Document:

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                                                                     EXHIBIT 4.2

                                     FORM OF

                              NET PERCEPTIONS, INC.

                          REGISTRATION RIGHTS AGREEMENT

                                FEBRUARY 14, 2000

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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                  <C>
1.      Registration Rights......................................................      1
        1.1    Definitions.......................................................      1
        1.2    Request for Registration..........................................      3
        1.3    Company Registration..............................................      5
        1.4    Obligations of the Company........................................      5
        1.5    Furnish Information...............................................      7
        1.6    Expenses of Demand Registration...................................      7
        1.7    Expenses of Company Registration..................................      8
        1.8    Underwriting Requirements.........................................      8
        1.9    Delay of Registration.............................................      9
        1.10   Indemnification...................................................      9
        1.11   Reports Under Securities Exchange Act of 1934.....................     12
        1.12   Assignment of Registration Rights.................................     12
        1.13   Termination of Registration Rights................................     13

2.      Miscellaneous............................................................     13
        2.1    Successors and Assigns............................................     13
        2.2    Governing Law.....................................................     13
        2.3    Counterparts......................................................     14
        2.4    Titles and Subtitles..............................................     14
        2.5    Notices...........................................................     14
        2.6    Expenses..........................................................     14
        2.7    Amendments and Waivers............................................     14
        2.8    Severability......................................................     14
        2.9    Entire Agreement..................................................     15
</TABLE>

Schedule A     Schedule of Holders

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                          REGISTRATION RIGHTS AGREEMENT

               REGISTRATION RIGHTS AGREEMENT, dated as of February 14, 2000
(this "Agreement") by and among Net Perceptions, Inc., a Delaware corpora tion
(the "Company"), and the stockholders of Knowledge Discovery One, Inc., a
Delaware corporation ("KD One"), immediately prior to the Effective Time, all of
whom or which are listed on Schedule A hereto (the "Holders").

               The Company, Kentucky Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of the Company ("Sub"), and KD One are
parties to an Agreement and Plan of Merger, dated as of January 15, 2000, as
amended February 3, 2000 (the "Merger Agreement"), providing for the merger of
Sub with and into KD One (the "Merger"), with KD One surviving the Merger as a
wholly owned subsidiary of the Company. Capitalized terms used and not defined
herein have the meanings ascribed to such terms in the Merger Agreement.

               The Buyer and the Holders desire to provide for certain
registration rights with respect to the Buyer Common Stock received by the
Holders pursuant to the Merger Agreement (together with any other securities
issued in respect of or in exchange for such Buyer Common Stock by way of
distribution or in connection with a split or combination of, or
recapitalization or reclassification affecting, Buyer Common Stock, the
"Registrable Securities"), and it is a condition to the obligation of KD One to
consummate the Merger that this Agreement be executed and delivered by the
Company.

               In consideration of the foregoing, and the respective covenants
and agreements set forth herein, the parties hereby agree as follows.

               1. Registration Rights. The Company covenants and agrees as
follows:

               1.1 Definitions. For purposes of this Section 1:

                      (a) The term "Act" means the Securities Act of 1933, as
amended.

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                      (b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.

                      (c) The term "Holder" is defined on the first page hereof
and also includes any assignee thereof in accordance with Section 1.12 hereof.

                      (d) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.

                      (e) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.

                      (f) The term "Registrable Securities" is defined on the
first page hereof, provided that (i) such term shall not include any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned and (ii) as to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have become
effective under the Act and such securities shall have been disposed of under
such registration statement, (B) such securities shall have been transferred
pursuant to Rule 144 under the Act (or any successor provision thereto) or are
transferable in accordance with paragraph (k) of such Rule 144 (or any successor
provision thereto), (C) such securities shall have been otherwise transferred or
disposed of, and, in each of the cases (A) through (C), new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by the Company, and subsequent transfer or disposition of such
securities shall not require their registration or qualification under the Act
or any similar state law then in force, or (D) such securities shall have ceased
to be out standing.

                      (g) The term "SEC" shall mean the Securities and Exchange
Commission.

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               1.2 Request for Registration.

                      (a) If the Company shall receive at any time 180 days
after the date hereof a written request from the Holders of a majority of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least fifty percent
(50%) of the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $40,000,000, then the Company shall:

                           (i) within ten (10) days of the receipt thereof, give
        written notice of such request to all Holders;

                           (ii) effect as soon as practicable, and in any event
        within sixty (60) days of the receipt of such request, the regis tration
        under the Act of all Registrable Securities that the Holders request to
        be registered, subject to the limitations of subsection 1.2(b), within
        twenty (20) days of the mailing of such notice by the Company in
        accordance with Section 2.5; and

                           (iii)effect such registration, at the election of the
        Holders, through either (A) an underwritten public offering or (B) a
        shelf registration pursuant to Rule 415 under the Act (a "Shelf
        Registration").

                      (b) If the Holders initiating the registration request
hereun der ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to subsection 1.2(a)
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). The under writer will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this

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Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practica ble) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting, subject to the rights of stockholders under
Section 1 of the Company's Amended and Restated Investors' Rights Agreement,
dated as of December 18, 1997 (the "1997 Rights Agreement").

                      (c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimen tal to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than ninety (90) days after
the receipt of the request of the Initiating Holders; provided, however, that
the Company may not utilize this right more than once in any twelve (12) month
period.

                      (d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:

                           (i) After the Company has effected one (1)
        registration pursuant to this Section 1.2 and such registration has been
        declared or ordered effective; or

                           (ii) During the period starting with the date sixty
        (60) days prior to the Company's good faith estimate of the date of
        filing of, and ending on a date one hundred eighty (180) days after the
        effective date of, a registration subject to Section 1.3 hereof;
        provided that the Company is actively employing in good faith all
        reasonable efforts to cause such registration statement to become
        effective.

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               1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securi ties solely for cash (other than a registration relating solely
to the sale of securities to participants in a Company stock plan, a
registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities that are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 2.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered. The Company shall be required to include Registrable Securities in
only one registration under this Section 1.3.

               1.4 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously and as reasonably possible:

                      (a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registra tion statement effective for a period of up to one hundred
twenty (120) days, pro vided, however, that in the case of a Shelf Registration,
the Company will, subject to Section 1.4(b), keep the Shelf Registration
Statement continuously effective for a period of two years from the date of this
Agreement, or such shorter period that will terminate when there are no
Registrable Securities outstanding.

                      (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement and, with respect to a Shelf Registration,
subject to the further provisions of this Section 1.4(b), use reasonable efforts
to enable a Holder to use the prospectus forming a part thereof for offers and
resales of Registrable Securities, including

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without limitation, to identify such Holder as a selling security holder in the
registra tion statement for the Shelf Registration provided, however, if the
Company deter mines based upon the advice of counsel that it is advisable to
disclose in the Shelf Registration Statement a financing, acquisition or other
corporate transaction or other material event affecting the Company or its
securities, and the Board of Directors of the Company (or an executive officer
of the Company duly authorized for such purpose) shall have determined in good
faith that such disclosure would not be in the best interests of the Company and
its stockholders, the Company shall not be required to prepare and file such
amendment or supplement for such period as the Board of Directors of the Company
shall have determined in good faith is in the best interests of the Company and
its stockholders. Upon notification of the Holders whose Registrable Securities
are included in such registration of the occurrence of any event contemplated
above, such Holders shall suspend the use of the prospectus forming a part of
such registration statement until the requisite changes to such prospectus have
been made.

