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                              SYNERON MEDICAL LTD.

                        THE 2004 ISRAEL STOCK OPTION PLAN

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                                TABLE OF CONTENTS

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1.       PURPOSE............................................................1

2.       DEFINITIONS........................................................1

3.       ADMINISTRATION OF THE PLAN.........................................4

4.       DESIGNATION OF PARTICIPANTS & AWARD OF OPTIONS.....................6

5.       DESIGNATION OF OPTIONS PURSUANT TO SECTION 102.....................6

6.       TRUSTEE............................................................7

7.       SHARES RESERVED FOR THE PLAN; RESTRICTION THEREON..................8

8.       EXERCISE PRICE.....................................................8

9.       ADJUSTMENTS........................................................8

10.      TERM AND EXERCISE OF OPTIONS.......................................9

11.      VESTING OF OPTIONS................................................11

12.      PURCHASE FOR INVESTMENT...........................................11

13.      DIVIDENDS.........................................................11

14.      RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS.................11

15.      EFFECTIVE DATE AND DURATION OF THE PLANS..........................12

16.      AMENDMENTS OR TERMINATION.........................................12

17.      GOVERNMENT REGULATIONS............................................12

18.      CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES.......................12

19.      GOVERNING LAW & JURISDICTION......................................13

20.      TAX CONSEQUENCES..................................................13

21.      NON-EXCLUSIVITY OF THE PLAN.......................................13

22.      MULTIPLE AGREEMENTS...............................................13

23.      TERM OF PLAN......................................................13

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This plan, as amended from time to time,  shall be known as the Syneron  Medical
Ltd. 2004 Israel Stock Option Plan (the "PLAN").

1.       PURPOSE

         The Plan is intended to provide an incentive  to retain,  in the employ
of the  Company and its  Affiliates  (as defined  below),  persons of  training,
experience,  and  ability,  to attract new  employees,  directors,  consultants,
service  providers and any other entity which the Board (as defined below) shall
decide their services are considered  valuable to the Company,  to encourage the
sense of proprietorship of such persons, and to stimulate the active interest of
such  persons  in the  development  and  financial  success  of the  Company  by
providing them with opportunities to purchase shares in the Company, pursuant to
the Plan.

         This Plan shall apply only to Grantees  who are  residents of the state
of Israel or those who are deemed to be residents of the state of Israel for the
payment of tax.

2.       DEFINITIONS

         For purposes of the Plan and related  documents,  including  the Option
Agreement, the following definitions shall apply:

         2.1  "AFFILIATE"  means any "employing  company"  within the meaning of
Section 102(a) of the Ordinance.

         2.2 "APPROVED 102 OPTION" means an Option  granted  pursuant to Section
102(b) of the  Ordinance  and held in trust by a Trustee  for the benefit of the
Grantee.

         2.3  "ASSUMED"  means that  pursuant  to a  Transaction  either (i) the
Option is expressly affirmed by the Company or (ii) the contractual  obligations
represented by the Option are expressly  assumed (and not simply by operation of
law) by the successor  entity or its parent in connection  with the  Transaction
with  appropriate  adjustments  to the  number  and  type of  securities  of the
successor  entity or its  parent  subject  to the  Option  and the  exercise  or
purchase price thereof which at least preserves the compensation  element of the
Option  existing at the time of the Transaction as determined in accordance with
the instruments evidencing the agreement to assume the Option.

         2.4 "BOARD" means the Board of Directors of the Company.

         2.5 "CAPITAL  GAIN OPTION" OR "CGO" shall have the meaning set forth in
Section 5.3 below.

         2.6  "CAUSE"  as such term is  expressly  defined  in a  then-effective
written agreement between the Grantee and the Company, or such Affiliate,  or in
the absence of such  then-effective  written agreement and definition means, (i)
conviction  of any felony  involving  moral  turpitude or affecting the Company;
(ii) any  refusal to carry out a  reasonable  directive  of the chief  executive
officer,  the Board or the  Grantee's  direct  supervisor,  which  involves  the
business of the  Company or its  Affiliates  and was  capable of being  lawfully
performed;  (iii)  embezzlement of funds of the Company or its Affiliates;  (iv)
any breach of the Grantee's  fiduciary  duties or duties

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of care of the Company;  including without limitation disclosure of confidential
information  of the  Company;  and (v) any conduct  (other than  conduct in good
faith)  reasonably  determined by the Board to be materially  detrimental to the
Company.

         2.7 "CHAIRMAN" means the chairman of the Committee.

         2.8  "COMMITTEE"  means  any  committee   appointed  by  the  Board  to
administer the Plan.

         2.9  "COMPANIES  LAW" means the  Israeli  Companies  Law, as amended or
replaced from time to time.

         2.10  "COMPANY"  means Syneron  Medical  Ltd., a corporation  organized
under the laws of the state of Israel.

         2.11 "CONTROLLING SHAREHOLDER" shall have the meaning ascribed to it in
Section 32(9) of the Ordinance.

         2.12  "DATE  OF  GRANT"  means,  the date of  grant  of an  Option,  as
determined  by the  Board or  Committee  and set forth in the  Grantee's  Option
Agreement.

         2.13  "EMPLOYEE"  means a person  subject  to Israeli  taxation  who is
employed  by the  Company or its  Affiliates,  including  an  individual  who is
serving  as a  director  or an office  holder,  but  excluding  any  Controlling
Shareholder.

         2.14  "EXPIRATION  DATE"  means  the date upon  which an  Option  shall
expire, as set forth in Section 10.2 of the Plan.

         2.15 "FAIR MARKET VALUE" means as of any date,  the value of the Shares
determined as follows:

                  If the Shares are listed on any established  stock exchange or
a national  market system,  including  without  limitation  the NASDAQ  National
Market system,  or the NASDAQ  SmallCap  Market of the NASDAQ Stock Market,  the
Fair  Market  Value  shall be the  closing  sales  price for such Shares (or the
closing bid, if no sales were reported), as quoted on such exchange or system on
the  date of  determination,  as  reported  in any  source  as the  Board  deems
reliable;

                  Without  derogating from the above,  solely for the purpose of
determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if
at the Date of Grant the Company's  shares are listed on any  established  stock
exchange  or a  national  market  system  or if the  Company's  shares  will  be
registered for trading within ninety (90) days following the Date of Grant,  the
Fair  Market  Value  of a Share at the Date of  Grant  shall  be  determined  in
accordance  with the average  value of the  Company's  shares on the thirty (30)
trading  days  preceding  the Date of Grant or on the thirty (30)  trading  days
following the date of registration for trading, as the case may be;

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                  If the Shares are regularly quoted by a recognized  securities
dealer but selling  prices are not reported,  the Fair Market Value shall be the
mean  between  the high bid and low asked  prices  for the Shares on the date of
determination, or;

                  In the absence of an  established  market for the Shares,  the
Fair Market Value thereof shall be determined in good faith by the Board.

         2.16 "ITA" means the Israeli Tax Authorities.

         2.17  "NON-EMPLOYEE"  means a consultant,  adviser,  service  provider,
Controlling Shareholder or any other person who is not an Employee.

         2.18 "ORDINARY INCOME OPTION" OR "OIO" shall have the meaning set forth
in Section 5.4 below.

         2.19  "OPTION"  means an option to  purchase  one or more Shares of the
Company pursuant to the Plan.

         2.20 "102 OPTION"  means any Option  granted to  Employees  pursuant to
Section 102 of the Ordinance.

         2.21 "3(I) OPTION" means an Option granted  pursuant to Section 3(i) of
the Ordinance to any person who is a Non- Employee.

         2.22 "GRANTEE" means a person who receives or holds an Option under the
Plan.

         2.23 "OPTION  AGREEMENT" means the share option  agreement  between the
Company and an Grantee that sets out the terms and conditions of an Option.

         2.24  "ORDINANCE"  means the 1961  Israeli  Income Tax  Ordinance  [New
Version] 1961 as now in effect or as hereafter amended.

         2.25 "PLAN" as defined in the recitals.

         2.26  "EXERCISE  PRICE"  means the price for each  Share  subject to an
Option.

         2.27  "REPLACED"  means that  pursuant to a  Transaction  the Option is
replaced  with a  comparable  stock  award or a cash  incentive  program  of the
Company,  the successor entity (if applicable) or parent of either of them which
at least preserves the compensation  element of such Option existing at the time
of the  Transaction  and provides for subsequent  payout in accordance  with the
same (or a more  favorable)  vesting  schedule  applicable  to such Option.  The
determination of Option comparability shall be made by the Administrator and its
determination shall be final, binding and conclusive

         2.28  "SECTION 102" means section 102 of the Ordinance as now in effect
or as hereafter amended.

         2.29 "SHARE" means the ordinary  shares NIS 0.01 par value each, of the
Company.

