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                                                                    Exhibit 10.7

                                                       Amended November 23, 1994
                             Adjusted for Stock Splits in 1990, 1994 and 1997(2)

                           COMPAQ COMPUTER CORPORATION
                1985 EXECUTIVE AND KEY EMPLOYEE STOCK OPTION PLAN

                                    ARTICLE I
                                   DEFINITIONS

         1.01 "Board" shall mean the Board of Directors of the Company.

         1.02 "Code" shall mean the Internal Revenue Code of 1986 as amended.

         1.03 "Committee" shall mean the body comprised of the member or
members of the Board appointed by the Board to administer the Plan.

         1.04 "Common Stock" means the Company's $.01 par value common stock.

         1.05 "Company" shall mean Compaq Computer Corporation.

         1.06 "Fair Market Value" shall mean the value of a share of Common
Stock as determined by the Board. The Board shall determine Fair Market Value
as follows:

               (i) If the Common Stock shall not then be listed and traded
upon a recognized securities exchange or in the NASDAQ National Market System,
upon the basis of the mean between the bid and asked quotations for such stock
on the Date of Grant (as reported by a recognized stock quotation service) or,
in the event that there shall be no bid or asked quotations on the Date of
Grant, then upon the basis of the mean between the bid an asked quotations on
the date nearest preceding the Date of Grant; or,

               (ii) If the Common Stock shall then be listed and traded upon
a recognized securities exchange or in the NASDAQ National Market System, upon
the basis of the reported closing price at which shares of the Common Stock were
traded on such recognized securities exchange or system on the Date of Grant or,
if the Common Stock was not traded on said date, upon the basis of the reported
closing price on the date nearest preceding the Date of Grant.

         1.07 "Date of Grant" means the later of (i) the date o which the Board
approves the grant of an Option or (ii) the date on which the Optionee is
employed by the Company or a Subsidiary.

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         1.08 "Incentive Option" means an option to purchase Common Stock
granted pursuant to the provisions of the Plan, including the provisions of
Paragraphs 8.02, 8.03, 8.04, and 8.05 of the Plan.

         1.09 "Optionee" shall mean an officer and key manager of the Company
to whom an Option has been granted under the Plan.

         1.10 "Plan" shall mean the Compaq Computer Corporation1985 Executive
and Key Employee Stock Option Plan, the terms of which are set forth herein.

         1.11 "Incentive Stock Option Agreement" shall mean any written notice,
agreement or other instrument or document evidencing an Incentive Option and
under which the Optionee may purchase Common Stock pursuant to the terms of the
Plan.

         1.12 "Subsidiary" or "Subsidiaries" shall mean any corporation which is
a subsidiary corporation of the Company pursuant to Section 425(f ) of the Code.

         1.13 "Successor" shall mean the legal representative of the estate of a
deceased Optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by the reason of the death of any Optionee.

         1.14 "Nonqualified Option" shall mean an Option to purchase Common
Stock granted pursuant to the provisions of the Plan, but which is not subject
to the provisions of Paragraphs 8.02 and 8.05 of the Plan

         1.15 "Nonqualified Stock Option Agreement" shall mean any written
notice,agreement or other instrument or document evidencing a Nonqualified
Option and under which the Optionee may purchase Common Stock pursuant to the
terms of the Plan.

         1.16 "Option" shall refer to either or both Incentive Options and
Nonqualified Options granted pursuant to the terms of the Plan.

                                   ARTICLE II
                                     PURPOSE

The purpose of the Plan is to advance the interests of the Company and its
stockholders by offering to officers and key managers of the Company and its
Subsidiaries the opportunity to acquire, or increase a proprietary interest in
the Company by the grant to such persons of Incentive Options entitled to the
income tax benefits described in Section 422A of the Code under the terms set
forth in the Plan and by the grant to employees of Nonqualified Options. By so
doing, the Company seeks to motivate, obtain, and attract those highly competent
individuals upon whose judgment, initiative, leadership, and continuing efforts
the success of the Company depends.