                      (c) Furnish to the Holders, without charge, such numbers
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

                      (d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.

                      (e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

                      (f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an

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untrue statement of a material fact or omits 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 then existing.

                      (g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.

                      (h) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

               1.5 Furnish Information.

                      (a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.

                      (b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 if, due to the operation of
subsec tion 1.5(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsec tion 1.2(a).

               1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disburse ments of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall

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bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to a demand registration pursuant to
Section 1.2 (which agreement shall bind all Holders of Registrable Securities,
even if a Holder has not signed such agreement); provided further, however, that
if at the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, business, or prospects of the Company from that
known to the Holders at the time of their request and have withdrawn the request
with reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their right to a demand registration pursuant to
Section 1.2.

               1.7 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualifica tion of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for all the selling
Holders selected by them, but excluding underwriting discounts and commissions
relating to Registrable Securities.

               1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, that the underwriters determine in their sole discretion
will not jeopardize the success of the offering (the securities so included to
be appor tioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders) but in no event shall (i) the amount of securities of the
selling Holders included in the offering be reduced below twenty-five percent
(25%) of the total amount of securities

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included in such offering or (ii) notwithstanding (i) above, any shares being
sold by a stockholder exercising a demand registration right similar to that
granted in Section 1.2 be excluded from such offering, including, without
limitation, rights granted in Section 1 of the 1997 Rights Agreement. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that is a holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder," and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.

               1.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.

               1.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:

                      (a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder, and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage,

                                       -9-

<PAGE>   12
liability or action; provided, however, that the indemnity agreement contained
in this subsection 1.10(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person. (b) To the
extent permitted by law, each selling Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within the
meaning of the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b) in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.

                      (c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
govern mental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemni fying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however,

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<PAGE>   13
that an indemnified party (together with all other indemnified parties that may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.

                      (d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

                      (e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

                      (f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.

                                      -11-

<PAGE>   14
               1.11 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:

                      (a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;

                      (b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;

                      (c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and

                      (d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Com pany that it has complied with the reporting requirements of SEC Rule 144,
the Act and the 1934 Act, or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably re quested in availing any Holder of any rule or regulation
of the SEC that permits the selling of any such securities without registration
or pursuant to such form.

               1.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 75,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to

                                      -12-

<PAGE>   15
which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of
Section 1.14 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) or
otherwise associated with such partnership shall be aggregated together and with
the partner ship; provided that all assignees and transferees who would not
qualify individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.

               1.13 Termination. This Agreement shall terminate and be of no
further force or effect on the fifth anniversary of the date the Company's
initial public offering was consummated or, as to any Holder, such earlier time
at which all Registrable Securities held by such Holder can be sold in any three
(3) month period without registration in compliance with Rule 144 of the Act.

               2. Miscellaneous.

               2.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
trans ferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agree ment.

               2.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.

                                      -13-

<PAGE>   16
               2.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

               2.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

               2.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties, or (iii) upon delivery by facsimile transmission to the party to
be notified at the facsimile number indicated for such party on the signature
page hereof, or at such other facsimile number as such party may designate by
ten (10) days' advance written notice to the other parties.

               2.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

               2.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.

               2.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

                                      -14-

<PAGE>   17
               2.9 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.

                                      -15-

<PAGE>   18
               IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.

                     NET PERCEPTIONS, INC.

                     By: /s/ Thomas M. Donnelly
                        -----------------------------------------------
                         Name:  Thomas M. Donnelly
                         Title: Chief Financial Officer

                         Address: 7901 Flying Cloud Drive
                                  Eden Prairie, MN  55344
                         Telephone: (612) 903-9424
                         Facsimile: (612) 903-9425

                     HOLDERS:

                     By: /s/ Chet Aitken
                        -----------------------------------------------
                        Name: Chet Aitken
                        Address:   100 Kingston Road
                                   New Market, Ontario
                                   L34 5W7 Canada

                        Telephone:

                    By: /s/ Nathan Beach
                        -----------------------------------------------
                        Name: Nathan Beach
                        Address:   404 Thompson Road
                                   Richardson, Texas  75080

                        Telephone:

                                      -16-

<PAGE>   19
                     By: /s/ Brian G. Benton
                        -----------------------------------------------
                        Name: Brian G. Benton
                        Address:   108 Tallstar
                                   Austin, Texas  78734

                        Telephone:

                     By: /s/ A. Bhargava
                        -----------------------------------------------
                        Name: Ajay Bhargava
                        Address:   8405 Cornerwood Drive
                                   Austin, Texas  78717

                        Telephone:

                     By: /s/ David Boles
                        -----------------------------------------------
                        Name: David Boles
                        Address:   7206 Holly Fern Cove
                                   Austin, Texas  78750

                        Telephone:

                     By: /s/ Joe Bulger
                        -----------------------------------------------
                        Name: Joe Bulger
                        Address:   16905 Capri Isle Lane
                                   Austin, Texas  78717

                        Telephone:

                     By: /s/ Roger H. Castillo
                        -----------------------------------------------
                        Name: Roger H. Castillo
                        Address:   6800 Austin Center Blvd. #931
                                   Austin, Texas  78731

                        Telephone:

                                      -17-

<PAGE>   20
                     By: /s/  Joseph Dalton
                        -----------------------------------------------
                        Name: Joseph Dalton
                        Address:   4104 Hidden Canyon
                                   Austin, Texas  78746

                        Telephone:

                     By: /s/ Mark Davis
                        -----------------------------------------------
                        Name: Mark Davis
                        Address:   10120 Scull Creek Drive
                                   Austin, Texas  78730

                        Telephone:

                     By: /s/ Paul Dehnert
                        -----------------------------------------------
                        Name: Paul Dehnert
                        Address:   3110 Maywood Avenue
                                   Austin, Texas  78703

                        Telephone:

                     By: /s/ Ron Dovich
                        -----------------------------------------------
                        Name: Ron Dovich
                        Address:   5721 Standing Rock Road
                                   Austin, Texas  78730

                        Telephone:

                     By: /s/ David Elliott
                        -----------------------------------------------
                        Name: David Elliott
                        Address:   8807 Silverarrow Circle
                                   Austin, Texas  78759

                        Telephone:

                                      -18-

<PAGE>   21
                     By: /s/ Peter J. Eppele
                        -----------------------------------------------
                        Name: Peter J. Eppele
                        Address:   1307 Delta Avenue  #1
                                   Cincinnati, Ohio  45208

