shares. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.

         (h) Adjustments. Upon the happening of any of the events described in
subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 2 hereof that are subject to options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Committee or
the Successor Board shall determine the specific adjustments to be made under
this paragraph 11 and, subject to Section 3, its determination shall be
conclusive.

         If any person or entity owning restricted Common Stock obtained by
exercise of an option made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs (a), (b) or
(c) above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.

12. No Special Employment Rights.

         Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee at the
time.

13. Withholding.

         The Company's obligation to deliver shares upon the exercise of any
option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and local income, excise and
employment tax withholding requirements. The Company and employee may agree to
withhold shares of Common Stock purchased upon exercise of an option to satisfy
the above-mentioned withholding requirements. With the approval of the
Committee, which it shall have sole discretion to grant, and on such terms and
conditions as the Committee may impose, the option holder may satisfy the
foregoing condition by electing to have the Company withhold from delivery
shares having a value equal to the amount of tax to be withheld. The Committee
shall also have the right to require that shares be withheld from delivery to
satisfy such condition.

14. Restrictions on Issue of Shares.

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         (a) Notwithstanding the provisions of Section 7, the Company may delay
the issuance of shares covered by the exercise of an option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:

         (i) The shares with respect to which such option has been exercised are
at the time of the issue of such shares effectively registered or qualified
under applicable Federal and state securities acts now in force or as hereafter
amended; or

         (ii) Counsel for the Company shall have given an opinion, which opinion
shall not be unreasonably conditioned or withheld, that such shares are exempt
from registration and qualification under applicable Federal and state
securities acts now in force or as hereafter amended.

         (b) It is intended that all exercises of options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.

15. Purchase for Investment; Rights of Holder on Subsequent Registration.

         Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
now in force or hereafter amended, the Company shall be under no obligation to
issue any shares covered by any option unless the person who exercises such
option, in whole or in part, shall give a written representation and undertaking
to the Company which is satisfactory in form and scope to counsel for the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option for his or her own account as an investment and not with
a view to, or for sale in connection with, the distribution of any such shares,
and that he or she will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the
Securities Act of 1933, or any other applicable law, and that if shares are
issued without such registration, a legend to this effect may be endorsed upon
the securities so issued. In the event that the Company shall, nevertheless,
deem it necessary or desirable to register under the Securities Act of 1933 or
other applicable statutes any shares with respect to which an option shall have
been exercised, or to qualify any such shares for exemption from the Securities
Act of 1933 or other applicable statutes, then the Company may take such action
and may require from each optionee such information in writing for use in any
registration statement, supplementary registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers and
directors and controlling persons from such holder against all losses, claims,
damages and liabilities arising from such use of the information so furnished
and caused by any untrue statement of any material fact therein or caused by the
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made.

16. Loans.

         The Company may make loans to optionees to permit them to exercise
options. If loans are made, the requirements of all applicable Federal and state
laws and regulations regarding such loans must be met.

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17. Modification of Outstanding Options.

         The Committee may authorize the amendment of any outstanding option
with the consent of the optionee when and subject to such conditions as are
deemed to be in the best interests of the Company and in accordance with the
purposes of this Plan.

18. Approval of Shareholders.

         The Plan shall be subject to approval by the vote of shareholders
holding at least a majority of the voting stock of the Company voting in person
or by proxy at a duly held shareholders' meeting, or by written consent of
shareholders holding at least a majority of the voting stock of the Company,
within twelve (12) months after the adoption of the Plan by the Board of
Directors and shall take effect as of the date of adoption by the Board of
Directors upon such approval. The Committee may grant options under the Plan
prior to such approval, but any such option shall become effective as of the
date of grant only upon such approval and, accordingly, no such option may be
exercisable prior to such approval.

19. Termination and Amendment.

         Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of Directors of the Company. The Board of Directors may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 19, the Board of
Directors may not, without the approval of the shareholders of the Company
obtained in the manner stated in Section 18, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under the Plan, or make any other change
in the Plan which requires shareholder approval under applicable law or
regulations, including any approval requirement which is a prerequisite for
exemptive relief under Section 16 of the Exchange Act. The Committee may grant
options to persons subject to Section 16(b) of the Exchange Act after an
amendment to the Plan by the Board of Directors requiring shareholder approval
under Section 19, but any such option shall become effective as of the date of
grant only upon such approval and, accordingly, no such option may be
exercisable prior to such approval. The Committee may terminate, amend or modify
any outstanding option without the consent of the option holder, provided,
however, that, except as provided in Section 11, without the consent of the
optionee, the Committee shall not change the number of shares subject to an
option, nor the exercise price thereof, nor extend the term of such option.