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                                   ARTICLE III
                           EFFECTIVE DATE OF THE PLAN

        The Plan shall become effective on the date of its adoption by a
resolution of the Board. Within one year of such adoption, this Plan shall be
submitted to the stockholders of the Company entitled to vote thereon; should a
majority of the stockholders of the Company entitled to vote thereon fail to
approve the Plan within such year, this Plan shall automatically terminate.

                                   ARTICLE IV
                                   ELIGIBILITY

        Options may be granted only to officers and key manager (including
officers and employees who are also directors) of the Company or any of its
Subsidiaries.

                                    ARTICLE V
                           ADMINISTRATION OF THE PLAN

        The Plan shall be administered by the Board. The Board may, in its
discretion, appoint a Committee to administer the Plan. The Committee shall
consist of three or more disinterested directors, none of whom shall be eligible
(or shall have been eligible for one year prior to appointment to the Committee)
to be granted Options under the Plan. The Committee shall serve at the pleasure
of the Board and shall exercise all powers of the Board granted herein, other
than the power to amend the Plan.

        The Board shall have the sole discretion and authority, subject to the
provisions of the Plan, to determine the officers and key managers to whom and
the time or times at which Options shall be granted, and the number of shares of
the Common Stock which shall be subject to each Option.
        Subject to the express provisions of the Plan, the Board shall also
have full and final authority to interpret the Plan, and to make all other
determinations and to take all other actions it deems necessary or advisable
for the proper administration of the Plan. All such actions and
determinations shall be conclusively binding for all purposes and upon all
persons.

        The majority of the members of the Board shall constitute a quorum
and any action taken by a majority present at a meeting a which a quorum is
present or any action taken without a meeting evidenced by writing executed
by a majority of the Board shall constitute the action of the Board.

                                   ARTICLE VI
                         COMMON STOCK SUBJECT TO OPTIONS

         Subject to the adjustments specified below, the aggregate number of
shares of Common Stock that may be issued upon the exercise of all Options that
may be granted under the Plan shall not exceed 30,000,000 shares of the Common
Stock. Any shares subject to an Option which for any reason is surrendered,
expires or is terminated unexercised as to such shares may again be subject to
an Option under the Plan.

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                                   ARTICLE VII
                        ADJUSTMENTS AND CHANGE IN CONTROL

         7.01 ADJUSTMENT. The total number of shares of Common Stock available
for Options under the Plan or which may be allocated to any one employee, the
number of shares of Common Stock subject to outstanding Options and the exercise
price for such Options shall be appropriately adjusted by the Board for any
increase or decrease in the number of outstanding shares of Common Stock
resulting from a stock dividend, subdivision or combination of shares or
reclassification, as may be necessary to maintain the proportionate interest of
the Option holder. In the event of a merger or consolidation of the Company or a
tender offer for shares of Common Stock, the Board may make such adjustments
with respect to Options under the Plan and take such other action as it deems
necessary or appropriate to reflect or in anticipation of such merger,
consolidation or tender offer including, without limitation, the substitution of
new Options, the termination or adjustment of outstanding Options, and the
acceleration of Options.

         7.02 IMMEDIATE VESTING. Notwithstanding any other provision of the
Plan to the contrary, upon a Change in Control, as defined below, all
outstanding Options shall vest and become immediately exercisable or payable,
or have all restrictions lifted as may apply to the type of Award; provided,
however, that unless otherwise determined by the Committee at the time of
award or thereafter, if it is determined that the Net After-Tax Amount to be
realized by any Optionee, taking into account the accelerated vesting
provided for by this paragraph 7.02 as well as all other payments to be
received by such Optionee in connection with such Change in Control, would be
higher if Options did not vest in accordance with the foregoing paragraph
7.02, then and to such extent the Options shall not vest. The determination
of whether any such Option should not vest shall be made by a nationally
recognized accounting firm selected by the Company, which shall be instructed
to consider that (i) stock options shall be vested in the order in which they
were granted and within each grant in the order in which they would otherwise
have vested and (ii) unless and to the extent any other plan, arrangement or
contract of the Company pursuant to which any such payment is to be received
provides to the contrary, such other payment shall be deemed to have occurred
after any acceleration of Options.