                        Telephone:

                     By: /s/ Wes Fox
                        -----------------------------------------------
                        Name: Wes Fox
                        Address:   4908 Reunion Drive
                                   Plano, Texas 75024

                        Telephone:

                     By: /s/ Francine R. Frazer
                        -----------------------------------------------
                        Name: Francine R. Frazer
                        Address:   5005 Rainbow End
                                   Culver City, CA 90230

                        Telephone:

                     By: /s/ Kent A. Fuka
                        -----------------------------------------------
                        Name: Kent A. Fuka
                        Address:   10904 Low Bridge Lane
                                   Austin, Texas 78750

                        Telephone:

                     By: /s/ Coyne A. Gibson
                        -----------------------------------------------
                        Name: Coyne A. Gibson
                        Address:   5946 Cape Coral Drive
                                   Austin, Texas 78746

                        Telephone:

                                      -19-

<PAGE>   22
                     By: /s/ Jeff Goke
                        -----------------------------------------------
                        Name: Jeff Goke
                        Address:   517 Academy Drive
                                   Austin, Texas 78704

                        Telephone:

                     By: /s/ Gregory P. Goralski
                        -----------------------------------------------
                        Name: Gregory P. Goralski
                        Address:   18548 Aztec Drive
                                   Spring Lake, Michigan  49456

                        Telephone:

                     By: /s/ Kay Hackmann
                        -----------------------------------------------
                        Name: Kay Hackmann
                        Address:   11038 Galleria Cove
                                   Austin, Texas  78759

                        Telephone:

                     By: /s/ Karen Heath
                        -----------------------------------------------
                        Name: Karen Heath
                        Address:   4100 Triple Crown
                                   Austin, Texas  78746

                        Telephone:

                     By: /s/ Barry Higgins
                        -----------------------------------------------
                        Name: Barry Higgins
                        Address:   1000 Madera Court
                                   Allen, Texas  75013

                        Telephone:

                                      -20-

<PAGE>   23
                     By: /s/ Leticia Huerta
                        -----------------------------------------------
                        Name: Leticia Huerta
                        Address:   5911 Cedardale Drive
                                   Austin, Texas  78745

                        Telephone:

                     By: /s/ Lynn Keeling
                        -----------------------------------------------
                        Name: Lynn Keeling
                        Address:   2709 Benbrook
                                   Austin, Texas  78757

                        Telephone:

                     By: /s/ Sue Keller
                        -----------------------------------------------
                        Name: Sue Keller
                        Address:   4814 Timberline Drive
                                   Austin, Texas  78746

                        Telephone:

                     By: /s/ Meredith Koester
                        -----------------------------------------------
                        Name: Meredith Koester
                        Address:   8615 Rockwood #123
                                   Austin, Texas  78757

                        Telephone:

                     By: /s/ Lee Kunkle
                        -----------------------------------------------
                        Name: Lee Kunkle
                        Address:   P.O. Box 192303
                                   San Francisco, California  94119

                        Telephone:

                                      -21-

<PAGE>   24
                     By: /s/ Mary S. McCommon
                        -----------------------------------------------
                        Name: Mary S. McCommon
                        Address:   2503 Park View Drive
                                   Austin, Texas  78757

                        Telephone:

                     By: /s/ Mark McKnight
                        -----------------------------------------------
                        Name: Mark McKnight
                        Address:   1463 Hargis Creek Trail
                                   Austin, Texas  78717

                        Telephone:

                     By: /s/ Mary Mitchell
                        -----------------------------------------------
                        Name: Mary Mitchell
                        Address:   7301 Bluntleaf Cove
                                   Austin, Texas  78750

                        Telephone:

                     By: /s/ Jean Nance
                        -----------------------------------------------
                        Name: Jean Nance
                        Address:   25601 River Fern Court
                                   Leander, Texas  78641

                        Telephone:

                     By: /s/ John A. Overholt
                        -----------------------------------------------
                        Name: John A. Overholt
                        Address:   10616 Pluchea Cove
                                   Austin, Texas  78733

                        Telephone:

                                      -22-

<PAGE>   25
                     By: /s/ Jackie Parker
                        -----------------------------------------------
                        Name: Jackie Parker
                        Address:   11409 Capstan Drive
                                   Upper Marlboro, Maryland  20772

                        Telephone:

                     By: /s/ Nick Revezzo
                        -----------------------------------------------
                        Name: Nick Revezzo
                        Address:   404 Innsbrook Drive
                                   Canton, Michigan  48188

                        Telephone:

                     By: /s/ Pam Saegert
                        -----------------------------------------------
                        Name: Pam Saegert
                        Address:   5803 Highland Hills Terrace
                                   Austin, Texas  78731

                        Telephone:

                     By: /s/ Larry Scroggins
                        -----------------------------------------------
                        Name: Larry Scroggins
                        Address:   3940 Cesar Chavez
                                   San Francisco, California  94131

                        Telephone:

                     By: /s/ Lawrence E. Steury
                        -----------------------------------------------
                        Name: Lawrence E. Steury
                        Address:   3913 North Hills Drive
                                   Austin, Texas  78731

                        Telephone:

                                      -23-

<PAGE>   26
                     By: /s/ Roger Sunshine
                        -----------------------------------------------
                        Name: Roger Sunshine
                        Address:   5012 China Garden Drive
                                   Austin, Texas  78730

                        Telephone:

                     By: /s/ John Thornton
                        -----------------------------------------------
                        Name: John Thornton
                        Address:   114 W. 7th Street, Suite 1300
                                   Austin, Texas  78701

                        Telephone:

                     By: /s/ Frank R. Triolo
                        -----------------------------------------------
                        Name: Frank R. Triolo
                        Address:   3 River Otter Lane
                                   Savannah, Georgia  31411

                        Telephone:

                     By: /s/ Chien Tung
                        -----------------------------------------------
                        Name: Chien Tung
                        Address:   5404 Merrywing Circle
                                   Austin, Texas  78730

                        Telephone:

                     By: /s/ Elaine Wetmore
                        -----------------------------------------------
                        Name: Elaine Wetmore
                        Address:   2908 Maravillas Loop
                                   Austin, Texas  78735

                        Telephone:

                                      -24-

<PAGE>   27
                     By: /s/ Larry Wikelius
                        -----------------------------------------------
                        Name: Larry Wikelius
                        Address:   2908 Maravillas Loop
                                   Austin, Texas  78735

                        Telephone:

                     By: /s/ Linda Wozniak
                        -----------------------------------------------
                        Name: Linda Wozniak
                        Address:   10000 Walnut Shores
                                   Fenton, Michigan  48430

                        Telephone:

                     By: /s/ Mark R. Zuzanek
                        -----------------------------------------------
                        Name: Mark R. Zuzanek
                        Address:   2081 Lakewind Drive
                                   West Bloomfield, Michigan  48324

                        Telephone:

                     By: /s/ Lisa Olson
                        -----------------------------------------------
                        Name: Phoenix Leasing Incorporated
                        Address:   2401 Kerner Blvd.
                                   San Rafael, California 94901-5529

                        Telephone:

                     By: /s/ Robert J. Paluck
                        -----------------------------------------------
                        Name: Centerpoint Venture Partners, L.P.
                        Address:   Two Galleria Tower
                                   13455 Noel Road #1670
                                   Dallas, Texas  75240

                        Telephone:

                                      -25-

<PAGE>   28
                     By: /s/ W. Stephen Holmes
                        -----------------------------------------------
                        Name: InterWest Partners VI, L.P.
                        Address:   3000 Sand Hill Road
                                   Building 3, Suite 255
                                   Menlo Park, California  94025

                        Telephone:

                     By: /s/ W. Stephen Holmes
                        -----------------------------------------------
                        Name: InterWest Investors VI, L.P.
                        Address:   3000 Sand Hill Road
                                   Building 3, Suite 255
                                   Menlo Park, California  94025

                        Telephone:

                     By: /s/ Habib Kairouz
                        -----------------------------------------------
                        Name: RHO Management Trust I
                        Address:   152 West 57th Street
                                   New York, New York  10019

                        Telephone:

                     By: /s/ John Thornton
                        -----------------------------------------------
                        Name: Austin Ventures V, L.P.
                        Address:   114 W. 7th Street, Suite 1300
                                   Austin, Texas  78701

                        Telephone:

                     By: /s/ John Thornton
                        -----------------------------------------------
                        Name: Austin Ventures V Affiliates Fund, L.P.
                        Address:   114 W. 7th Street, Suite 1300
                                   Austin, Texas  78701

                        Telephone:

                                      -26-

<PAGE>   29
                     By: /s/ Donald J. Phillips
                        -----------------------------------------------
                        Name: Phillips-Smith Specialty Retail Group III
                        Address:   5080 Spectrum Drive
                                   Suite 805W
                                   Addison, Texas  75001

                        Telephone:

                     By: /s/ L.J. Sevin
                        -----------------------------------------------
                        Name: L.J. Sevin
                        Address:   13455 Noel Road #1670
                                   Dallas, Texas  75240

                        Telephone:

                     By: /s/ Dietrich Erdmann
                        -----------------------------------------------
                        Name: Dietrich Erdmann
                        Address:   36 Pengstrasse
                                   CH-6052 Hergiswil
                                   Switzerland

                        Telephone:

                     By: /s/ Jon W. Bayless
                        -----------------------------------------------
                        Name: Jon W. Bayless
                        Address:   13455 Noel Road #1670
                                   Dallas, Texas  75240

                        Telephone:

                     By: /s/ Terrence L. Rock
                        -----------------------------------------------
                        Name: Terrence L. Rock
                        Address:   1408 E. Jeter Road
                                   Bartonville, Texas  76226

                        Telephone:

                                      -27-

<PAGE>   30
                     By: /s/ Cindy Alff Perkins
                        -----------------------------------------------
                        Name: Estate of JoAnn K. Eisler
                        Address:   24 Vaughn's Mill Court
                                   Simpsonville, South Carolina 29681

                        Telephone:

                     By: /s/ Harvey B. Cash
                        -----------------------------------------------
                        Name: Harvey B. Cash
                        Address:   13455 Noel Road #1670
                                   Dallas, Texas  75240

                        Telephone:

                     By: /s/ John Dirvin
                        -----------------------------------------------
                        Name: John Dirvin
                        Address:   1218 Havre Lafitte Drive
                                   Austin, Texas  78746

                        Telephone:

                     By: /s/ Craig Foley
                        -----------------------------------------------
                        Name: Craig Foley
                        Address:   7 Locust Lane
                                   Bronxville, New York  10708

                        Telephone:

                                      -28-

<PAGE>   31
                                                                      Schedule A

                               Schedule of Holders

<TABLE>
<S>                                        <C>
Chet Atiken                                Jean Nance
Ajay Barghava                              John Overholt
Nathan Beach                               Jackie Parker
Brian Benton                               Nick Revezzo
David Boles                                Pam Saegert
Joe Bulger                                 Larry Scroggins
Roger Castillo                             Larry Steury
Joe Dalton                                 Roger Sunshine
Mark Davis                                 John Thornton
Paul Dehnert                               Frank Triolo
Ron Dovich                                 Chien Tung
David Elliott                              Elaine Wetmore
Peter Eppele                               Larry Wikelius
Wes Fox                                    Linda Wozniak
Fran Frazer                                Mark Zuzanek
Kent Fuka                                  Centerpoint Venture Partners L.P.
Coyne Gibson                               InterWest Partners VI, L.P.
Jeff Goke                                  InterWest Investors VI, L.P.
Greg Goralski                              RHO Management Trust I
Kay Hackmann                               L.J. Sevin
Karen Heath                                Dietrich Erdmann
Barry Higgins                              Jon Bayless
Leticia Huerta                             Terry Rock
Roger Hughes                               Estate of Jo Eisler
Lynn Keeling                               H. Berry Cash
Sue Keller                                 Austin Ventures V, L.P.
Meredith Koester                           Austin Ventures Affiliates Funds V, L.P.
Lee Kunkle                                 John Dirvin
Mary McCommon                              Phillips-Smith Specialty Retail Group III
Mark McKnight                              Craig Foley
Mary Mitchell
</TABLE><PAGE>   1
                                                                    EXHIBIT 10.8

                           KNOWLEDGE DISCOVERY ONE, INC.
                      1996 STOCK OPTION/STOCK ISSUANCE PLAN

                                   ARTICLE ONE

                               GENERAL PROVISIONS

I.      PURPOSE OF THE PLAN

        This 1996 Stock Option/Stock Issuance Plan is intended to promote the
interests of Knowledge Discovery One, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.

        Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.

II.     STRUCTURE OF THE PLAN

        A. The Plan shall be divided into two (2) separate equity programs:

                      (i) the Option Grant Program under which eligible persons
        may, at the discretion of the Plan Administrator, be granted options to
        purchase shares of Common Stock, and

                      (ii) the Stock Issuance Program under which eligible
        persons may, at the discretion of the Plan Administrator, be issued
        shares of Common Stock directly, either through the immediate purchase
        of such shares or as a bonus for services rendered the Corporation (or
        any Parent or Subsidiary).

        B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern, the interest of all
persons under the Plan.

<PAGE>   2

III.    ADMINISTRATION OF THE PLAN

        A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and may he removed by the Board at any time. The Board
may also at any time terminate the functions of the Committee and reassume all
powers and authority previously delegated to the Committee.

        B. The Plan Administrator shall have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and to make such determinations under, and issue
such interpretations of, the Plan and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any option or stock issuance thereunder.

IV.     ELIGIBILITY

        A. The persons eligible to participate in the Plan are as follows:

                      (i)   Employees,

                      (ii)  non-employee members of the Board or the board of
        directors of any Parent or Subsidiary, and

                      (iii) consultants and other independent advisors who
        provide services to the Corporation (or any Parent or Subsidiary).

