Document:

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                                                                  EXHIBIT 10.2.1

                               NASSDA CORPORATION

                             1998 STOCK OPTION PLAN

                         FORM OF STOCK OPTION AGREEMENT

         Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT
   ----------------------------

[Optionee's Name and Address]
-----------------------------

_____________________________

         You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:

         Grant Number                  _________________________

         Date of Grant                       _________________________

         Vesting Commencement Date           _________________________

         Exercise Price per Share            $________________________

         Total Number of Shares Granted      _________________________

         Total Exercise Price                $_________________________

         Type of Option:                     ___    Incentive Stock Option

                                             ___    Nonstatutory Stock Option

         Term/Expiration Date:               _________________________

     Vesting Schedule:
     ----------------

         This Option may be exercised, in whole or in part, in accordance with
the following schedule:

         25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48th of the Shares subject to the Option
shall vest each month thereafter.

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         Termination Period:
         ------------------

         This Option may be exercised for 45 days after termination of
employment or consulting relationship, or such longer period as may be
applicable upon death or disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.

II.  AGREEMENT
     ---------

         1.  Grant of Option. NASSDA Corporation, a California corporation (the
             ---------------
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1998 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.

             If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").

         2.  Exercise of Option.  This Option shall be exercisable  during
             ------------------
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:

                 (i)     Right to Exercise.
                         -----------------

                         (a)    This Option may not be exercised for a fraction
of a Share.

                         (b)    In the event of Optionee's  death,  disability
or other  termination  of the  employment or consulting relationship, the
exercisability of the Option is governed by Sections 6, 7 and
8 below, subject to the limitation contained in subsection 2(i)(c).

                         (c)    In no event may this Option be exercised  after
the date of  expiration  of the term of this Option asset forth in the Notice of
Grant.

                 (ii)    Method of Exercise. This Option shall be exercisable by
                         ------------------
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price.

                 No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock

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exchange upon which the Shares may then be listed. Assuming such compliance, for
income tax purposes the Shares shall be considered transferred to the Optionee
on the date on which the Option is exercised with respect to such Shares.

         3. Optionee's Representations. In the event the Shares purchasable
            --------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.

         4. Method of Payment.  Payment of the Exercise Price shall be by any of
            -----------------
of the following, or a combination  thereof, at the election of the Optionee:

            (i)   cash; or

            (ii)  check; or

            (iii) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or

            (iv)  delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.

         5. Restrictions on Exercise. This Option may not be exercised until
            ------------------------
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

         6. Termination of Relationship. In the event an Optionee's Continuous
            ---------------------------
Status as an Employee or Consultant terminates, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.

                                       -3-

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     7.  Disability of Optionee. Notwithstanding the provisions of Section 6
         ----------------------
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within six (6) months from the date of such termination (and in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination; provided, however, that if such
disability is not a "disability" as such term is defined in Section 22(e)(3) of
the Code, in the case of an Incentive Stock Option such Incentive Stock Option
shall automatically convert to a Nonstatutory Stock Option on the day three
months and one day following such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

     8.  Death of Optionee. In the event of termination of Optionee's Continuous
         -----------------
Status as an Employee or Consultant as a result of the death of Optionee, the
Option may be exercised at any time within six (6) months following the date of
death (but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee could exercise the Option at the date of death.

     9.  Non-Transferability of Option. This Option may not be transferred in
         -----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

     10. Term of Option. This Option may be exercised only within the term set
         --------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.

     11. Taxation Upon Exercise of Option. Optionee understands that, upon
         --------------------------------
exercising a Nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.

                                       -4-

<PAGE>

         12.     Tax  Consequences.  Set forth below is a brief summary as of
                 -----------------
the date of this Option of some of the federal and state tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.

                 (i)   Exercise of ISO. If this Option qualifies as an ISO,
                       ---------------
there will be no regular federal income tax liability or state income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.

                 (ii)  Exercise of ISO Following Disability. If the Optionee's
                       ------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO to
be qualified as an ISO.

                 (iii) Exercise of Nonstatutory Stock Option. There may be a
                       -------------------------------------
regular federal income tax liability and state income tax liability upon the
exercise of a Nonstatutory Stock Option. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.

                 (iv)  Disposition of Shares. In the case of an NSO, if Shares
                       ---------------------
are held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal and state income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and state income tax
purposes. If Shares purchased under an ISO are disposed of within such one-year
period or within two years after the Date of Grant, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the difference between the Exercise Price and the lesser
of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the
sale price of the Shares.

                 (v)   Notice of Disqualifying Disposition of ISO Shares. If the
                       -------------------------------------------------
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such

                                       -5-

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disposition. Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by the
Optionee.