         7.03 CHANGE IN CONTROL. A "Change in Control" shall be deemed to
have occurred if: (i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or more
of the combined voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years (not including any period
prior to January 18, 1989), individuals who at the beginning of such period
constitute the Board of Directors, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii), or (iv) of
this paragraph whose

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election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
the two year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority of the Board of Directors; (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a
recapitalization of the company (or similar transaction) in which no person
acquires more than 30% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control of the
Company; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.

         7.04 NET AFTER-TAX AMOUNT. "Net After-Tax Amount" shall mean the net
amount of compensation, assuming for this purpose only that all vested
Options are exercised upon such Change in Control, to be received (or deemed
to have been received) by such Optionee in connection with such Change of
Control under any option agreement and under any other plan, arrangement or
contract of the company to which such Optionee is a party, after giving
effect to all income and excise taxes applicable to such payments.

                                  ARTICLE VIII
                         TERMS AND CONDITIONS OF OPTIONS

         8.01 OPTION GRANT AND AGREEMENT. Each Incentive Option and each
Nonqualified Option granted prior to November 23, 1994, shall be evidenced by a
written Incentive Stock Option Agreement or a written Nonqualified Stock Option
Agreement, as applicable, dated as of the Date of Grant and executed by the
Company and the Optionee, which Agreement shall set forth the applicable terms
and conditions provided in this Article VIII and such other provisions which the
Board, in its discretion, may deem appropriate. Each Incentive Option and each
Nonqualified Option granted on or after November 23, 1994, shall be evidenced by
a Stock Option Agreement in the form of a written notice to the Participant
receiving an Option, which shall set forth the applicable terms and conditions
provided in this Article VIII and such other provisions which the Board, in its
discretion may deem appropriate.

         8.02 PARTICIPATION LIMITATION. In accordance with rules and
procedures established by the Committee, the aggregate Fair Market Value
(determined as of the time of grant) of the stock subject to Incentive Stock
Options as defined by Section 422A of the Code ("Section 422A") held by any
Optionee that become exercisable for the first time by such Optionee during
any calendar year under the Plan (and under any other benefit plans of the
Company or of any parent or subsidiary corporation of the Company) shall not
exceed $100,000 or, if different the maximum limitation in effect at the time
of grant under Section 422A, or any successor provision, and any

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regulations promulgated thereunder. The terms of any Incentive Option granted
hereunder shall comply in all respects with the provisions of Section 422A,
or any successor provision, and any regulations promulgated thereunder.

         8.03 OPTION PRICE. The per share Option price of the Common Stock
subject to each Option shall be determined by the Board but the per share
price shall not be less than the Fair Market Value of the Common Stock on the
Date of Grant.

         8.04 OPTION. Each Option granted must be granted within ten years
from the date of the Plan's adoption by the Board. The period of exercise of
each Option shall be set forth in the applicable Option Agreement; provided
that such period not exceed ten years from the Date of Grant.

         8.05 TEN PERCENT SHAREHOLDER LIMITATIONS. In any case in which an
Incentive Option is granted to an employee who, at the time the Incentive Option
is granted, owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, its parent or subsidiary, the per share
Incentive Option price of the Common Stock subject to each Incentive Option
shall be determined by the Board but the per share price shall not be less than
one hundred and ten percent of the Fair Market Value of the Common Stock on the
Date of Grant; furthermore, the period for exercise, of each such Incentive
Option shall not exceed five (5) years from the Date of Grant. For the purposes
of the immediately preceding sentence, an employee shall be considered owning
the shares of Common Stock owned, directly or indirectly, by or for his brothers
and sisters (whether by the whole or half blood), spouse, ancestors and lineal
descendants. In addition, the stock owned directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as owned
proportionately by or for its shareholders, partners or beneficiaries.

         8.06 EXERCISE OF OPTIONS. Incentive Options and Nonqualified Options
shall become exercisable in whole or in part and at such time or times as shall
be set forth in the Incentive Stock Option Agreement or Nonqualified Stock
Option Agreement, as applicable. Options shall be exercised by notice of intent
to exercise the Option with respect to a specified number of whole shares
delivered to the Company at its principal office, and payment in full to the
Company in the amount of the Option price for the number of shares of the Common
Stock with respect to which the Option is then being exercised. The payment of
the Option price shall be made in cash or, with the consent of the Board, in
whole or in part in Common Stock valued at Fair Market Value which is owned by
the Optionee.