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         2.30 "TRANSACTION" means:

                  (i) a merger or  consolidation in which the Company is not the
surviving entity,  except for a transaction the principal purpose of which is to
change the jurisdiction in which the Company is incorporated;

                  (ii)  the  sale,  transfer  or  other  disposition  of  all or
substantially  all of the assets of the Company  (including the capital stock of
the Company's subsidiary corporations);

                  (iii) the complete liquidation or dissolution of the Company;

                  (iv) any reverse  merger in which the Company is the surviving
entity but in which  securities  possessing more than fifty percent (50%) of the
total  combined  voting  power  of  the  Company's  outstanding  securities  are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or

                  (v)  acquisition  by any  person or  related  group of persons
(other  than the Company or by a  Company-sponsored  employee  benefit  plan) of
beneficial  ownership  (within  the  meaning  of Rule  13d-3  of the  Securities
Exchange  Act of 1934,  as amended)  of  securities  possessing  more than fifty
percent (50%) of the total  combined  voting power of the Company's  outstanding
securities.

         2.31 "TRUSTEE"  means any individual  appointed by the Company to serve
as a trustee for the Plan and  approved by the ITA, all in  accordance  with the
provisions of Section 102(a) of the Ordinance.

         2.32  "UNAPPROVED  102  OPTION"  means an Option  granted  pursuant  to
Section 102(c) of the Ordinance and not held in trust by a Trustee.

         2.33 "VESTED  OPTION"  means any Option,  which has already been vested
according to the Vesting Dates.

         2.34  "VESTING  DATES"  means,  as  determined  by the  Board or by the
Committee,  the date as of which the Grantee  shall be entitled to exercise  the
Options or part of the Options, as set forth in Section 11 of the Plan.

3.       ADMINISTRATION OF THE PLAN

         3.1 The Board or the Committee  shall have the power to administer  the
Plan,  all as provided by  applicable  law and in the  Company's  organizational
documents.  Notwithstanding  the  above,  the  Board  shall  automatically  have
residual  authority if the  Committee is not  constituted  or if such  Committee
shall cease to operate for any reason.  In this Plan any  reference  to the term
"Committee"  shall also mean the Board if no Committee is operating at that time
in the Company.  The Board shall appoint the members of the  Committee,  and may
from time to time remove members from, or add members to, the Committee.

         3.2 The  Committee  shall select one of its members as its Chairman and
shall  hold  its  meetings  at such  times  and  places  as the  Chairman  shall
determine.  The Committee shall keep

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records  of its  meetings  and shall  make such  rules and  regulations  for the
conduct of its business, as it shall deem advisable.

         3.3 The Committee  shall have the full power and authority,  subject to
(i) the terms and conditions of the Plan,  (ii) provisions of the Companies Law,
and (iii) the approval of the Board to the extent required under  applicable law
to: (a) designate  participants to whom Options shall be granted;  (b) determine
the terms and provisions of the respective Option Agreements, including, but not
limited to, the number of Options to be granted to each  Grantee,  the number of
Shares to be  covered by each  Option,  provisions  concerning  the time and the
extent to which the  Options  may be  exercised  and the nature and  duration of
restrictions as to the transferability or restrictions  constituting substantial
risk of forfeiture and to cancel or suspend awards, as necessary;  (c) determine
the Fair Market Value of the Shares covered by each Option; (d) make an election
as to the type of 102 Approved  Option;  (e) designate the type of Options;  (f)
alter any  restrictions  and  conditions of any Options or Shares subject to any
Options;  (g) interpret the provisions and supervise the  administration  of the
Plan;  (h)  accelerate  the right of an Grantee to exercise in whole or in part,
any previously  granted Option;  (i) determine the Exercise Price of the Option;
(j) prescribe, amend and rescind rules and regulations relating to the Plan; and
(k)  make  all  other  determinations  deemed  necessary  or  advisable  for the
administration of the Plan.

         3.4  Notwithstanding  Section  3.3,  (i) the  reduction of the Exercise
Price of any Option  awarded  under the Plan  shall be  subject  to  stockholder
approval and (ii)  canceling an Option at a time when its Exercise Price exceeds
the Fair Market Value of the underlying  Shares,  in exchange for another Option
shall be subject to stockholder  approval,  unless the cancellation and exchange
occurs in connection with a Transaction.

         3.5 Subject to the Company's  organizational  documents,  all decisions
and selections made by the Board or the Committee  pursuant to the provisions of
the Plan shall be made by a majority of its members except that no member of the
Board or the Committee  shall vote on, or be counted for quorum  purposes,  with
respect to any  proposed  action of the Board or the  Committee  relating to any
Option to be granted to that member.  Any decision  reduced to writing  shall be
executed in  accordance  with the  provisions  of the  Company's  organizational
documents, as the same may be in effect from time to time.

         3.6  The  interpretation  and  construction  by  the  Committee  of any
provision of the Plan or of any Option  Agreement  thereunder shall be final and
conclusive unless otherwise determined by the Board.

         3.7 Subject to the Company's organizational documents and the Company's
decision and to all approvals legally required,  each member of the Board or the
Committee shall be indemnified and held harmless by the Company against any cost
or expense (including fees of legal counsel)  reasonably incurred by him, or any
liability  (including any sum paid in settlement of a claim with the approval of
the Company)  arising out of any act or omission to act in  connection  with the
Plan unless  arising out of such member's own fraud or bad faith,  to the extent
permitted by applicable  law. Such  indemnification  shall be in addition to any
rights of  indemnification  the member may have as a director or otherwise under
the Company's organizational  documents, any agreement, any vote of shareholders
or disinterested directors, insurance policy or otherwise.

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4.       DESIGNATION OF PARTICIPANTS & AWARD OF OPTIONS

         4.1 The  persons  eligible  for  participation  in the Plan as Grantees
shall  include  any  Employees  and/or  Non-Employees  of the  Company or of any
Affiliate;  provided,  however,  that  (i)  Employees  may only be  granted  102
Options;  (ii)  Non-Employees  may  only be  granted  3(i)  Options;  and  (iii)
Controlling Shareholders may only be granted 3(i) Options.

         4.2 The grant of an Option  hereunder shall neither entitle the Grantee
to participate nor disqualify the Grantee from participating in, any other grant
of Options pursuant to the Plan or any other option or share plan of the Company
or any of its Affiliates.

         4.3 Anything in the Plan to the contrary notwithstanding, all grants of
Options to directors and office holders shall be authorized  and  implemented in
accordance  with the provisions of any applicable law, as in effect from time to
time.

         4.4 The Committee in its  discretion  may award to Grantees  Options to
purchase Shares in the Company available under the Plan.  Options may be granted
at any time after this Plan has been  approved by the Board and until the end of
the term of the Plan as  provided  in Section 23 below.  Provided  however  that
Options shall not be granted until the lapse of 30 days following the receipt by
the ITA of a request by the Company to approve the Plan.

5.       DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

         The Company may  designate  Options  granted to  Employees  pursuant to
Section 102 as Unapproved 102 Options or Approved 102 Options.

         5.1 The grant of  Approved  102  Options  shall be made under this Plan
adopted by the Board as described in Section 16 below,  and shall be conditioned
upon the approval of this Plan by the ITA.

         5.2  Approved  102 Options  may either be  classified  as Capital  Gain
Option ("CGO") or Ordinary Income Option ("OIO").

         5.3  Approved  102  Options  elected and  designated  by the Company to
qualify under the capital gain tax treatment in accordance  with the  provisions
of Section 102(b)(2) of the Ordinance shall be referred to herein as CGO.

         5.4  Approved  102 Option  elected  and  designated  by the  Company to
qualify  under  the  ordinary  income  tax  treatment  in  accordance  with  the
provisions of Section  102(b)(1) of the Ordinance shall be referred to herein as
OIO.

         5.5 The  Company's  election of the type of Approved 102 Options as CGO
or OIO granted to Employees (the "ELECTION"),  shall be appropriately filed with
the ITA before the Date of Grant of an Approved 102 Option.  Such Election shall
become  effective  beginning  the first Date of Grant of an Approved  102 Option
under  this Plan and shall  remain in effect at least  until the end of the year
following the year during which the Company first granted  Approved 102 Options.
The Election  shall  obligate the Company to grant ONLY the type of Approved 102
Option  it has  elected,  and  shall  apply to all  Employees  who were  granted
Approved 102 Options

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during the period  indicated  herein,  all in accordance  with the provisions of
Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall
not prevent the Company from granting Unapproved 102 Options simultaneously.

         5.6 All  Approved  102 Options  must be held in trust by a Trustee,  as
described in Section 6 below.

                  For the avoidance of doubt,  the designation of Unapproved 102
Options and  Approved 102 Options  shall be subject to the terms and  conditions
set forth in Section 102 and the regulations promulgated thereunder.

         5.7  Any  provision  of  Section  102  and/or  regulations  promulgated
thereunder  and/or any  applicable  law,  which is necessary in order to receive
and/or  to  keep  any tax  benefit  pursuant  thereto,  which  is not  expressly
specified in the Plan or in the Option  Agreement,  shall be considered  binding
upon the Company and the Grantees.