          13. Entire Agreement; Governing Law. The Plan is incorporated herein
              -------------------------------
by reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by California law except for that body of
law pertaining to conflict of laws.

                               NASSDA CORPORATION
                               a California corporation

                               By: ____________________________________________

          OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.

          Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

Dated: _______________           ______________________________________________
                                   Optionee

                                   Residence Address:

                                       -6-

<PAGE>

                                           __________________________________

                                           __________________________________

                                           __________________________________

                                       -7-

<PAGE>

                                    EXHIBIT A
                                    ---------

                             1998 STOCK OPTION PLAN

                                 EXERCISE NOTICE

NASSDA Corporation
2975 Scott Boulevard, Suite 110
Santa Clara, CA  95054
Attention: Secretary

         1. Exercise of Option. Effective as of today, ___________, 20__, the
            ------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of NASSDA Corporation (the
"Company") under and pursuant to the 1998 Stock Option Plan, as amended (the
"Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
August 14, 2000 (the "Option Agreement").

         2. Representations of Optionee. Optionee acknowledges that Optionee has
            ---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

         3. Rights as Shareholder. Until the stock certificate evidencing such
            ---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.

            Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.

         4. Company's Right of First Refusal. Before any Shares held by Optionee
            --------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").

            (a) Notice of Proposed Transfer. The Holder of the Shares shall
                ---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise

<PAGE>

transfer such Shares; (ii) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (iii) the number of Shares to be transferred
to each Proposed Transferee; and (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Shares (the "Offered
Price"), and the Holder shall offer the Shares at the Offered Price to the
Company or its assignee(s).

         (b) Exercise of Right of First Refusal. At any time within thirty (30)
             ----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.

         (c) Purchase Price. The purchase price ("Purchase Price") for the
             --------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.

         (d) Payment. Payment of the Purchase Price shall be made, at the option
             -------
of the Company or its assignee(s), in cash (by check), by cancellation of all or
a portion of any outstanding indebtedness of the Holder to the Company (or, in
the case of repurchase by an assignee, to the assignee), or by any combination
thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.

         (e) Holder's Right to Transfer. If all of the Shares proposed in the
             --------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.

         (f) Exception for Certain Family Transfers. Anything to the contrary
             --------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.

                                      -2-

<PAGE>

         (g) Termination of Right of First Refusal. The Right of First Refusal
             -------------------------------------
shall terminate as to any Shares 90 days after the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.

      5. Tax Consultation. Optionee understands that Optionee may suffer adverse
         ---------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.

     6.  Restrictive Legends and Stop-Transfer Orders.
         --------------------------------------------

         (a) Legends. Optionee understands and agrees that the Company shall
             -------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:

         THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
         OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
         REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL TO THE ISSUER OF
         THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
         IS IN COMPLIANCE THEREWITH.

         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
         RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
         ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
         THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
         BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
         RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
         THESE SHARES.

         IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
         ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
         THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
         STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

                                      -3-

<PAGE>

        THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
        TRANSFER FOR A PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE
        COMPANY'S INITIAL UNDERWRITTEN PUBLIC OFFERING AND MAY NOT BE SOLD OR
        OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT OF THE COMPANY
        OR THE MANAGING UNDERWRITER.

        Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.

        (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
            ---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

        (c) Refusal to Transfer. The Company shall not be required (i) to
             -------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

     7. Market Standoff. Optionee hereby agrees that if so requested by the
        ---------------
Company or any representative of the underwriters in connection with any
registration of the offering of the securities of the Company under the
Securities Act of 1933, as amended (the "Act"), Optionee shall not sell or
otherwise transfer the Shares for a period of 180 days following the effective
date of a Registration filed under the Act; provided, that such restriction
shall apply only to the first registration statement of the Company to become
effective under the Act which include securities to be sold on behalf of the
Company in an underwritten offering under the Act. The Company may impose
stop-transfer instructions with respect to the Shares subject to the foregoing
restrictions until the end of each such 180-day period.

     8. Successors and Assigns. The Company may assign any of its rights under
        ----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.

     9. Interpretation. Any dispute regarding the interpretation of this
        --------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.

                                       -4-

<PAGE>

          10. Governing Law; Severability. This Agreement shall be governed by
              ---------------------------
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

          11. Notices. Any notice required or permitted hereunder shall be given
              -------
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

          12. Further Instruments. The parties agree to execute such further
              -------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

          13. Delivery of Payment. Optionee herewith delivers to the Company the
              -------------------
full Exercise Price for the Shares.