         8.07 NON-TRANSFERABILITY OF OPTIONS; TRANSFER UPON DEATH OF
OPTIONEE. No Option shall be transferable or assignable by the Optionee,
other than by will or the laws of descent and distribution. Each Option shall
be exercisable during the Optionee's lifetime, only by the Optionee.

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         8.08 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT.

             (a) If the Optionee's employment with the Company is terminated
for any reason other than death, disability, or retirement, the Optionee's
right to exercise any Stock Option shall terminate, and such Option shall
expire, on the earlier of (A) the first anniversary of such termination of
employment or (B) the date such Option would have expired had it not been for
the termination of employment. The Optionee shall have the right to exercise
such Option prior to such expiration to the extent it was exercisable at the
date of such termination of employment and shall not have been exercised.

             (b) If the Optionee's employment with the Company is terminated
by reason of death, disability, or retirement, the Optionee's right to
exercise any Stock Option shall terminate, and such Option shall expire, on
the earlier of (A) the third anniversary of such termination of employment or
(B) the date such Option would have expired had it not been for the
termination of employment. The Optionee (or his successor if his employment
is terminated by death) shall have the right to exercise such Option prior to
such expiration to the extent it was exercisable at the date of such
termination of employment and shall not have been exercised.

             (c) Notwithstanding the foregoing, the Board may in its
discretion provide in an Option Agreement that such Option shall terminate at
a date earlier or later than the date set forth above, provided such date
shall not be beyond the earlier of (i) three years from the last day of
Optionee's employment or (ii) the date such Option would have expired had it
not been for the termination of the Optionee's employment.

             (d) The term "disability" as used in this paragraph means total
and permanent disability. The terms "disability" and "retirement" shall be
determined in accordance with applicable Company personnel policies as
interpreted in the exercise of the Board's discretion.

             (e) No transfer of an Option by an Optionee by will or by the
laws of descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice of the same
and an authenticated copy of the will and/or such other evidence as the Board
may deem necessary to establish the validity of the transfer and the
acceptance of the transferee or transferees of the terms and conditions of
such Option.

             (f) In the event an Optionee holds an Incentive Stock Option,
such Option to the extent not exercised during the 90 days after termination
of employment, automatically will be deemed a Nonqualified Stock Option and
such Option will be exercisable during the remainder of the time set forth
above; provided that in the event that employment is terminated because of
death or the Optionee dies in such 90-day period, the Option will continue to
be an Incentive Stock Option to the extent provided by Section 421 or Section
422A of the Code, or any successor provision, and any regulations promulgated
thereunder.

         8.09 LEAVE WITHOUT PAY. Any time spent by a Participant in the
status of "leave without pay" shall be disregarded for purposes of
determining the extent to which an Option or any portion thereof has vested.
The meaning of the term "leave without pay" shall be determined by

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the Committee and shall include but not be limited to periods during which
the Participant is receiving payments under the Company's Long-Term
Disability Plan.

         8.10 RIGHTS OF STOCKHOLDER. Optionee or his successor shall have no
rights as a stockholder with respect to any share subject to an Option until the
certificates evidencing the share purchased are properly delivered to such
Optionee or his Successor.

                                   ARTICLE IX
                         RESTRICTIONS ON ISSUING SHARES

        The exercise of each Option shall be subject to the condition that if at
any time the Board shall determine in its discretion that the listing,
registration or qualification of any shares otherwise deliverable upon such
exercise upon any securities exchange or under any state or federal law, or that
the consent or approval of any regulatory body is necessary or desirable as a
condition of or in connection with such exercise of delivery or purchase of
shares pursuant to the Plan, then in any such event, such exercise shall not be
effective unless such withholding, listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Board.