20. Compliance with Rule 16b-3.

         It is intended that the provisions of the Plan and any option granted
hereunder to a person subject to the reporting requirements of Section 16(a) of
the Exchange Act shall comply in all respects with the terms and conditions of
Rule 16b-3 under the Exchange Act, or any successor provisions, to the extent
the Company has any equity security registered pursuant to Section 12 of the
Exchange Act. Any agreement granting options shall contain such provisions as
are necessary or appropriate to assure such compliance. To the extent that any
provision hereof is found not to be in compliance with such Rule, such provision
shall be deemed to be modified so as to be in compliance with such Rule, or if
such modification is not possible, shall be deemed to be null and void, as it
relates to a recipient subject to Section 16(a) of the Exchange Act.

21. Reservation of Stock.

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         The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.

22. Limitation of Rights in the Option Shares.

         An optionee shall not be deemed for any purpose to be a shareholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.

23. Notices.

         Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.

Approved by the Directors: February 12, 1997

Approved by the Stockholders: May 22, 1997<PAGE>

                                                                   Exhibit 10.03
                                NETEGRITY, INC.
                  1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

1. PURPOSE OF THE PLAN.

         The purpose of this 1997 Non-Employee Director Stock Option Plan (the
"Plan") is to promote the interests of Netegrity, Inc. (the "Company") by
providing an inducement to attract and retain the services of qualified persons
who are not employees or officers of the Company to serve as members of its
Board of Directors.

2. SHARES SUBJECT TO THE PLAN.

         The total number of the authorized but unissued shares of common stock,
par value $.01 per share, of the Company (the "Common Stock") for which options
may be granted under this Plan shall not exceed 125,000 shares in the aggregate,
subject to adjustment in accordance with Section 9 hereof.

3. ADMINISTRATION.

         The Plan shall be administered by the Board of Directors (the "Board").
The Board shall, subject to the provisions of this Plan, have the power to
construe this Plan, to determine all questions hereunder, and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable. No member of the Board shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.

4. ELIGIBILITY; GRANT OF OPTION.

         EXISTING DIRECTOR OPTIONS. Subject to the availability of shares of
Common Stock under this Plan, each of, Eric R. Giler, Michael L. Mark, Milton J.
Pappas, Ralph B. Wagner and Stephen L. Watson who are the current directors of
the Company who are not otherwise employees the Company or any subsidiary shall
be granted initially an option to acquire twelve thousand five hundred (12,500)
shares under this Plan (the "Existing Director Options"). The date of grant for
such options granted to the five (5) current non-employee directors named above
shall be the date of adoption of this Plan by the Board.

         NEW DIRECTOR OPTIONS. Subject to the availability of shares of Common
Stock under this Plan, each person who is first elected as a member of the Board
after the adoption of this Plan and during the term of this Plan and who is not
an employee or officer of the Company on the date of such election may be
granted an option to purchase shares of Common Stock (the "New Director
Options") as determined by the Board.

         The Existing Director Options and the New Director Options
(collectively, the "Options") shall be non-qualified options not intended to
meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").

5. OPTION AGREEMENT.

         Each Option granted under this Plan shall be evidenced by an option
agreement (the "Agreement") duly executed on behalf of the Company and by the
director to whom such Option is granted, which Agreement shall (i) comply with
and be subject to the terms and conditions of this Plan and (ii) provided that
the optionee agrees to continue to serve as a director of the Company during the
term for which he was elected.

6. OPTION EXERCISE PRICE.

         EXISTING DIRECTOR OPTIONS. The option exercise price for the Existing
Director Options granted this date shall be $2.19/sh.

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         NEW DIRECTOR OPTIONS. Subject to the provisions of Section 9 hereof,
the option exercise price for New Director Options granted under this Plan shall
be the fair market value of the shares of Common Stock covered by the option on
the date of grant of the option. If such shares are then listed on any national
securities exchange, the fair market value shall be the mean between the high
and low sales prices, if any, on such exchange on the business day immediately
preceding the date of the grant of the option or, if none, shall be determined
by taking a weighted average of the means between the highest and lowest sales
prices on the nearest date before and the nearest date after the date of grant.
If the shares are not then listed on any such exchange, the fair market value of
such shares shall be the mean between the high and low sales prices, if any, as
reported in the National Association of Securities Dealers Automated Quotation
System National Market System ("NASDAQ/NMS") for the business day immediately
preceding the date of the grant of the option, or, if none, shall be determined
by taking a weighted average of the means between the highest and lowest sales
on the nearest date before and the nearest date after the date of grant. If the
shares are not then either listed on any such exchange or quoted in NASDAQ/NMS,
the fair market value shall be the mean between the average of the "Bid" and the
average of the "Ask" prices, if any, as reported in the National Daily Quotation
Service for the business day immediately preceding the date of the grant of the
option, or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales prices on the nearest date before and
the nearest date after the date of grant. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Board.

7. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS.

         (a) VESTING. Options granted under this Plan shall not be exercisable
until they become vested. Options granted under this Plan shall be vested in the
optionee and thus become exercisable, in accordance with the following schedules
provided that the optionee has continuously served as a member of the Board
through such vesting date:

            Existing
            Director Options:
            -----------------

                  Cumulative Number of Shares
                  for which Existing Director
                  Option will be Exercisable     Date of Vesting
                  --------------------------     ---------------
                           5%                    December 31, 1997
                     -----------
                           5%                    End of each subsequent calendar
                     -----------                     quarter over five years

NEW DIRECTOR OPTIONS: Will vest 5% quarterly at the end of each calendar quarter
over five (5) years.

         CHANGE OF CONTROL: In the event the Company undergoes a change of
control all of the Options granted pursuant to this Plan shall immediately vest
and become fully exercisable upon the change of control. For purposes of the
Plan, a "Change of Control" shall be deemed to have occurred if any of the
following conditions have occurred: (1) the merger or consolidation of the
Company with another entity where the Company is not the surviving entity and
where after the merger or consolidation (i) its stockholders prior to the merger
or consolidation hold less than 50% of the voting stock of the surviving entity
and (ii) its Directors prior to the merger or consolidation are less than a
majority of the Board of the surviving entity; (2) the sale of all or
substantially all of the Company's assets to a third party and subsequent to the
transaction (i) its stockholders hold less than 50% of the stock of said third
party and (ii) its Directors are less than a majority of the Board of said third
party; (3) a transaction or series of related transactions, including a merger
of the Company with another entity where the Company is the surviving entity,
whereby (i) 50% or more of the voting stock of the Company after the
transaction(s) is owned actually or beneficially by parties who held less than
thirty percent (30%) of the voting stock, actually or beneficially, prior to the
transaction(s) and (ii) its Board of Directors after the

<PAGE>

transaction(s) or within 60 days thereof, is comprised of less than a majority
of the Directors serving prior to the transaction(s); or (4) the Continuing
Directors shall not constitute a majority of the Board of Directors of the
Company. The term "Continuing Directors" shall mean a member of the Board of
Directors of the Company who either was a member of the Board of Directors of
the Company on the date this Plan was adopted by the Board of Directors or who
subsequently became a director of the Company and whose initial appointment,
initial election or initial nomination for election by the Company's
shareholders subsequent to such date was approved by a vote of a majority of the
Continuing Directors then on the Board of Directors of the Company.

         (b) EXERCISE. To the extent that the right to exercise an Option has
accrued and is in effect, the Option may be exercised in full at one time or in
part from time to time by giving written notice, signed by the person or persons
exercising the Option, to the Company, stating the number of shares of Common
Stock with respect to which the Option is being exercised, accompanied by
payment in full for such shares, which payment may be in cash or in whole or in
part in shares of Common Stock already owned for a period of at least six (6)
months by the person or persons exercising the Option, valued at fair market
value, as determined under Section 6 hereof, on the date of exercise; provided,
however, that there shall be no such exercise at any one time as to fewer than
two hundred fifty (250) shares or all of the remaining shares then purchasable
by the person or persons exercising the Option, if fewer than two hundred fifty
(250) shares. Upon such exercise, delivery of a certificate for paid-up
non-assessable shares shall be made at the principal office of the Company to
the person or persons exercising the Option at such time, during ordinary
business hours, not more than thirty (30) days from the date of receipt of the
notice by the Company, as shall be designated in such notice, or at such time,
place and manner as may be agreed upon by the Company and the person or persons
exercising the Option.

         (c) LEGEND ON CERTIFICATES. The certificates representing such shares
shall carry such appropriate legend, and such written instructions shall be
given to the Company's transfer agent, as may be deemed necessary or advisable
by counsel to the Company in order to comply with the requirements of the
Securities Act of 1933, as amended, or any state securities laws.

         (d) NON-TRANSFERABILITY. Any Option granted pursuant to this Plan shall
not be assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, as defined by
the Code, or Title I of the Employment Retirement Security Income Act, or the
rules thereunder, and shall be exercisable during the optionee's lifetime only
by him or her.

8. TERM OF OPTIONS.

         (a) Each Option shall expire ten (10) years from the date of the
granting thereof, but shall be subject to earlier termination as herein
provided.

         (b) Except as otherwise provided in this Section 8, in the event that
an optionee ceases to be a director of the Company, the Option granted to such
optionee may be exercised by him, but only to the extent that under Section 6
hereof the right to exercise the Option has accrued and is in effect. Such
Option may be exercised at any time within ninety (90) days after the date such
optionee ceases to be a director of the Company, at which time the Option shall
terminate, or prior to the date on which the Option expires by its terms,
whichever is earlier.