          14. Entire Agreement. The Plan and Notice of Grant/Option Agreement
              ----------------
are incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Purchaser with respect to the subject matter hereof, and may not be modified
adversely to the Purchaser's interest except by means of a writing signed by the
Company and Purchaser

Submitted by:                            Accepted by:

OPTIONEE:                                NASSDA Corporation

                                         By:__________________________________

________________________________         Its:__________________________________
      (Signature)

Address:                                 Address:
-------                                  -------

___________________________              625 Ellis Street, Suite 206
___________________________                        Mountain View, CA

                                      -5-

<PAGE>

                                    EXHIBIT B
                                    ---------

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE         :

COMPANY          :       NASSDA Corporation

SECURITY         :       COMMON STOCK

AMOUNT           :

DATE             :

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

                 (a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

                 (b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.

                 (c) Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the

<PAGE>

time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the Securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.

         In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

                 (d) Optionee hereby agrees that if so requested by the Company
or any representative of the underwriters in connection with any registration of
the offering of any securities of the Company under the Securities Act, Optionee
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall only apply to the first registration statement of the
Company to become effective under the Securities Act which include securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.

                 (e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.

                 (f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such

                                      -2-

<PAGE>

restriction, a copy of which is attached.

                                            Signature of Optionee:

                                            ___________________________

                                            Date:________________, 20__

                                      -3-<PAGE>

                                                                    EXHIBIT 10.3

                               NASSDA CORPORATION
                             2001 STOCK OPTION PLAN

     1.    Purposes of the Plan. The purposes of this Stock Option Plan are to
           --------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant.

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

           (a)    "Administrator" means the Board or any of its Committees
                   --------------
appointed in accordance with Section 4 hereof.

           (b)    "Applicable Laws" means the requirements relating to the
                   ----------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

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

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

           (e)    "Committee"  means a committee of Directors appointed by the
                   ---------
 Board in accordance with Section 4 hereof.

           (f)    "Common Stock" means the Common Stock of the Company.
                   ------------

           (g)    "Company" means NASSDA Corporation, a Delaware corporation.
                   -------

           (h)    "Consultant" means any person who is engaged by the Company
                   ----------
or any Parent or Subsidiary to render consulting or advisory services to such
entity and who is compensated for such services, including a Director.

           (i)    "Director" means a member of the Board of Directors of the
                   ---------
Company.

           (j)    "Employee" means any person, including Officers and Directors,
                   --------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181/st/

<PAGE>

day of such leave any Incentive Stock Option held by the Optionee shall cease to
be treated as an Incentive Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.

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

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

              (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

              (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or

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

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

          (n) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

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

          (p) "Option" means a stock option granted pursuant to the Plan.
               ------

          (q) "Option Agreement" means a written or electronic agreement between
               ----------------
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

          (r) "Option Exchange Program" means a program whereby outstanding
               -----------------------
Options are exchanged for Options with a lower exercise price.

          (s) "Optioned Stock" means the Common Stock subject to an Option.
               --------------

          (t) "Optionee" means the holder of an outstanding Option granted under
               --------
the Plan.

                                       -2-

<PAGE>

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

         (v) "Plan" means this 2001 Stock Option Plan.
              ----

         (w) "Service Provider" means an Employee, Director or Consultant.
              ----------------

         (x) "Share" means a share of the Common Stock, as adjusted in
              -----
accordance with Section 12 below.

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

     3.  Stock Subject to the Plan. Subject to the provisions of Section 12 of
         -------------------------
the Plan, the maximum aggregate number of Shares (as adjusted for the August
2001 four-for-three stock split) which may be subject to option and sold under
the Plan is 3,999,999 Shares (post-split), together with an annual increase in
the number of shares of Common Stock reserved for issuance hereunder on the
first day of the Company's fiscal year, beginning with October 1, 2002, equal to
the lesser of (i) 3,999,999 Shares (post-split), (ii) six percent (6.0%) of the
outstanding Shares of the Company as of the last day of the prior fiscal year or
(iii) such amount as determined by the Board of Directors. The Shares may be
authorized but unissued, or reacquired Common Stock.

         If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, upon exercise of an Option, shall
not be returned to the Plan and shall not become available for future
distribution under the Plan.

     4.  Administration of the Plan.
         --------------------------

         (a) Procedure.
             ---------

             (i) Multiple Administrative Bodies. The Plan may be administered by
                 ------------------------------
different Committees with respect to different groups of Employees and
Consultants.

             (ii) Section 162(m). To the extent that the Administrator
                  -------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

             (iii) Rule 16b-3. To the extent desirable to qualify transactions
                   ----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.

                                       -3-

<PAGE>

              (iv) Other Administration. Other than as provided above, the Plan
                   --------------------
shall be administered by (A) the Board or (B) a Committee, which Committee shall
be constituted to satisfy Applicable Laws.