        B. The Plan Administrator shall have full authority to determine, (i)
with respect to the option grants under the Option Grant Program, which eligible
persons are to receive option grants, the time or times when such option grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times at which each option is to become exercisable, the
vesting schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to
receive stock issuance, the time or times when such issuances are to be made,
the number of shares to be issued to each Participant,

                                       2
<PAGE>   3

the vesting schedule (if any) applicable to the issued shares and the
consideration to be paid for such shares.

        C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.

V.      STOCK SUBJECT TO THE PLAN

        A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 2,801,636
shares.

        B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan, and subsequently repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan, shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan.

        C. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan and (ii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of rights and benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.

                                       3
<PAGE>   4

                                   ARTICLE TWO

                              OPTION GRANT PROGRAM

I.      OPTION TERMS

        Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided however, that each such document
shall comply with the terms specified below. Each document evidencing an Incen-
tive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

        A.     Exercise Price.

               1. The exercise price per share shall be fixed by the Plan Admin-
istrator and may be less than, equal to or greater than the Fair Market Value
per share of Common Stock on the option grant date.

               2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Four
and the documents evidencing the option, be payable in cash or check made
payable to the Corporation. Should the Common Stock be registered under Section
12(g) of the 1934 Act at the time the option is exercised, then the exercise
price may also be paid as follows:

                      (i) in shares of Common Stock held for the requisite
        period necessary to avoid a charge to the Corporation's earnings for
        financial reporting purposes and valued at Fair Market Value on the
        Exercise Date, or

                      (ii) to the extent the option is exercised for vested
        shares, through a special sale and remittance procedure pursuant to
        which the Optionee shall concurrently provide irrevocable written
        instructions to (a) a Corporation designated brokerage firm to effect
        the immediate sale of the purchased shares and remit to the Corporation,
        out of the sale proceeds available on the settlement date, sufficient
        funds to cover the aggregate exercise price payable for the purchased
        shares plus all applicable Federal, state and local income and
        employment taxes required to be withheld by the Corporation by reason of
        such exercise and (b) the Corporation to deliver the

                                       4
<PAGE>   5

        certificates for the purchased shares directly to such brokerage firm in
        order to complete the sale.

        Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

        B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

        C. Effect of Termination of Service.

               1.     The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                      (i) Any option outstanding at the time of the Optionee's
        cessation of Service for any reason shall remain exercisable for such
        period of time thereafter as shall be determined by the Plan
        Administrator and set forth in the documents evidencing the option, but
        no such option shall be exercisable after the expiration of the option
        term.

                      (ii) Any option exercisable in whole or in part by the
        Optionee at the time of death may be exercised subsequently by the
        personal representative of the Optionee's estate or by the person or
        persons to whom the option is transferred pursuant to the Optionee's
        will or in accordance with the laws of descent and distribution.

                      (iii) During the applicable post-Service exercise period,
        the option may not be exercised in the aggregate for more than the
        number of vested shares for which the option is exercisable on the date
        of the Optionee's cessation of Service. Upon the expiration of the
        applicable exercise period or (if earlier) upon the expiration of the
        option term, the option shall terminate and cease to be outstanding for
        any vested shares for which the option has not been exercised. However,
        the option shall, immediately upon the Optionee's cessation of Service,
        terminate and cease to be outstanding to the extent the option is not
        otherwise at that time exercisable for vested shares.

                                       5
<PAGE>   6

                      (iv) Should the Optionee's Service be terminated for
        Misconduct, then all outstanding options held by the Optionee shall
        terminate immediately and cease to be outstanding.

               2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:

                      (i) extend the period of time for which the option is to
        remain exercisable following the Optionee's cessation of Service from
        the period otherwise in effect for that option to such greater period of
        time as the Plan Administrator shall deem appropriate, but in no event
        beyond the expiration of the option term, and/or

                      (ii) permit the option to be exercised, during the
        applicable post-Service exercise period, not only with respect to the
        number of vested shares of Common Stock for which such option is
        exercisable at the time of the Optionee's cessation of Service but also
        with respect to one or more additional installments in which the
        Optionee would have vested under the option had the Optionee continued
        in Service.

        D. Stockholder Rights. The holder of an option shall have no stock
holder rights with respect to the shares subject to the option until such person
shall have exercised the option, paid the exercise price and become a holder of
record of the purchased shares.

        E. Repurchase Rights. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

        F. First Refusal Rights. Until such time as the Common Stock is first
registered under Section 12(g) of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the Optionee
(or any successor in interest) of any shares of Common Stock issued under the
Option Grant

                                       6
<PAGE>   7

Program. Such right of first refusal shall be exercisable in accordance with the
terms established by the Plan Administrator and set forth in the document
evidencing such right.

        G. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may, in connection with the Optionee's estate plan, be assigned in whole
or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.

II.     INCENTIVE OPTIONS

        The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.

        A. Eligibility. Incentive Options may only be granted to Employees.

        B. Exercise Price. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.

        C. Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (of any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as

                                       7
<PAGE>   8

Incentive Options shall be applied on the basis of the order in which such
options are granted.

        D. 10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date and the option term shall not exceed five
(5) years measured from the option grant date.

III.    CORPORATE TRANSACTION

        A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall not so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to pur chase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.

        B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

                                       8
<PAGE>   9

        C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).

        D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number, and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the number and class of securities available for issuance under the Plan
following the consummation of such Corporate Transaction and (ii) the exercise
price payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.

        E. The Plan Administrator shall have the discretion, exercisable at the
time the option is granted or at any time while the option remains outstanding,
to provide that any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.

        F. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding to provide for the automatic acceleration of one or more outstanding
options (and the automatic termination of one or more outstanding repurchase
rights with the immediate vesting of the shares of Common Stock subject to
those rights) upon the occurrence of a Corporate Transaction, whether or not
those options are to be assumed or replaced (or those repurchase rights are to
be assigned) in the Corporate Transaction.

                                       9
<PAGE>   10

        G. The portion of my Incentive Option accelerated in connection with an
Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is
not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.

        H. The grant of options under the Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

IV.     CANCELLATION AND REGRANT OF OPTIONS

        The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Option Grant Program
and to grant in substitution new options covering the same or different number
of shares of Common Stock but with an exercise price per share based on the
Fair Market Value per share of Common Stock on the new grant date.

                                       10
<PAGE>   11

                                  ARTICLE THREE

                              STOCK ISSUANCE TERMS

I.      STOCK ISSUANCE TERMS

        Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

        A.     Purchase Price.

               1. The purchase price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair Market
Value per share of Common Stock on the stock issuance date.

               2. Subject to the provisions of Section I of Article Four, shares
of Common Stock may be issued under the Stock Issuance Program for one or both
of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

                      (i)   cash or check made payable to the Corporation, or

                      (ii)  past services rendered to the Corporation (or any
        Parent or Subsidiary).