6.       TRUSTEE

         6.1 Approved 102 Options  which shall be granted  under the Plan and/or
any Shares allocated or issued upon exercise of such Approved 102 Options and/or
other  shares  received  subsequently   following  any  realization  of  rights,
including bonus shares, shall be allocated or issued to the Trustee and held for
the benefit of the  Grantees  for such period of time as required by Section 102
or any regulations,  rules or orders or procedures  promulgated  thereunder (the
"HOLDING  PERIOD").  In the event the  requirements for Approved 102 Options are
not met,  then the  Approved  102  Options  shall be treated as  Unapproved  102
Options,  all in accordance  with the provisions of Section 102 and  regulations
promulgated thereunder.

         6.2  Notwithstanding  anything to the  contrary,  the Trustee shall not
release any Shares  allocated  or issued upon  exercise of Approved  102 Options
prior to the full payment of the Grantee's tax liabilities arising from Approved
102 Options or until the Trustee has ensured the payment of the tax  liabilities
arising from  Approved  102 Options  which were granted to him and/or any Shares
allocated or issued upon exercise of such Options.

         6.3 Upon receipt of any  Approved 102 Option,  the Grantee will sign an
undertaking  to release the Trustee from any  liability in respect of any action
or decision  taken and executed in good faith in relation  with the Plan, or any
Approved 102 Option or Share granted to him thereunder.

         6.4 With respect to any Approved 102 Option,  unless  permitted  and to
the  extent  allowable  by the  provisions  of  Section  102  and any  rules  or
regulation or orders or procedures promulgated  thereunder,  a Grantee shall not
sell or release from trust any Share  received  upon the exercise of an Approved
102 Option and/or any share received  subsequently  following any realization of
rights,  including  without  limitation,  bonus  shares,  until the lapse of the
Holding Period  required under Section 102.  Notwithstanding  the above,  if any
such sale or release  occurs  during the Holding  Period,  the  sanctions  under
Section  102  and  under  any  rules  or  regulation  or  orders  or  procedures
promulgated thereunder shall apply to and shall be borne by such Grantee.

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         6.5 During the  Restricted  Period,  all benefits  arising from the 102
Options/Shares, including share dividends (bonus shares) shall be deposited with
the Trustee for the duration of the  Restricted  Period,  and the  provisions of
Section 102 shall apply to such benefits.

7.       SHARES RESERVED FOR THE PLAN; RESTRICTION THEREON

         7.1 Subject to adjustment as set forth in Section 9 below,  the maximum
aggregate  number of  authorized  but  unissued  Shares  which the  Company  has
reserved  for issuance  pursuant to the Plan is 1,000,000  Shares plus an annual
increase to be added on the first  business day of each calendar year  beginning
in 2005 equal to three percent (3 %) of the number of Shares  outstanding  as of
such date or a lesser number of Shares determined by the Board. Any Shares which
remain  unissued  and which are not  subject to the  outstanding  Options at the
termination  of the Plan shall cease to be reserved for the purpose of the Plan,
but until  termination  of the Plan the  Company  shall at all  times  reserve a
sufficient  number of Shares to meet the  requirements  of the Plan.  Should any
Option for any reason  expire or be canceled or forfeited  prior to its exercise
or  relinquishment  in full,  the  Shares  subject  to such  Option may again be
subjected to an Option under the Plan.

         7.2 Each Option granted  pursuant to the Plan,  shall be evidenced by a
written Option  Agreement  between the Company and the Grantee,  in such form as
the  Board  or the  Committee  shall  from  time to time  approve.  Each  Option
Agreement  shall state,  among other matters,  the number of Shares to which the
Option  relates,  the type of Option  granted  thereunder  (whether a CGO,  OIO,
Unapproved 102 Option or a 3(i) Option),  the Vesting Dates,  the Exercise Price
per share,  the  Expiration  Date and such  other  terms and  conditions  as the
Committee or the Board in its discretion  may prescribe,  provided that they are
consistent with this Plan.

8.       EXERCISE PRICE

         8.1 The  Exercise  Price of each Share  subject  to an Option  shall be
determined  by the  Committee in its sole and absolute  discretion in accordance
with applicable law, subject to any guidelines as may be determined by the Board
from time to time.  Each  Option  Agreement  will  contain  the  Exercise  Price
determined for each Grantee.

         8.2 The Exercise Price shall be payable upon the exercise of the Option
in a form satisfactory to the Committee,  including without limitation,  by cash
or check or another secure method of payment as may be customary in the Company.
The  Committee  shall have the authority to postpone the date of payment on such
terms as it may determine.

         8.3 The  Exercise  Price shall be  denominated  in the  currency of the
primary economic  environment of, either the Company or the Grantee (that is the
functional currency of the Company or the currency in which the Grantee is paid)
as determined by the Company.

9.       ADJUSTMENTS

         Upon  the  occurrence  of any  of the  following  described  events,  a
Grantee's  rights  to  purchase  Shares  under  the Plan  shall be  adjusted  as
hereafter provided:

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         9.1 Effective upon the  consummation of a Transaction,  all outstanding
Options  under the Plan shall  terminate.  However,  all such Options  shall not
terminate to the extent they are Assumed in connection with the Transaction.

         9.2 Except as provided otherwise in an individual Option Agreement,  in
the event of a  Transaction,  for the  portion  of each  Option  that is neither
Assumed nor  Replaced,  such  portion of the Option shall  automatically  become
fully vested and  exercisable  and be released from any repurchase or forfeiture
rights (other than repurchase  rights  exercisable at Fair Market Value) for all
of the shares at the time represented by such portion of the Option, immediately
prior to the specified  effective  date of such  Transaction,  provided that the
Optionee's  employment  or service  with the  Company or any  Affiliate  has not
terminated  prior to such date.  The  portion of the Option  that is not Assumed
shall  terminate  under  Section  9.1 to the extent not  exercised  prior to the
consummation of such Transaction.

         9.3 If the  outstanding  shares  of the  Company  shall  at any time be
changed or exchanged by declaration of a share dividend  (bonus  shares),  share
split,  combination or exchange of shares,  recapitalization,  or any other like
event by or of the  Company,  and as often as the  same  shall  occur,  then the
number,  class and kind of the  Shares  subject  to the Plan or  subject  to any
Options therefore granted,  and the Exercise Prices,  shall be appropriately and
equitably adjusted so as to maintain the proportionate  number of Shares without
changing the aggregate  Exercise Price,  provided,  however,  that no adjustment
shall be made by reason  of the  distribution  of  subscription  rights  (rights
offering) on outstanding shares. Upon the happening of any of the foregoing, the
class and aggregate number of Shares issuable pursuant to the Plan (as set forth
in Section 7 hereof),  in respect of which Options have not yet been  exercised,
shall be  appropriately  adjusted,  all as will be determined by the Board whose
determination shall be final.

10.      TERM AND EXERCISE OF OPTIONS

         10.1 Options shall be exercised by the Grantee by giving written notice
to the  Company  and/or  to any  third  party  designated  by the  Company  (the
"REPRESENTATIVE"),  in such form and method as may be  determined by the Company
and when  applicable,  by the Trustee in  accordance  with the  requirements  of
Section 102,  which  exercise  shall be effective upon receipt of such notice by
the Company and/or the  Representative  and the payment of the Exercise Price at
the Company's or the Representative's principal office. The notice shall specify
the number of Shares with respect to which the Option is being exercised.

         10.2 Options, to the extent not previously  exercised,  shall terminate
forthwith upon the earlier of: (i) 7 years from the Date of Grant or a different
period which may be shorter or longer as set forth in the Option Agreement;  and
(ii) the  expiration  of any  extended  period in any of the events set forth in
Section 10.5 below.

         10.3 The Options may be exercised by the Grantee in whole, at any time,
or in part,  from time to time, to the extent that the Options become vested and
exercisable,  prior to the Expiration  Date,  and provided that,  subject to the
provisions  of Section  10.5 below,  the  Grantee is  employed  by or  providing
services to the Company or any of its Affiliates, at all times during the period
beginning with the granting of the Option and ending upon the date of exercise.

                                       9
<PAGE>

         10.4 Subject to the  provisions of Section 10.5 below,  in the event of
termination  of the Grantee's  employment or services with the Company or any of
its Affiliates,  all un-vested  Options granted to such Grantee will immediately
expire.

         10.5  Notwithstanding  anything to the contrary  hereinabove and unless
otherwise  determined  in the  Grantee's  Option  Agreement,  an  Option  may be
exercised after the date of termination of Grantee's  employment or service with
the Company or any  Affiliates  during an  additional  period of time beyond the
date of such termination,  but only with respect to the number of Vested Options
at the time of such termination according to the Vesting Dates, if:

                  (i)  termination  is without  Cause,  in which case any Vested
Option still in force and unexpired  may be exercised  within a period of ninety
(90) days after the date of such termination; or

                  (ii)  termination  is the result of death or disability of the
Grantee,  in which case any Vested  Option still in force and  unexpired  may be
exercised  within  a  period  of  twelve  (12)  months  after  the  date of such
termination; or

                  (iii)  prior to the date of such  termination,  the  Committee
shall  authorize an extension of the terms of all or part of the Vested  Options
beyond the date of such termination for a period not to exceed the period during
which the Options by their terms would otherwise have been exercisable.