         (b)  Powers of the Administrator. Subject to the provisions of the Plan
              ---------------------------
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:

              (i)    to determine the Fair Market Value;

              (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;

              (iii)  to determine the number of Shares to be covered by each
such award granted hereunder;

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

              (v)    to determine the terms and conditions, of any Option
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

              (vi)   to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;

              (vii)  to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;

              (viii) to initiate an Option Exchange Program;

              (ix)   to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

              (x)    to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

                                       -4-

<PAGE>

             (xi)  to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

             (xii) to make all other determinations deemed necessary or
advisable for administering the Plan.

        (c)  Effect of Administrator's Decision. All decisions, determinations
             ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.

     5. Eligibility.
        -----------

        (a)  Nonstatutory Stock Options may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.

        (b)  Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

        (c)  Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate such relationship at any time, with or
without cause.

        (d)  Upon the Company, or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act, or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants to options to
Service Providers:

             (i)   No Employee shall be granted in any fiscal year, Options to
purchase more than 3,999,999 Shares (post-split).

             (ii)  In connection with his or her initial employment, and
Employee may be granted Options to purchase up to an additional 2,000,000 Shares
(post-split) which shall not count against the amount set forth in subsection
(i) above.

             (iii) The foregoing limitations shall be adjusted appropriately in
connection with any change in the Company's capitalization as described in
Section 11.

             (iv)  If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the

                                       -5-

<PAGE>

cancelled Option will be counted against the limits set forth in
subsections (i)and (ii) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

     6. Term of Plan. The Plan shall become effective upon its adoption by the
        ------------
Board; provided, however, the Plan shall not become effective until the
       --------  -------
effective date of the Company's initial public offering pursuant to a
registration statement filed with the Securities and Exchange Commission. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.

     7. Term of Option. The term of each Option shall be stated in the Option
        --------------
Agreement; provided, however, that the term shall be no more than ten (10) years
           --------  -------
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.

     8. Option Exercise Price and Consideration.
        ---------------------------------------

        (a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:

          (i) In the case of an Incentive Stock Option

              (A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the exercise
price shall be no less than 110% of the Fair Market Value per Share on the date
of grant.

              (B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

          (ii)  In the case of a Nonstatutory Stock Option granted to a Service
Provider who, at the time of grant of such Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the exercise price shall be no less than
110% of the Fair Market Value per Share on the date of the grant.

          (iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a merger or other
corporate transaction.

       (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on

                                       -6-

<PAGE>

the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, (6)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, (7) any combination of
the foregoing methods of payment, or (8) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
In making (b) its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

        9.     Exercise of Option.
               ------------------

               (a) Procedure for Exercise; Rights as a Stockholder. Any Option
                   -----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence.

               An Option may not be exercised for a fraction of a Share.

                   An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a Stockholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.

                   Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

               (b) Termination of Relationship as a Service Provider. If an
                   -------------------------------------------------
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by

                                       -7-

<PAGE>

the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

        (c)    Disability of Optionee. If an Optionee ceases to be a Service
               ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

        (d)    Death of Optionee. If an Optionee dies while a Service Provider,
               -----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

        (e)    Buyout Provisions. The Administrator may at any time offer to buy
               -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

    10. Non-Transferability of Options. Options may not be sold, pledged,
        ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

    11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
        ----------------------------------------------------------------

        (a)    Changes in Capitalization. Subject to any required action by the
               -------------------------
Stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon

                                       -8-

<PAGE>

cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. 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 of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with
              --------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in

                                       -9-

<PAGE>

fair market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.

     12. Time of Granting Options and Stock Purchase Rights. The date of grant
         --------------------------------------------------
of an Option shall, for all purposes, be the date on which the Administrator
makes the determination granting such Option, or such other date as is
determined by the Administrator. Notice of the determination shall be given to
each Employee or Consultant to whom an Option is so granted within a reasonable
time after the date of such grant.

     13. Amendment and Termination of the Plan.
         -------------------------------------

         (a)  Amendment and Termination. The Board may at any time amend, alter,
              -------------------------
suspend or terminate the Plan.

         (b)  Stockholder Approval. The Board shall obtain stockholder approval
              --------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

         (c)  Effect of Amendment or Termination. No amendment, alteration,
              ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

     14. Conditions Upon Issuance of Shares.
         ----------------------------------

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

         (b)  Investment Representations. As a condition to the exercise of an
              --------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

     15. Inability to Obtain Authority. The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

                                       -10-

<PAGE>

     16. Reservation of Shares. The Company, during the term of this Plan, shall
         ---------------------
at all times reserve and keep available such numberof Shares as shall be
sufficient to satisfy the requirements of the Plan.

     17. Stockholder Approval. The Plan shall be subject to approval by the
         --------------------
stockholders of the Company within twelve (12) monthsafter the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under Applicable Laws.

                                       -11-

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