        B.     Vesting Provisions.

               1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives.

               2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization,

                                       11
<PAGE>   12

combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.

               3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

               4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.

               5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.

        C. First Refusal Rights. Until such time as the Common Stock is first
registered under Section 12(g) of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with

                                       12
<PAGE>   13

the terms established by the Plan Administrator and set forth in the document
evidencing such right.

II.     CORPORATE TRANSACTION

        A. All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.

        B. Any cancellation rights that are assigned in the Corporate
Transaction shall automatically terminate, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Participant's Service should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective date
of such Corporate Transaction.

        C. The Plan Administrator shall have the discretion, exercisable either
at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to provide for the automatic
termination of one or more outstanding repurchase rights, and the immediate
vesting of the shares of Common Stock subject to those rights, upon the
occurrence of a Corporate Transaction, whether or not those repurchase rights
are assigned in connection with the Corporate Transaction.

III.    SHARE ESCROW/LEGENDS

        Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

                                       13
<PAGE>   14

                                  ARTICLE FOUR

                                  MISCELLANEOUS

I.      FINANCING

        A. The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price or the purchase price for shares issued under the Plan
by delivering a promissory note payable in one or more installments. The terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.

        B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.

II.     EFFECTIVE DATE AND TERM OF THE PLAN

        A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders. If
such stockholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.

        B. The Plan shall terminate upon the earliest of (i) the expiration of
the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as all fully-vested shares or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options

                                       14
<PAGE>   15

and unvested stock issuances outstanding under the Plan shall continue to have
full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.

III.    AMENDMENT OF THE PLAN

        A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect any rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan,
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

        B. Options to purchase shares of Common Stock may be granted under the
Plan and shares of Common Stock may be issued under the Plan that are in each
instance in excess of the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under the Plan are held in
escrow until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess grants or issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.

IV.     USE OF PROCEEDS

        Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.

V.      WITHHOLDING

        The Corporation's obligation to deliver shares of Common Stock upon the
exercise of any options or upon the issuance or vesting of such shares issued
under

                                       15
<PAGE>   16

the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.

VI.     REGULATORY APPROVALS

        The implementation of the Plan, the granting of any option under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.

VII.    NO EMPLOYMENT OR SERVICE RIGHTS

        Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

                                       16
<PAGE>   17

                                    APPENDIX

        The following definitions shall be in effect under the Plan:

        A. Board shall mean the Corporation's Board of Directors.

        B. Code shall mean the Internal Revenue Code of 1986, as amended.

        C. Committee shall mean a committee of one (1) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.

        D. Common Stock shall mean the Corporation's common stock.

        E. Corporate Transaction shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:

                      (i) a merger or consolidation in which securities
        possessing more than fifty percent (50%) of the total combined voting
        power of the Corporation's outstanding securities are transferred to a
        person or persons different from the persons holding those securities
        immediately prior to such transaction, or

                      (ii) the sale, transfer or other disposition of an or
        substantially all of the Corporation's assets in complete liquidation or
        dissolution of the Corporation.

        F. Corporation shall mean Knowledge Discovery One, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Knowledge Discovery One, Inc., which shall by
appropriate action adopt the Plan.

        G. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

        H. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.

                                      A-1
<PAGE>   18

        I. Fair Market Value per share of common stock on any relevant date
shall be determined in accordance with the following provisions:

                      (i) If the Common Stock is at the time traded on the
        Nasdaq National Market, then the Fair Market Value shall be the closing
        selling price per share of Common Stock on the date in question, as such
        price is reported by the National Association of Securities Dealers on
        the Nasdaq National Market or any successor system. If there is no
        closing selling price for the Common Stock on the date in question, then
        the Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

                      (ii) If the Common Stock is at the time listed on any
        Stock Exchange, then the Fair Market Value shall be the closing selling
        price per share of Common Stock on the date in question on the Stock
        Exchange determined by the Plan Administrator to be the primary market
        for the Common Stock, as such price is officially quoted in the
        composite tape of transactions on such exchange. If there is no closing
        selling price for the Common Stock on the date in question, then the
        Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

                      (iii) If the Common Stock is at the time neither listed on
        any Stock Exchange nor traded on the Nasdaq National Market, then the
        Fair Market Value shall be determined by the Plan Administrator after
        taking into account such factors as the Plan Administrator shall deem
        appropriate.

        J. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.

        K. Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:

                      (i)   such individual's involuntary dismissal or discharge
        by the Corporation for reasons other than Misconduct, or

                      (ii) such individual's voluntary resignation following (A)
        a change in his or her position with the Corporation which materially
        reduces his or her level of responsibility, (B) a reduction in his or
        her level of

                                      A-2
<PAGE>   19

        compensation (including base salary, fringe benefits and participation
        in corporate-performance based bonus or incentive programs) by more than
        fifteen percent (15%) or (C) a relocation of such individual's place of
        employment by more than fifty (50) miles, provided and only if such
        change, reduction or relocation is effected by the Corporation without
        the individual's consent.

        L. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or ommissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

        M. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

        N. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.

        O. Option Grant Program shall mean the option grant program in effect
under the Plan.

        P. Optionee shall mean any person to whom an option is granted under the
Option Grant Program.

        Q. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

        R. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.

                                      A-3
<PAGE>   20

        S. Permanent Disability shall mean the inability of the optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.

        T. Plan shall mean the Corporation's 1996 Stock Option/Stock Issuance
Plan, as set forth in this document.

        U. Plan Administrator shall mean either the Board or the Committee, to
the extent the Committee is at the time responsible for the administration of
the Plan.

        V. Service shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.

        W. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.

        X. Stock Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

        Y. Stock Issuance Program shall mean the stock issuance program in
effect Under the Plan.

        Z. Subsidiary shall mean my corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

        AA. 10% Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

                                      A-4
<PAGE>   21

                           KNOWLEDGE DISCOVERY ONE, INC.
                             STOCK OPTION AGREEMENT

RECITALS

A. The Board has adopted the Plan for the purpose of retaining the services of
selected Employees, non-employee members of the Board or of the board of
directors of any Parent or Subsidiary and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).

B. Optionee is to render valuable services to the Corporation (or a Parent or
Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.

C. All capitalized terms in this Agreement shall have the meaning assigned to
them in the attached Appendix.

               NOW, THEREFORE, it is hereby agreed as follows:

        1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.

        2. Option Term. This option shall have a term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5, 6 or
17.

        3. Limited Transferability. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may, in connection
with Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of Optionee's immediate family members or to a
trust established exclusively for the benefit of one or more such family
members. The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the

                                       1
<PAGE>   22

assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.

        4. Exercisability/Vesting.

               (a) This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule, and shall remain so exercisable until the Expiration
Date or sooner termination of the option term under Paragraph 5, 6 or 17. Any
unvested Option Shares purchased under this option shall be subject to
repurchase by the Corporation, at the Exercise Price paid per share, upon
Optionee's cessation of Service prior to vesting in those Option Shares.