                           For  avoidance  of  any  doubt,   if  termination  of
employment or service is for Cause, any outstanding  unexercised Option (whether
vested or non-vested),  will immediately  expire and terminate,  and the Grantee
shall not have any right in connection to such outstanding Options.

         10.6  POST   TERMINATION   FORFEITURE.   The   reason  of   termination
notwithstanding, if during the period after the termination of engagement during
which  the  Grantee  may  still  exercise  Options,  the  Grantee  breaches  the
confidentiality,  non-competition  non-solicitation,  non-use or  assignment  of
intellectual  property undertakings binding upon him/her, the Company shall have
the right (only to the extent  specifically  set forth in the  Grantee's  Option
Agreement) to effect a forfeiture of all Options  (whether vested or non-vested)
then  outstanding,  and the Shares  covered by such Options  shall revert to the
Plan.

         10.7 To avoid doubt,  the holders of Options shall not be deemed owners
of the Shares  issuable  upon the  exercise of Options and shall not have any of
the rights or privileges of shareholders of the Company in respect of any Shares
purchasable  upon the exercise of any part of an Option,  until  registration of
the Grantee as holder of such Shares in the Company's  register of  shareholders
upon exercise of the Option in accordance with the provisions of the Plan.

                  Any  form of  Option  Agreement  authorized  by the  Plan  may
contain such other  provisions  as the Committee  may,  from time to time,  deem
advisable.

                  With  respect to any  Unapproved  102  Option,  if the Grantee
ceases to be employed by the Company or any Affiliate,  the Grantee shall extend
to the Company  and/or its  Affiliate a security or guarantee for the payment of
tax due at the time of sale of Shares,  all in accordance with the provisions of
Section 102 and the rules, regulation or orders promulgated thereunder.

                                       10
<PAGE>

11.      VESTING OF OPTIONS

         11.1  Subject to the  provisions  of the Plan,  each Option  shall vest
following the Vesting Dates and for the number of Shares as shall be provided in
the Option  Agreement.  However,  no Option shall vest after the  termination of
engagement as set forth in Section 10.2 above and no option shall be exercisable
after the Expiration Date.

         11.2 An Option may be subject to such other terms and conditions at the
time or times when it may be exercised,  as the Committee may deem  appropriate.
The vesting provisions of individual Options may vary.

12.      PURCHASE FOR INVESTMENT

         The Company's  obligation to issue or allocate  Shares upon exercise of
an  Option  granted  under  the  Plan is  expressly  conditioned  upon:  (a) the
Company's  completion of any registration or other qualifications of such Shares
under all applicable  laws,  rules and  regulations or (b)  representations  and
undertakings by the Grantee (or his legal  representative,  heir or legatee,  in
the event of the Grantee's death) to assure that the sale of the Shares complies
with any  registration  exemption  requirements  which the  Company  in its sole
discretion shall deem necessary or advisable.  Such required representations and
undertakings  may include  representations  and agreements that such Grantee (or
his legal representative,  heir, or legatee):  (a) is purchasing such Shares for
investment and not with any present intention of selling or otherwise  disposing
thereof;  and (b)  agrees  to have  placed  upon  the face  and  reverse  of any
certificates   evidencing   such  Shares  a  legend  setting   forth:   (i)  any
representations  and undertakings which such Grantee has given to the Company or
a  reference  thereto  and  (ii)  that,  prior  to  effecting  any sale or other
disposition  of any such  Shares,  the  Grantee  must  furnish to the Company an
opinion of counsel,  satisfactory to the Company,  that such sale or disposition
will not violate the applicable laws,  rules,  and  regulations,  whether of the
State of Israel or of the United  States or any other State having  jurisdiction
over the Company and the Grantee.

13.      DIVIDENDS

         With respect to all Shares (but excluding,  for avoidance of any doubt,
any  unexercised  Options)  allocated  or issued  upon the  exercise  of Options
purchased by the Grantee and held by the Grantee or by the Trustee,  as the case
may be, the Grantee shall be entitled to receive  dividends in  accordance  with
the  quantity  of  such  Shares,  subject  to the  provisions  of the  Company's
organizational  documents  (and  all  amendments  thereto)  and  subject  to any
applicable taxation on distribution of dividends, and when applicable subject to
the provisions of Section 102 and the rules,  regulations or orders  promulgated
thereunder.

14.      RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

         14.1  No  Option  or  any  right  with  respect  thereto,   purchasable
hereunder, whether fully paid or not, shall be assignable, transferable or given
as  collateral,  or any  right  with  respect  to it  given to any  third  party
whatsoever,  except as specifically  allowed under the Plan. During the lifetime
of the  Grantee,  each  and all of such  Grantee's  rights  to  purchase  Shares
hereunder shall be exercisable only by the Grantee.

                                       11
<PAGE>

                  Any such action made directly or indirectly,  for an immediate
validation or for a future one, shall be void.

         14.2 As long as the  Shares  are held by the  Trustee  on behalf of the
Grantee,  all rights of the Grantee  over the Shares are personal and may not be
transferred,  assigned,  pledged or mortgaged, other than by will or pursuant to
the laws of descent and distribution.

15.      EFFECTIVE DATE AND DURATION OF THE PLANS

         The Plan shall be  effective  upon the earlier to occur of its adoption
by the  Board or its  approval  by the  stockholders  of the  Company  and shall
continue in effect until  terminated by the Board or until the expiration of the
term of the Plan as provided in Section 23 below.

16.      AMENDMENTS OR TERMINATION

         16.1 The Board may at any time, and when applicable, after consultation
with the  Trustee,  amend,  alter,  suspend  or  terminate  the Plan,  provided,
however,  that no such  amendment  shall be made  without  the  approval  of the
Company's  stockholders  to the extent such  approval is required by  applicable
laws or the rules of any applicable stock exchange or national market system, or
if such  amendment  would  change any of the  provisions  of Section 3.4 or this
Section 16.1.

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

17.      GOVERNMENT REGULATIONS

         The Plan, and the granting and exercise of Options  hereunder,  and the
obligation of the Company to sell and deliver  Shares under such Options,  shall
be subject to all applicable laws, rules, and regulations,  whether of the State
of Israel or of the United  States or any other State having  jurisdiction  over
the Company and the Grantee,  including the registration of the Shares under the
United States Securities Act of 1933, and the Ordinance and to such approvals by
any governmental  agencies or national securities  exchanges as may be required.
Nothing  herein  shall be deemed to require the  Company to register  the Shares
under the securities laws of any jurisdiction.

18.      CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

         Neither the Plan nor the Option Agreement with the Grantee shall impose
any obligation on the Company or an Affiliate  thereof,  to continue any Grantee
in its employ or  service,  and  nothing  in the Plan or in any  Option  granted
pursuant  thereto  shall  confer  upon any  Grantee any right to continue in the
employ or service of the Company or an  Affiliate  thereof or restrict the right
of the Company or an Affiliate  thereof to terminate such  employment or service
at any time.

                                       12
<PAGE>

19.      GOVERNING LAW & JURISDICTION

         The Plan shall be governed by and  construed and enforced in accordance
with the laws of the  State of Israel  applicable  to  contracts  made and to be
performed therein,  without giving effect to the principles of conflict of laws.
The competent courts of the city of Haifa,  Israel shall have sole  jurisdiction
in any matters pertaining to the Plan.

20.      TAX CONSEQUENCES

         20.1 Any tax  consequences  arising  from the grant or  exercise of any
Option,  from the payment for Shares covered  thereby or from any other event or
act  (of the  Company  and/or  its  Affiliates,  the  Trustee  or the  Grantee),
hereunder,  shall be  borne  solely  by the  Grantee.  The  Company  and/or  its
Affiliates and/or the Trustee shall withhold taxes according to the requirements
under the applicable laws, rules, and regulations,  including withholding taxes.
Furthermore,  the  Grantee  shall  agree to  indemnify  the  Company  and/or its
Affiliates  and/or the Trustee and hold them  harmless  against and from any and
all liability for any such tax or interest or penalty thereon, including without
limitation,  liabilities  relating  to the  necessity  to  withhold,  or to have
withheld, any such tax from any payment made to the Grantee.

         20.2 The Company  and/or,  when  applicable,  the Trustee  shall not be
required  to  release  any Share  certificate  to a Grantee  until all  required
payments have been fully made.