         (c) If the optionee ceases to be a director of the Company because the
optionee has become permanently disabled (within the meaning of Section 22(e)(3)
of the Code), the Option granted to such optionee may be exercised by the
optionee, to the extent the optionee was entitled to do so on the date such
optionee ceases to be a director. Such Option may be exercised at any time
within six (6) months after the date the optionee ceases to be a director, at
which time the Option shall terminate, or prior to the date on which the Option
otherwise expires by its terms, whichever is earlier.

         (d) In the event of the death of an optionee, the Option granted to
such optionee may be exercised, to the extent the optionee was entitled to do so
on the date of such optionee's death, by the estate of such optionee or by any
person or persons who acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death of such optionee. Such Option
may be exercised at any time within one (1) year after the date of death of such
optionee, at which time the Option shall terminate, or prior to the date on
which the Option otherwise expires by its terms, whichever is earlier.

9. ADJUSTMENTS.

<PAGE>

         Subject to the right to acceleration upon a change of control, as set
forth in Section 7(a) hereof, upon the occurrence of any of the following
events, an optionee's rights with respect to Options granted to him hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:

         (a) STOCK DIVIDENDS AND STOCK SPLITS. If, the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.

         (b) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company pursuant to which securities
of the Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, an optionee upon exercising an Option shall
be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior to such
recapitalization or reorganization.

         (c) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.

         (d) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.

         (e) FRACTIONAL SHARES. No fractional shares shall be issued under this
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.

         (f) ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs (a) or (b) above, the class and aggregate number of shares set
forth in Section 2 hereof that are subject to Options which previously have been
or subsequently may be granted under this Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Board shall
determine the specific adjustments to be made under this paragraph 9 and,
subject to Section 3, its determination shall be conclusive.

10. RESTRICTIONS ON ISSUE OF SHARES.

         Notwithstanding the provisions of Section 7 hereof, the Company may
delay the issuance of shares of Common Stock covered by the exercise of any
Option and the delivery of a certificate for such shares until one of the
following conditions shall be satisfied:

         (i) the shares with respect to which an Option has been exercised are
at the time of the issue of such shares effectively registered under applicable
Federal and state securities acts now in force or hereafter amended; or

         (ii) counsel for the Company shall have given an opinion, which opinion
shall not be unreasonably conditioned or withheld, that such shares are exempt
from registration under applicable Federal and state securities acts now in
force or hereafter amended. It is intended that all exercises of Options shall
be effective. Accordingly, the Company shall use its best efforts to bring about
compliance with the above conditions within a reasonable time, except that the
Company shall be under no obligation to cause a registration statement or a
post-effective amendment to any registration statement to be prepared at its
expense solely for the purpose of covering the issue of shares in respect of
which any Option may be exercised, except as otherwise agreed to by the Company
in writing.

11. RIGHTS OF HOLDER ON PURCHASE FOR INVESTMENT; SUBSEQUENT REGISTRATION.

         Unless the shares of Common Stock to be issued upon exercise of an
Option granted under this Plan have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended, the Company shall
be under no obligation to issue any shares covered by any Option unless the
person who exercises such Option, in whole or in part, shall give a written
representation

<PAGE>

and undertaking to the Company which is satisfactory in form and scope to
counsel to the Company and upon which, in the opinion of such counsel, the
Company may reasonably rely, that he is acquiring the shares issued to him
pursuant to such exercise of the Option for his own account as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares, and that he will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the
Securities Act of 1933, as amended, or any other applicable law, and that if
shares are issued without such registration a legend to this effect may be
endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the Securities
Act of 1933, as amended, or other applicable statutes any shares with respect to
which an Option shall have been exercised, or to qualify any such shares for
exemption from the Securities Act of 1933, as amended, or other applicable
statutes, then the Company shall take such action at its own expense and may
require from each optionee such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made.

12. LOANS PROHIBITED.

         The Company shall not, directly or indirectly, lend money to an
optionee or to any person or persons entitled to exercise an Option by reason of
the death of an optionee for the purpose of assisting him or them in the
acquisition of shares covered by an Option granted under this Plan.

13. TERMINATION AND AMENDMENT OF PLAN.

         Unless sooner terminated as herein provided, this Plan shall terminate
ten (10) years from the date upon which this Plan was duly approved by the
Board. The Board may at any time terminate this Plan or make such modification
or amendment thereof as it deems advisable.

14. LIMITATION OF RIGHTS IN THE OPTION SHARES.

         An optionee shall not be deemed for any purpose to be a shareholder of
the Company with respect to any of the Options except to the extent that the
Option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.

15. NOTICES.

         Any communication or notice required or permitted to be given under
this Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.

         Approved by Board of Directors: September 10, 1997

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