               (b) Optionee shall, in accordance with the Vesting Schedule, vest
in the Option Shares in one or more installments over his or her period of
Service. Vesting in the Option Shares may be accelerated pursuant to the
provisions of Paragraph 6. In no event, however, shall any additional Option
Shares vest following Optionee's cessation of Service.

        5. Cessation of Service. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

                      (i) Should Optionee cease to remain in Service for any
        reason (other than death, Permanent Disability or Misconduct) while this
        option is outstanding, then Optionee shall have a period of three (3)
        months (commencing with the date of such cessation of Service) during
        which to exercise this option, but in no event shall this option be
        exercisable at any time after the Expiration Date.

                      (ii) Should Optionee die while this option is outstanding,
        then the personal representative of Optionee's estate or the person or
        persons to whom the option is transferred pursuant to Optionee's will or
        in accordance with the laws of descent and distribution shall have the
        right to exercise this option. Such right shall lapse and this option
        shall cease to be outstanding upon the earlier of (A) the expiration of
        the twelve (12) month period measured from the date of Optionee's death
        or (B) the Expiration Date.

                                       2
<PAGE>   23

                      (iii) Should Optionee cease Service by reason of Permanent
        Disability while this option is outstanding, then Optionee shall have a
        period of twelve (12) months (commencing with the date of such cessation
        of Service) during which to exercise this option. In no event shall this
        Option be exercisable at any time after the Expiration Date.

                      (iv) Should Optionee's Service be terminated for
        Misconduct, then this option shall terminate immediately and cease to
        remain outstanding.

                      (v) During the limited post-Service exercise period, this
        option may not be exercised in the aggregate for more than the number of
        Option Shares in which Optionee is, at the time of Optionee's cessation
        of Service, vested in accordance with the Vesting Schedule. Upon the
        expiration of such limited exercise period or (if earlier) upon the
        Expiration Date, this option shall terminate and cease to be outstanding
        for any vested Option Shares for which the option has not been
        exercised. To the extent Optionee is not vested in the Option Shares at
        the time of Optionee's cessation of Service, this option shall
        immediately terminate and cease to be outstanding with respect to those
        shares.

                      (vi) In the event of a Corporate Transaction, the
        provisions of Paragraph 6 shall govern the period for which this option
        is to remain exercisable following Optionee's cessation of Service and
        shall supersede any provisions to the contrary in this paragraph.

        6. Special Termination of Option.

               (a) All the Option Shares subject to this option at the time of a
Corporate Transaction but not otherwise vested shall automatically vest and the
Corporation's repurchase rights with respect to those Option Shares shall
immediately terminate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all of the
Option Shares as fully-vested shares of Common Stock and may be exercised for
any or all of those Option Shares. No such accelerated vesting of the Option
Shares, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) and the Corporations repurchase rights with respect to the unvested
option shares are to be assigned to such successor corportion (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program

                                       3
<PAGE>   24

of the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the Exercise Price payable for such
shares) and provides for subsequent payout in accordance with the Vesting
Schedule. The determination of option comparability under clause (i) shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.

               (b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

               (c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable in consummation of such Corporate Transaction had the
option been exercised immediately prior to such Corporate Transaction, and
appropriate adjustments shall also be made to the Exercise Price, provided the
aggregate Exercise Price shall remain the same.

               (d) Should there occur in Involuntary Termination of Optionee's
Service within eighteen (18) months following a Corporate Transaction in which
this option is assumed or replaced and the Corporation's repurchase rights with
respect to the unvested Option Shares are assigned, all the Option Shares at the
time subject to this option but not otherwise vested shall automatically vest
and the Corporation's repurchase rights with respect to those Option Shares
shall terminate so that this option shall immediately become exercisable for all
those Option Shares as fully- vested shares of Common Stock and may be exercised
for any or all of those vested Option Shares at any time prior to the earlier of
(i) the Expiration Date or (ii) the expiration of the one (1)-year period
measured from the date of such Involuntary Termination.

               (e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

        7. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding

                                       4
<PAGE>   25

Common Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the total number and/or class of
securities subject to this option and (ii) the Exercise Price in order to
reflect such change and thereby preclude a dilution or enlargement of benefits
hereunder.

        8. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

        9. Manner of Exercising Option.

               (a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                      (i) Execute and deliver to the Corporation a Purchase
        Agreement for the Option Shares for which the option is exercised.

                      (ii) Pay the aggregate Exercise Price for the purchased
        shares in one or more of the following forms:

                      (A) cash or check made payable to the Corporation; or

                      (B) a promissory note payable to the Corporation, but only
               to the extent authorized by the Plan Administrator in accordance
               with Paragraph 14.

        Should the Common Stock be registered under Section 12(g) of the 1934
Act at the time the option is exercised, then the Exercise Price may also be
paid as follows:

                      (C) in shares of Common Stock held by Optionee (or any
               other person or persons exercising the option) for the requisite
               period necessary to avoid a charge to the Corporation's earnings
               for financial reporting purposes and valued at Fair Market Value
               on the Exercise Date; or

                      (D) to the extent the option is exercised for vested
               Option Shares, through a special sale and remittance procedure
               pursuant to

                                       5
<PAGE>   26

               which Optionee (or any other person or persons exercising the
               option) shall concurrently provide irrevocable written
               instructions (I) to a Corporation-designated brokerage firm to
               effect the immediate sale of the purchased shares and remit to
               the Corporation, out of the sale proceeds available on the
               settlement date, sufficient funds to cover the aggregate Exercise
               Price payable for the purchased shares plus all applicable
               Federal, state and local income and employment taxes required to
               be withheld by the Corporation by reason of such exercise and
               (II) to the Corporation to deliver the certificates for the
               purchased shares directly to such brokerage firm in order to
               complete the sale.

                      Except to the extent the sale and remittance procedure is
               utilized in connection with the option exercise, payment of the
               Exercise Price must accompany the Purchase Agreement delivered to
               the Corporation in connection with the option exercise.

                      (iii) Furnish to the Corporation appropriate documentation
        that the person or persons exercising the option (if other than
        Optionee) have the right to exercise this option.

                      (iv) Execute and deliver to the Corporation such written
        representations as may be requested by the Corporation in order for it
        to comply with the applicable requirements of Federal and state
        securities laws.

                      (v) Make appropriate arrangements with the Corporation (or
        Parent or Subsidiary employing or retaining Optionee) for the
        satisfaction of all Federal, state and local income and employment tax
        withholding requirements applicable to the option exercise.

               (b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto. To the extent any such Option Shares are
unvested, the certificates for those Option Shares shall be endorsed with an
appropriate legend evidencing the Corporation's repurchase rights and may be
held in escrow with the Corporation until such shares vest.

               (c) In no event may this option be exercised for any fractional
shares.

                                       6
<PAGE>   27

        10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF
THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.

        11. Compliance with Laws and Regulations.

               (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

               (b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.