21.      NON-EXCLUSIVITY OF THE PLAN

         The  adoption  of the  Plan by the  Board  shall  not be  construed  as
amending, modifying or rescinding any previously approved incentive arrangements
or as  creating  any  limitations  on the power of the Board to adopt such other
incentive arrangements as it may deem desirable,  including, without limitation,
the granting of Options otherwise than under the Plan, and such arrangements may
be either applicable generally or only in specific cases.

22.      MULTIPLE AGREEMENTS

         The terms of each Option may differ from other  Options  granted  under
the Plan at the same time,  or at any other time.  The Board may also grant more
than one  Option  to a given  Grantee  during  the term of the  Plan,  either in
addition to, or in substitution for, one or more Options  previously  granted to
that Grantee.

23.      TERM OF PLAN

         The Plan shall  terminate  ten (10) years  after the Plan is adopted by
the Board,  and no Option shall be granted pursuant to the Plan after that date,
subject to earlier termination as provided in Paragraph 10 above.SYNERON MEDICAL LTD.

                            2004 STOCK INCENTIVE PLAN

     1.  PURPOSES OF THE PLAN.  The Plan is intended to provide an  incentive to
retain,  in the  employ of the  Company  and its  Related  Entities,  persons of
training,  experience,  and ability,  to attract new Employees,  Directors,  and
Consultants which the Board shall decide their services are considered  valuable
to the Company, to encourage the sense of proprietorship of such persons, and to
stimulate the active  interest of such persons in the  development and financial
success of the Company by providing them with  opportunities  to purchase shares
in the Company, pursuant to the Plan.

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

          (a) "ADMINISTRATOR" means the Board or any of the Committees appointed
to administer the Plan.

          (b)  "APPLICABLE  LAWS" means the legal  requirements  relating to the
administration of stock incentive plans, if any, under applicable  provisions of
United States,  Israeli and Canadian tax and securities laws,  Israeli Companies
Law, the Code,  the rules of any applicable  stock  exchange or national  market
system,  and the  rules of any  jurisdiction  applicable  to Awards  granted  to
residents therein.

          (c) "ASSUMED"  means that pursuant to a Corporate  Transaction  either
(i) the Award is  expressly  affirmed  by the  Company  or (ii) the  contractual
obligations  represented  by the Award are expressly  assumed (and not simply by
operation of law) by the successor  entity or its Parent in connection  with the
Corporate  Transaction  with  appropriate  adjustments to the number and type of
securities  of the successor  entity or its Parent  subject to the Award and the
exercise or purchase  price  thereof which at least  preserves the  compensation
element  of the  Award  existing  at the time of the  Corporate  Transaction  as
determined in accordance with the instruments evidencing the agreement to assume
the Award.

          (d) "AWARD" means the grant of an Option,  Restricted  Stock, or other
right or benefit under the Plan.

          (e) "AWARD AGREEMENT" means the written agreement evidencing the grant
of an Award  executed by the Company and the Grantee,  including any  amendments
thereto.

          (f) "BOARD" means the Board of Directors of the Company.

          (g) "CAUSE" means, with respect to the termination by the Company,  or
a Related Entity of the Grantee's  Continuous Service,  that such termination is
for  "Cause"  as such term is  expressly  defined  in a  then-effective  written
agreement between the Grantee and the Company, or such Related Entity, or in the
absence of such then-effective written agreement and definition, shall mean: (i)
conviction of any felony involving moral turpitude or affecting the Company or a
Related  Entity;  (ii) any refusal to carry out a  reasonable  directive  of the
chief executive officer,

                                       1
<PAGE>

the Board or the Optionee's  direct  supervisor,  which involves the business of
the  Company or a Related  Entity and was capable of being  lawfully  performed;
(iii) embezzlement of funds of the Company or a Related Entity;  (iv) any breach
of the Optionee's fiduciary duties or duties of care of the Company or a Related
Entity;  including without limitation disclosure of confidential  information of
the Company or a Related Entity; and (v) any conduct (other than conduct in good
faith)  reasonably  determined by the Board to be materially  detrimental to the
Company or a Related Entity.

          (h) "CODE" means the Internal Revenue Code of 1986, as amended.

          (i)  "COMMITTEE"  means  any  committee  appointed  by  the  Board  to
administer the Plan.

          (j)  "COMPANY"  means Syneron  Medical  Ltd., a corporation  organized
under the laws of the State of Israel.

          (k)  "CONSULTANT"  means  any  person  (other  than an  Employee  or a
Director, solely with respect to rendering services in such person's capacity as
a  Director)  who is engaged  by the  Company  or any  Related  Entity to render
consulting or advisory services to the Company or such Related Entity.

          (l)  "CONTINUOUS  SERVICE" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not  interrupted  or terminated.  Continuous  Service shall not be considered
interrupted  in the case of (i) any approved  leave of absence,  (ii)  transfers
among the Company,  any Related  Entity,  or any  successor,  in any capacity of
Employee,  Director or Consultant,  or (iii) any change in status as long as the
individual  remains  in the  service of the  Company or a Related  Entity in any
capacity of Employee,  Director or Consultant  (except as otherwise  provided in
the Award  Agreement).  An approved  leave of absence  shall include sick leave,
military leave,  or any other  authorized  personal leave.  For purposes of each
Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90)
days,  and  reemployment  upon  expiration  of such leave is not  guaranteed  by
statute or  contract,  then the  Incentive  Stock  Option  shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following
the expiration of such ninety (90) day period.

          (m) "CORPORATE TRANSACTION" means any of the following transactions:

               (i) a merger or  consolidation  in which the  Company  is not the
surviving entity,  except for a transaction the principal purpose of which is to
change the jurisdiction in which the Company is incorporated;

               (ii)  the  sale,   transfer  or  other   disposition  of  all  or
substantially  all of the assets of the Company  (including the capital stock of
the Company's subsidiary corporations);

               (iii) the complete liquidation or dissolution of the Company;

                                       2
<PAGE>

               (iv) any  reverse  merger in which the  Company is the  surviving
entity but in which  securities  possessing more than fifty percent (50%) of the
total  combined  voting  power  of  the  Company's  outstanding  securities  are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or

               (v)  acquisition by any person or related group of persons (other
than the Company or by a Company-sponsored  employee benefit plan) of beneficial
ownership  (within the meaning of Rule 13d-3 of the Exchange  Act) of securities
possessing  more than fifty percent (50%) of the total combined  voting power of
the Company's outstanding securities.

          (n)  "DIRECTOR"  means a member of the Board or the board of directors
of or any Related Entity.

          (o)  "DISABILITY"  means as  defined  under the  long-term  disability
policy of the  Company  or the  Related  Entity to which  the  Grantee  provides
services  regardless  of whether the Grantee is covered by such  policy.  If the
Company or the Related  Entity to which the Grantee  provides  service  does not
have a long-term disability plan in place,  "Disability" means that a Grantee is
unable to carry out the  responsibilities  and functions of the position held by
the  Grantee  by  reason  of  any  medically  determinable  physical  or  mental
impairment.  A Grantee  will not be  considered  to have  incurred a  Disability
unless he or she furnishes  proof of such  impairment  sufficient to satisfy the
Administrator in its discretion.

          (p) "EMPLOYEE" means any person, including an Officer or Director, who
is an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related  Entity shall not be  sufficient  to  constitute
"employment" by the Company.

          (q)  "EXCHANGE  ACT" means the  Securities  Exchange  Act of 1934,  as
amended.

          (r)  "FAIR  MARKET  VALUE"  means,  as of any  date,  the value of the
Ordinary Shares determined as follows:

               (i) If the Shares are listed on any established stock exchange or
a national  market system,  including  without  limitation  the Nasdaq  National
Market system,  or the Nasdaq  SmallCap  Market of the Nasdaq Stock Market,  the
Fair  Market  Value  shall be the  closing  sales  price for such Shares (or the
closing bid, if no sales were reported), as quoted on such exchange or system on
the date of determination, as reported in the Wall Street Journal, or such other
source as the Board deems reliable;

               (ii)  If  the  Shares  are  regularly   quoted  by  a  recognized
securities  dealer but selling  prices are not  reported,  the Fair Market Value
shall be the mean  between  the high bid and low asked  prices for the Shares on
the date of determination, or;

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

          (s) "GRANTEE"  means an Employee,  Director or Consultant who receives
an Award under the Plan.

                                       3
<PAGE>

          (t) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

          (u) "ISRAELI  COMPANIES LAW" means the Israeli  Companies Law 1999, as
amended or replaced from time to time.

          (v)  "NON-QUALIFIED  STOCK  OPTION"  means an Option not  intended  to
qualify as an Incentive Stock Option.

          (w)  "OFFICER"  means a person who is an  officer of the  Company or a
Related  Entity  within the  meaning of Section 16 of the  Exchange  Act and the
rules and regulations promulgated thereunder.

          (x) "OPTION" means an option to purchase  Shares  pursuant to an Award
Agreement granted under the Plan.

          (y) "ORDINARY SHARES" means the ordinary shares par value NIS 0.01 per
share of the Company.

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

          (aa) "PLAN" means this 2004 Stock Incentive Plan.

          (bb) "POST-TERMINATION  EXERCISE PERIOD" means the period specified in
the Award  Agreement (or if not  mentioned  therein - as specified in this Plan)
commencing on the date of termination  (other than termination by the Company or
any Related Entity for Cause) of the Grantee's Continuous Service.

          (cc)  "RELATED  ENTITY"  means any Parent or Subsidiary of the Company
and any business, corporation,  partnership,  limited liability company or other
entity in which the Company or a Parent or a Subsidiary  of the Company  holds a
substantial ownership interest, directly or indirectly.

          (dd)  "REPLACED"  means that pursuant to a Corporate  Transaction  the
Award is replaced with a comparable  stock award or a cash incentive  program of
the Company,  the successor  entity (if  applicable) or Parent of either of them
which at least preserves the compensation  element of such Award existing at the
time  of the  Corporate  Transaction  and  provides  for  subsequent  payout  in
accordance with the same (or a more favorable)  vesting  schedule  applicable to
such  Award.  The  determination  of  Award  comparability  shall be made by the
Administrator and its determination shall be final, binding and conclusive.

          (ee)  "RESTRICTED  STOCK"  means  Shares  issued under the Plan to the
Grantee for such  consideration,  if any,  and subject to such  restrictions  on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.

                                       4
<PAGE>

          (ff) "RULE 16B-3" means Rule 16b-3  promulgated under the Exchange Act
or any successor thereto.

          (gg) "SHARE" means a share of the Ordinary Shares.

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

     3. STOCK SUBJECT TO THE PLAN.

          (a)  Subject to the  provisions  of Section  10,  below,  the  maximum
aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive  Stock  Options) is 1,000,000  Shares,  plus an annual  increase to be
added on the first business day of each calendar year beginning in 2005 equal to
the lesser of (y) three percent (3%) of the number of Shares  outstanding  as of
such date, or (z) a lesser number of Shares  determined by the Board. The Shares
to be issued pursuant to Awards may be authorized,  but unissued,  or reacquired
Ordinary Shares.

          (b) Any Shares  covered by an Award (or portion of an Award)  which is
forfeited,  canceled or expires (whether  voluntarily or involuntarily) shall be
deemed not to have been issued for purposes of determining the maximum aggregate
number of Shares which may be issued under the Plan.  Shares that  actually have
been  issued  under the Plan  pursuant  to an Award shall not be returned to the
Plan and shall not become  available for future issuance under the Plan,  except
that if unvested  Shares are  forfeited,  or  repurchased  by the Company at the
lower of their original purchase price or their Fair Market Value at the time of
repurchase,  such Shares shall become available for future grant under the Plan.
To the  extent  not  prohibited  by  Section  422(b)(1)  of the  Code  (and  the
corresponding  regulations  thereunder),  the listing requirements of The Nasdaq
National Market (or other  established  stock exchange or national market system
on which the Common Stock is traded) and  Applicable  Law, any Shares covered by
an Award which are  surrendered (i) in payment of the Award exercise or purchase
price or (ii) in  satisfaction of tax  withholding  obligations  incident to the
exercise  of an Award  shall be deemed not to have been  issued for  purposes of
determining  the maximum  number of Shares  which may be issued  pursuant to all
Awards under the Plan, unless otherwise determined by the Administrator.

     4. ADMINISTRATION OF THE PLAN.

          (a) PLAN ADMINISTRATOR.

               (i) ADMINISTRATION  WITH RESPECT TO DIRECTORS AND OFFICERS.  With
respect to grants of Awards to Directors or Employees  who are also  Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee  designated by the Board,  which  Committee  shall be constituted in
such a manner as to satisfy  the  Applicable  Laws and to permit such grants and
related  transactions  under the Plan to be  exempt  from  Section  16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its  designated  capacity until  otherwise  directed by the
Board.

                                       5
<PAGE>

               (ii)   ADMINISTRATION  WITH  RESPECT  TO  CONSULTANTS  AND  OTHER
EMPLOYEES.  With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee  designated by the Board, which Committee shall
be  constituted  in such a  manner  as to  satisfy  the  Applicable  Laws.  Once
appointed,  such Committee  shall  continue to serve in its designated  capacity
until  otherwise  directed  by the Board.  The Board may  authorize  one or more
Officers  to grant  such  Awards  and may  limit  such  authority  as the  Board
determines from time to time.

               (iii) ADMINISTRATION  ERRORS. In the event an Award is granted in
a manner  inconsistent  with the provisions of this  subsection  (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

          (b) POWERS OF THE  ADMINISTRATOR.  Subject to Applicable  Laws and the
provisions of the Plan  (including  any other powers given to the  Administrator
hereunder),  and except as otherwise  provided by the Board,  the  Administrator
shall have the authority, in its discretion:

               (i) to select the  Employees,  Directors and  Consultants to whom
Awards may be granted from time to time hereunder;

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

               (iii) to  determine  the  number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

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

               (v) to determine  the terms and  conditions  of any Award granted
hereunder;

               (vi) to amend the terms of any  outstanding  Award  granted under
the Plan,  provided  that (A) any  amendment  that  would  adversely  affect the
Grantee's  rights  under an  outstanding  Award  shall not be made  without  the
Grantee's written consent, (B) the reduction of the exercise price of any Option
awarded  under  the Plan  shall  be  subject  to  stockholder  approval  and (C)
canceling  an Option at a time when its exercise  price  exceeds the Fair Market
Value of the  underlying  Shares,  in exchange  for another  Option,  Restricted
Stock,  or other  Award  shall be subject to  stockholder  approval,  unless the
cancellation and exchange occurs in connection with a Corporate Transaction;

               (vii) to construe and interpret the terms of the Plan and Awards,
including without  limitation,  any notice of award or Award Agreement,  granted
pursuant to the Plan;

               (viii)  to  establish  additional  terms,  conditions,  rules  or
procedures, to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable  treatment under such rules or laws;  provided,
however,  that no Award  shall be  granted

                                       6
<PAGE>

under any such additional terms,  conditions,  rules or procedures with terms or
conditions which are inconsistent with the provisions of the Plan; and

               (ix) to take such other action,  not inconsistent  with the terms
of the Plan, as the Administrator deems appropriate.

          (c)   INDEMNIFICATION.   In   addition   to  such   other   rights  of
indemnification  as they may have as  members  of the  Board or as  Officers  or
Employees  of the  Company  or a Related  Entity,  members  of the Board and any
Officers or  Employees of the Company or a Related  Entity to whom  authority to
act for the  Board,  the  Administrator  or the  Company is  delegated  shall be
defended  and  indemnified  by the Company to the extent  permitted by law on an
after-tax  basis against all reasonable  expenses,  including  attorneys'  fees,
actually and  necessarily  incurred in connection with the defense of any claim,
investigation,  action,  suit or  proceeding,  or in connection  with any appeal
therein,  to which  they or any of them may be a party by reason  of any  action
taken or  failure  to act under or in  connection  with the  Plan,  or any Award
granted  hereunder,  and against all amounts paid by them in settlement  thereof
(provided  such  settlement  is  approved  by the  Company)  or  paid by them in
satisfaction  of a judgment in any such claim,  investigation,  action,  suit or
proceeding,  except in  relation  to matters as to which it shall be adjudged in
such claim, investigation, action, suit or proceeding that such person is liable
for gross negligence,  bad faith or intentional misconduct;  provided,  however,
that within thirty (30) days after the institution of such claim, investigation,
action, suit or proceeding,  such person shall offer to the Company, in writing,
the opportunity at the Company's expense to defend the same.

     5. ELIGIBILITY. Awards other than Incentive Stock Options may be granted to
Employees,  Directors and  Consultants.  Incentive  Stock Options may be granted
only to Employees of the Company or a Parent or a Subsidiary of the Company.  An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards. Awards may be granted to such Employees,
Directors  or  Consultants  who are  residing  in foreign  jurisdictions  as the
Administrator may determine from time to time.

     6. TERMS AND CONDITIONS OF AWARDS.

          (a) TYPE OF AWARDS.  The Administrator is authorized under the Plan to
award any type of arrangement to an Employee, Director or Consultant that is not
inconsistent  with the  provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option or similar right with a
fixed or variable  price related to the Fair Market Value of the Shares and with
an  exercise  or  conversion  privilege  related  to the  passage  of time,  the
occurrence of one or more events, or the satisfaction of performance criteria or
other  conditions,  or (iii) any other  security with the value derived from the
value of the Shares. Such awards include,  without limitation,  Options or sales
or bonuses of Restricted Stock, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.