        12. Successors and Assigns. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.

        13. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

        14. Financing. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the

                                       7
<PAGE>   28

requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.

        15. Construction. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

        16. Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Texas without
resort to that State's conflict-of-laws rules.

        17. Stockholder Approval.

               (a) The grant of this option is subject to approval of the Plan
by the Corporation's stockholders within twelve (12) months after the adoption
of the Plan by the Board. Notwithstanding any provision of this Agreement to the
contrary, this option may not be exercised in whole or in part until such
stockholder approval is obtained. In the event that such stockholder approval is
not obtained, then this option shall terminate in its entirety and Optionee
shall have no further rights to acquire any Option Shares hereunder.

               (b) If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.

        18. Additional Terms Applicable to an Incentive Option. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

                      (i) This option shall cease to qualify for favorable tax
        treatment as an Incentive Option if (and to the extent) this option is
        exercised for one or more Option Shares: (A) more than three (3) months
        after the date Optionee ceases to be an Employee for any reason other
        than death or

                                       8
<PAGE>   29

        Permanent Disability or (B) more than twelve (12) months after the date
        Optionee ceases to be an Employee by reason of Permanent Disability.

                      (ii) This option shall not become exercisable in the
        calendar year in which granted if (and to the extent) the aggregate Fair
        Market Value (determined at the Grant Date) of the Common Stock for
        which this option would otherwise first become exercisable in such
        calendar year would, when added to the aggregate value (determined as of
        the respective date or dates of grant) of the Common Stock and any other
        securities for which one or more other Incentive Options granted to
        Optionee prior to the Grant Date (whether under the Plan or any other
        option plan of the Corporation or any Parent or Subsidiary) first become
        exercisable during the same calendar year, exceed One Hundred Thousand
        Dollars ($100,000) in the aggregate. To the extent the exercisability of
        this option is deferred by reason of the foregoing limitation, the
        deferred portion shall become exercisable in the first calendar year or
        years thereafter in which the One Hundred Thousand Dollar ($100,000)
        limitation of this Paragraph 18(ii) would not be contravened, but such
        deferral shall in all events end immediately prior to the effective date
        of a Corporate Transaction in which this option is not to be assumed or
        the Optionee's Involuntary Termination in connection with a Corporate
        Transaction, whereupon the option shall become immediately exercisable
        as a Non-Statutory Option for the deferred portion of the Option Shares.

                      (iii) Should Optionee hold, in addition to this Option,
        one or more other options to purchase Common Stock which become
        exercisable for the first time in the same calendar year as this option,
        then the foregoing limitations on the exercisability of such options as
        Incentive Options shall be applied on the basis of the order in which
        such options are granted.

                                       9
<PAGE>   30

                                    APPENDIX

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Stock Option Agreement.

B. Board shall mean the Corporation's Board of Directors.

C. Code shall mean the Internal Revenue Code of 1986, as amended.

D. Common Stock shall mean the Corporation's common stock.

E. Corporate Transaction shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:

                      (i) a merger or consolidation in which securities
        possessing more than fifty percent (50%) of the total combined voting
        power of the Corporation's outstanding securities am transferred to a
        person or persons different from the persons holding those securities
        immediately prior to such transaction, or

                      (ii) the sale, transfer or other disposition of all or
        substantially all of the Corporation's assets in complete liquidation or
        dissolution of the corporation.

F. Corporation shall mean Knowledge Discovery One, Inc., a Delaware corporation.

G. Employee shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.

H. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.

I. Exercise Price shall mean the exercise price per share as specified in the
Grant Notice.

                                       10
<PAGE>   31

J. Expiration Date shall mean the date on which the option expires as specified
in the Grant Notice.

K. Fair Market Value per share of the Common Stock on any relevant date shall be
determined in accordance with the following provisions:

                      (iii) If the Common Stock is at the time traded on the
        Nasdaq National Market, then the Fair Market Value shall be the closing
        selling price per share of Common Stock on the date in question, as the
        price is reported by the National Association of Securities Dealers on
        the Nasdaq National Market or any successor system. If there is no
        closing selling price for the Common Stock on the date in question, then
        the Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

                      (iv) If the Common Stork is at the time listed on any
        Stock Exchange, then the Fair Market Value shall be the closing selling
        price per share of Common Stock on the date in question on the Stock
        Exchange determined by the Plan Administrator to be the primary market
        for the Common Stock, as such price is officially quoted in the
        composite tape of transactions on such exchange. If there is no closing
        selling price for the Common Stock on the date in question, then the
        Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

                      (v) If the Common Stock is at the time neither listed on
        any Stock Exchange nor traded on the Nasdaq National Market, then the
        Fair Market Value shall be determined by the Plan Administrator after
        taking into account such factors as the Plan Administrator shall deem
        appropriate.

L. Grant Date shall mean the date of grant of the option as specified in the
Grant Notice.

M. Grant Notice shall mean the Notice of Grant of Stock Option accompanying the
Agreement, pursuant to which Optionee has been informed of the basic terms of
the option evidenced hereby.

N. Incentive Option shall mean an option which satisfies the requirements of
Code Section 422.

                                       11
<PAGE>   32

O. Involuntary Termination shall mean the termination of Optionee's Service
which occurs by reason of:

                      (vi)  Optionee's involuntary dismissal or discharge by the
        Corporation for reasons other than Misconduct, or

                      (vii) Optionee's voluntary resignation following (A) a
        change in Optionee's position with the Corporation (or Parent or
        Subsidiary employing Optionee) which materially reduces Optionee's level
        of responsibility, (B) a reduction in Optionee's level of compensation
        (including base salary, fringe benefits and participation in corporate
        performance based bonus or incentive programs) by more than fifteen
        percent (15%) or (C) a relocation of Optionee's place of employment by
        more than fifty (50) miles, provided and only if such change, reduction
        or relocation is effected by the Corporation without Optionee's consent.

P. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).

Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

R. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.

S. Option Shares shall mean the number of shares of Common Stock subject to the
option as specified in the Grant Notice.

T. Optionee shall mean the person to whom the option is granted as specified in
the Grant Notice.

U. Parent shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of

                                       12
<PAGE>   33

the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

V. Permanent Disability shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which is expected to result in death or has lasted or can be
expected to last for a continuous period of twelve (12) months or more.

W. Plan shall mean the Corporation's 1996 Stock Option/Stock Issuance Plan.

X. Plan Administrator shall mean either the Board or a committee of Board
members, to the extent the committee is at the time responsible for the
administration of the Plan.

Y. Purchase Agreement shall mean the stock purchase agreement in substantially
the form of Exhibit B to the Grant Notice.

Z. Service shall mean Optionee's performance of services for the Corporation (or
any Parent or Subsidiary) in the capacity of an Employee, a non-employee member
of the board of directors or a consultant or independent advisor.

AA. Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange.

BB. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

CC. Vesting Schedule shall mean the vesting schedule specified in the Grant
Notice, as such vesting schedule is subject to acceleration in the event of a
Corporate Transaction.

                                       13

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