          (b) DESIGNATION OF AWARD.  Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding
such  designation,  to the

                                       7
<PAGE>

extent  that the  aggregate  Fair  Market  Value of Shares  subject  to  Options
designated as Incentive  Stock Options  which become  exercisable  for the first
time by a Grantee  during any  calendar  year (under all plans of the Company or
any Parent or Subsidiary of the Company) exceeds $100,000,  such excess Options,
to the  extent  of  the  Shares  covered  thereby  in  excess  of the  foregoing
limitation,  shall be treated as Non-Qualified Stock Options.  For this purpose,
Incentive  Stock  Options shall be taken into account in the order in which they
were granted,  and the Fair Market Value of the Shares shall be determined as of
the grant date of the relevant Option.

          (c)  CONDITIONS  OF  AWARD.  Subject  to the  terms of the  Plan,  the
Administrator  shall  determine the  provisions,  terms,  and conditions of each
Award  including,  but not limited to, the Award  vesting  schedule,  repurchase
provisions,  rights of first  refusal,  forfeiture  provisions,  form of payment
(cash,  Shares, or other  consideration)  upon settlement of the Award,  payment
contingencies,  and  satisfaction of any performance  criteria.  The performance
criteria  established  by the  Administrator  may be  based  on any one  of,  or
combination of, increase in share price,  earnings per share,  total stockholder
return, return on equity, return on assets, return on investment,  net operating
income,   cash  flow,  revenue,   economic  value  added,   personal  management
objectives,  or other  measure of  performance  selected  by the  Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

          (d) ACQUISITIONS AND OTHER  TRANSACTIONS.  The Administrator may issue
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity  acquiring  another  entity,  an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

          (e) DEFERRAL OF AWARD PAYMENT.  The Administrator may establish one or
more programs  under the Plan to permit  selected  Grantees the  opportunity  to
elect to defer receipt of consideration upon exercise of an Award,  satisfaction
of performance  criteria,  or other event that absent the election would entitle
the  Grantee to payment  or  receipt of Shares or other  consideration  under an
Award (but only to the extent that such deferral programs would not result in an
accounting    compensation   charge   unless   otherwise   determined   by   the
Administrator).  The  Administrator may establish the election  procedures,  the
timing of such  elections,  the  mechanisms  for  payments  of,  and  accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred,  and such  other  terms,  conditions,  rules and  procedures  that the
Administrator  deems  advisable  for the  administration  of any  such  deferral
program.

          (f) SEPARATE  PROGRAMS.  The  Administrator  may establish one or more
separate programs under the Plan for the purpose of issuing  particular forms of
Awards to one or more  classes  of  Grantees  on such  terms and  conditions  as
determined by the Administrator from time to time.

          (g) EARLY EXERCISE.  The Award Agreement may, but need not,  include a
provision whereby the Grantee may elect at any time while an Employee,  Director
or  Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received

                                       8
<PAGE>

pursuant to such  exercise may be subject to a repurchase  right in favor of the
Company  or a  Related  Entity  or to any other  restriction  the  Administrator
determines to be appropriate.

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

          (i)  TRANSFERABILITY  OF AWARDS.  Incentive  Stock  Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other  than  by  will  or by the  laws of  descent  or  distribution  and may be
exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards
shall be  transferable  (i) by will and by the laws of descent and  distribution
and (ii)  during the  lifetime of the  Grantee,  to the extent and in the manner
authorized by the Administrator.  Notwithstanding the foregoing, the Grantee may
designate one or more  beneficiaries  of the Grantee's Award in the event of the
Grantee's death on a beneficiary designation form provided by the Administrator.

          (j) TIME OF GRANTING  AWARDS.  The date of grant of an Award shall for
all purposes be the date on which the  Administrator  makes the determination to
grant such  Award,  or such other date as is  determined  by the  Administrator.
Notice of the grant determination  shall be given to each Employee,  Director or
Consultant  to whom an Award is so granted  within a  reasonable  time after the
date of such grant.

     7. AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION AND TAXES.

          (a) EXERCISE OR PURCHASE  PRICE.  The exercise or purchase  price,  if
any, for an Award shall be as follows:

               (i) In the case of an Incentive Stock Option:

                    (A) granted to an Employee  who, at the time of the grant of
such Incentive Stock Option owns stock  representing more than ten percent (10%)
of the  voting  power of all  classes  of stock of the  Company or any Parent or
Subsidiary of the Company,  the per Share  exercise price shall be not less than
one hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant; or

                    (B) granted to any Employee other than an Employee described
in the preceding paragraph,  the per Share exercise price shall be not less than
one hundred  percent  (100%) of the Fair  Market  Value per Share on the date of
grant.

               (ii) In the case of a Non-Qualified  Stock Option,  the per Share
exercise  price  shall be not less than  eighty-five  percent  (85%) of the Fair
Market Value per Share on the date of grant.

                                       9
<PAGE>

               (iii) In the case of other Awards, such price as is determined by
the Administrator.

               (iv)  Notwithstanding  the  foregoing  provisions of this Section
7(a),  in the case of an Award  issued  pursuant  to Section  6(d),  above,  the
exercise or purchase price for the Award shall be determined in accordance  with
the principles of Section 424(a) of the Code.

          (b) CONSIDERATION. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment,  shall be  determined by the  Administrator  (and, in the
case of an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration  the  Administrator  may determine,
the  Administrator  is authorized to accept as  consideration  for Shares issued
under the Plan the following:

               (i) cash;

               (ii) check;

               (iii) surrender of Shares or delivery of a properly executed form
of  attestation  of ownership of Shares as the  Administrator  may require which
have a Fair Market Value on the date of surrender  or  attestation  equal to the
aggregate  exercise  price  of the  Shares  as to  which  said  Award  shall  be
exercised,  provided,  however, that Shares acquired under the Plan or any other
equity  compensation plan or agreement of the Company must have been held by the
Grantee for a period of more than six (6) months (and not used for another Award
exercise by attestation during such period);

               (iv) with  respect to Options,  payment  through a  broker-dealer
sale and  remittance  procedure  pursuant to which the Grantee (A) shall provide
written  instructions  to a Company  designated  brokerage  firm to  effect  the
immediate  sale of some or all of the purchased  Shares and remit to the Company
sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall  provide  written  directives to the Company to deliver the
certificates  for the purchased  Shares directly to such brokerage firm in order
to complete the sale transaction; or

               (v) any combination of the foregoing methods of payment.

The  Administrator  may at any time or from time to time,  by  adoption of or by
amendment  to the  standard  forms  of  Award  Agreement  described  in  Section
4(b)(iv),  or by  other  means,  grant  Awards  which do not  permit  all of the
foregoing forms of  consideration  to be used in payment for the Shares or which
otherwise restrict one or more forms of consideration.

          (c) TAXES.  No Shares shall be delivered under the Plan to any Grantee
or other  person  until  such  Grantee  or other  person  has made  arrangements
acceptable to the  Administrator  for the satisfaction of any foreign,  federal,
state,  or local income and employment tax withholding  obligations,  including,
without  limitation,  obligations  incident  to the  receipt  of  Shares  or the
disqualifying  disposition of Shares  received on exercise of an Incentive Stock

                                       10
<PAGE>

Option.  Upon  exercise of an Award the Company  shall  withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.

     8. EXERCISE OF AWARD.

          (a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.

               (i) Any Award  granted  hereunder  shall be  exercisable  at such
times and under such  conditions as determined  by the  Administrator  under the
terms of the Plan and specified in the Award Agreement.

               (ii) An Award shall be deemed to be exercised when written notice
of such exercise has been given to the Company in  accordance  with the terms of
the Award by the person  entitled to exercise the Award and full payment for the
Shares with respect to which the Award is  exercised,  including,  to the extent
selected,  use of the  broker-dealer  sale and  remittance  procedure to pay the
purchase price as provided in Section 7(b)(iv).

          (b) EXERCISE OF AWARD FOLLOWING  TERMINATION OF CONTINUOUS SERVICE. In
the event of termination of a Grantee's  Continuous Service for any reason other
than  Disability or death (but not in the event of a Grantee's  change of status
from Employee to Consultant or from  Consultant to Employee),  such Grantee may,
but only during the Post-Termination Exercise Period (but in no event later than
the  expiration  date of the  term of  such  Award  as set  forth  in the  Award
Agreement),  exercise the portion of the Grantee's  Award that was vested at the
date of such  termination or such other portion of the Grantee's Award as may be
determined by the Administrator.  The Grantee's Award Agreement may provide that
upon  the  termination  of the  Grantee's  Continuous  Service  for  Cause,  the
Grantee's  right to exercise  the Award shall  terminate  concurrently  with the
termination of Grantee's  Continuous Service. In the event of a Grantee's change
of status from  Employee to  Consultant,  an Employee's  Incentive  Stock Option
shall convert automatically to a Non-Qualified Stock Option on the day three (3)
months  and one day  following  such  change of status.  To the extent  that the
Grantee's Award was unvested at the date of termination,  or if the Grantee does
not   exercise   the  vested   portion  of  the   Grantee's   Award  within  the
Post-Termination Exercise Period, the Award shall terminate.

          (c) DISABILITY OF GRANTEE.  In the event of termination of a Grantee's
Continuous  Service as a result of his or her Disability,  such Grantee may, but
only within twelve (12) months from the date of such termination (or such longer
or shorter period as specified in the Award Agreement but in no event later than
the  expiration  date of the  term of  such  Award  as set  forth  in the  Award
Agreement),  exercise the portion of the Grantee's  Award that was vested at the
date of such termination;  provided,  however,  that if such Disability is not a
"disability"  as such term is defined in Section  22(e)(3)  of the Code,  in the
case  of  an  Incentive   Stock  Option  such   Incentive   Stock  Option  shall
automatically  convert  to a  Non-Qualified  Stock  Option  on the day three (3)
months and one day following such termination.  To the extent that the Grantee's
Award was unvested at the date of  termination,  or if Grantee does not exercise
the vested portion of the Grantee's Award within the time specified herein,  the
Award shall terminate.

                                       11
<PAGE>

          (d) DEATH OF GRANTEE.  In the event of a termination  of the Grantee's
Continuous Service as a result of his or her death, or in the event of the death
of the Grantee during the Post-Termination  Exercise Period or during the twelve
(12) month period following the Grantee's termination of Continuous Service as a
result of his or her Disability,  the Grantee's  estate or a person who acquired
the right to  exercise  the Award by bequest or  inheritance  may  exercise  the
portion of the  Grantee's  Award that was vested as of the date of  termination,
within  twelve  (12)  months  from the date of death (or such  longer or shorter
period  as  specified  in the Award  Agreement  but in no event  later  than the
expiration  of the term of such Award as set forth in the Award  Agreement).  To
the extent that, at the time of death,  the Grantee's Award was unvested,  or if
the Grantee's estate or a person who acquired the right to exercise the Award by
bequest or  inheritance  does not exercise the vested  portion of the  Grantee's
Award within the time specified herein, the Award shall terminate.

          (e)  EXTENSION  IF  EXERCISE  PREVENTED  BY LAW.  Notwithstanding  the
foregoing,  if the exercise of an Award within the  applicable  time periods set
forth in this Section 8 is prevented by the  provisions of Section 9 below,  the
Award shall remain exercisable until one (1) month after the date the Grantee is
notified by the Company that the Award is exercisable, but in any event no later
than  the  expiration  of the  term of such  Award  as set  forth  in the  Award
Agreement.

          (f)  POST  TERMINATION  FORFEITURE.   The  reason  of  termination  of
Continuous  Service  notwithstanding,  if during the  Post-Termination  Exercise
Period,    the   Grantee   breaches   the    confidentiality,    non-competition
non-solicitation,  non-use or assignment of intellectual  property  undertakings
binding upon such Grantee,  the Company shall have the right (only to the extent
specifically  set forth in the Grantee's Award Agreement) to effect a forfeiture
of all of the Grantee's then outstanding Awards (whether vested or non-vested).

     9. CONDITIONS UPON ISSUANCE OF SHARES.

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

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

     10.  ADJUSTMENTS  UPON CHANGES IN  CAPITALIZATION.  Subject to any required
action by the stockholders of the Company,  the number of Shares covered by each
outstanding  Award,  and the  number of Shares  which have been  authorized  for
issuance under the Plan but as to which no Awards have yet been granted or which
have been  returned to the Plan,  the  exercise  or purchase  price of each such
outstanding Award, as well as any other terms that the Administrator  determines
require  adjustment  shall be  proportionately  adjusted for (i) any increase or
decrease in the number of issued Shares  resulting  from a stock split,  reverse
stock split, stock dividend,

                                       12
<PAGE>

combination or reclassification of the Shares, or similar transaction  affecting
the Shares,  (ii) any other  increase or decrease in the number of issued Shares
effected  without  receipt  of  consideration  by the  Company,  or (iii) as the
Administrator  may  determine  in its  discretion,  any other  transaction  with
respect to Common Stock including a corporate merger, consolidation, acquisition
of property or stock,  separation (including a spin-off or other distribution of
stock or property), reorganization, liquidation (whether partial or complete) or
any similar  transaction;  provided,  however that conversion of any convertible
securities  of the Company  shall not be deemed to have been  "effected  without
receipt of  consideration."  Such adjustment shall be made by the  Administrator
and its  determination  shall be final,  binding and  conclusive.  Except as the
Administrator  determines,  no issuance by the Company of shares of stock of any
class,  or  securities  convertible  into  shares of stock of any  class,  shall
affect,  and no  adjustment  by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.

     11. CORPORATE TRANSACTIONS.

          (a)  TERMINATION  OF AWARD TO EXTENT NOT ASSUMED.  Effective  upon the
consummation of a Corporate  Transaction,  all outstanding Awards under the Plan
shall terminate. However, all such Awards shall not terminate to the extent they
are Assumed in connection with the Corporate Transaction.

          (b)  ACCELERATION  OF AWARD  UPON  CORPORATE  TRANSACTION.  Except  as
provided otherwise in an individual Award Agreement, in the event of a Corporate
Transaction, for the portion of each Award that is neither Assumed nor Replaced,
such  portion  of  the  Award  shall  automatically   become  fully  vested  and
exercisable and be released from any repurchase or forfeiture rights (other than
repurchase rights exercisable at Fair Market Value) for all of the Shares at the
time  represented  by  such  portion  of the  Award,  immediately  prior  to the
specified  effective  date of such  Corporate  Transaction,  provided  that  the
Grantee's  Continuous Service has not terminated prior to such date. The portion
of the Award that is not Assumed shall  terminate  under  subsection (a) of this
Section  11 to the  extent  not  exercised  prior  to the  consummation  of such
Corporate Transaction.

          (c) EFFECT OF ACCELERATION ON INCENTIVE STOCK OPTIONS.  The portion of
any Incentive Stock Option  accelerated under this Section 11 in connection with
a Corporate  Transaction  shall remain  exercisable as an Incentive Stock Option
under the Code only to the  extent the  $100,000  dollar  limitation  of Section
422(d) of the Code is not  exceeded.  To the extent  such dollar  limitation  is
exceeded,  the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.

     12.  EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become  effective upon
the  earlier  to occur of its  adoption  by the  Board  or its  approval  by the
stockholders of the Company.  It shall continue in effect for a term of ten (10)
years unless sooner  terminated.  Subject to Section 17, below,  and  Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

                                       13
<PAGE>

     13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.

          (a) The Board may at any time amend,  suspend or  terminate  the Plan;
provided,  however, that no such amendment shall be made without the approval of
the Company's stockholders to the extent such approval is required by Applicable
Laws,  or if such  amendment  would  change  any of the  provisions  of  Section
4(b)(vi) or this Section 13(a).

          (b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.

          (c) Any amendment,  suspension or  termination of the Plan  (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted,  and such Awards  shall  remain in full force and effect as if the Plan
had not been amended, suspended or terminated,  unless mutually agreed otherwise
between the Grantee and the  Administrator,  which  agreement must be in writing
and signed by the Grantee and the Company.

     14. RESERVATION OF SHARES.

          (a) The  Company,  during  the  term of the  Plan,  will at all  times
reserve  and keep  available  such  number of Shares as shall be  sufficient  to
satisfy the requirements of the Plan.

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

     15.  NO  EFFECT ON TERMS OF  EMPLOYMENT/CONSULTING  RELATIONSHIP.  The Plan
shall not  confer  upon any  Grantee  any right with  respect  to the  Grantee's
Continuous  Service,  nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's  Continuous  Service at any time,
with or without  Cause,  and with or without  notice.  The Company's  ability to
terminate  the  employment  of a Grantee  who is  employed  at will is in no way
affected by its  determination  that the Grantee's  Continuous  Service has been
terminated for Cause for the purposes of this Plan.

     16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as specifically
provided  in a  retirement  or other  benefit  plan of the  Company or a Related
Entity,  Awards  shall not be deemed  compensation  for  purposes  of  computing
benefits or contributions  under any retirement plan of the Company or a Related
Entity,  and shall not affect any benefits  under any other  benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount  of  benefits  is  related  to level of  compensation.  The Plan is not a
"Retirement  Plan" or  "Welfare  Plan"  under  the  Employee  Retirement  Income
Security Act of 1974, as amended.

     17.  STOCKHOLDER  APPROVAL.  The grant of Incentive Stock Options under the
Plan shall be subject to approval  by the  stockholders  of the  Company  within
twelve  (12)  months  before  or after  the date the Plan is  adopted  excluding
Incentive Stock Options issued in substitution  for outstanding  Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder

                                       14
<PAGE>

approval shall be obtained in the degree and manner  required  under  Applicable
Laws. The  Administrator  may grant Incentive Stock Options under the Plan prior
to approval by the  stockholders,  but until such approval is obtained,  no such
Incentive  Stock  Option  shall be  exercisable.  In the event that  stockholder
approval is not obtained within the twelve (12) month period provided above, all
Incentive Stock Options  previously  granted under the Plan shall be exercisable
as Non-Qualified Stock Options.

                                       15

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