         In addition, the exercise of each Option shall be subject to the
condition that, if required by the Board, Optionee shall give satisfactory
assurance in writing, signed by Optionee, his successor or legal representative,
as the case may be, that such shares are being purchased for investment and not
with a view to the distribution thereof; provided that such assurance shall b
deemed inapplicable to (i) any sale of such shares by such Optionee made in
accordance with the terms of a registration statement covering such sale, which
has heretofore been (or may hereafter be) filed and become effective under the
Securities Ac of 1933, as amended, and with respect to which no stop order
suspending the effectiveness thereof has been issued, and (ii) any other sale of
such shares with respect to which, in the opinion of counsel for the Company,
such assurance is not required to be given in order to comply with the
provisions of the Securities Act of 1933 as amended.

                                    ARTICLE X
                AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN

         The Board shall have the right to amend, suspend or terminate the
Plan at any time; provided, however, that no such action shall affect any
Option granted without the consent of the Optionee or his Successor of the
Option. In addition, unless duly approved by a majority of the holders of
Common Stock entitled to vote thereon at a meeting (which may be the annual
meeting), or the equivalent of said meeting, duly called and held for such
purpose, no amendment or change shall be made in the Plan (a) increasing the
total number of shares which may be issued under the Plan (except for
adjustments for recapitalization, stock dividends and other changes in the
corporate structure and except as contemplated in Article VII), (b) changing
the minimum purchase price hereinbefore specified for the Common Stock
subject to the Options, (c) changing the maximum period during which the
Options may be exercised, (d) increasing the maximum number of shares for
which Incentive Options may be granted to any one employee, or (e)

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extending the period during which Options may be granted under the Plan. It
is contemplated that the Incentive Options issued pursuant to the Plan
qualify as "Incentive Stock Options" within the meaning of Section 422A of
the Code. Accordingly, the Board shall administer the Plan and make such
amendments as to accomplish this purpose.

                                   ARTICLE XI
                                  MISCELLANEOUS

         11.01 EMPLOYMENT. Nothing in the Plan, any Option granted pursuant to
the Plan, or in any Incentive Stock Option Agreement or Nonqualified Stock
Option Agreement shall confer upon any employee the right to continue in the
employ of the Company or any Subsidiary.

         11.02 OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other stock option, incentive or other compensation plans in effect
for the Company or any Subsidiary or preclude the Company from establishing any
other forms of incentive or other compensation for employees of the Company or
any Subsidiary.

         11.03 PLAN BINDING ON SUCCESSORS. The Plan shall be binding on the
successors and assigns of the Company.

         11.04 USE OF PROCEEDS. The proceeds from the sale of Common Stock,
pursuant to Options granted under the Plan, shall constitute general funds of
the Company.

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                                                               EXHIBIT 10.8

                                                  Amended November 23, 1994
                        Adjusted for Stock Splits in 1990, 1994 and 1997(2)

                           COMPAQ COMPUTER CORPORATION
                       1985 NONQUALIFIED STOCK OPTION PLAN

         1. PURPOSE OF THE PLAN. The purpose of the COMPAQ COMPUTER CORPORATION
1985 Nonqualified Stock Option Plan ("Plan") is to provide compensation in the
form of ownership of the common stock, $.01 par value ("Common Stock"), of
Compaq Computer Corporation, a Delaware corporation ("Company"), to certain
selected employees of the Company and its subsidiaries.

         2. ADMINISTRATION OF THE PLAN. The Board of Directors of the Company
("Board") shall have full power and authority, subject to the provisions of the
Plan, to designate participants and to interpret the provisions and supervise
the administration of the Plan. All such decisions, selections and other actions
shall be conclusively binding for all purposes and upon all persons. All
decisions and selections made by the Board pursuant to the provisions of the
Plan shall be made by a majority of its members. Any decision reduced to writing
and signed by a majority of the members shall be fully effective as if it had
been made by a majority at a meeting duly held. The Board may, in its
discretion, appoint a Compensation Committee ("Committee") to administer the
Plan. If appointed, the Committee shall consist of at least three directors,
none of whom is eligible to participate in the Plan or has been eligible to
participate in the Plan for at least one year prior to his appointment. The
Committee shall serve at the pleasure of the Board, and shall exercise all
powers of the Board granted herein, other than the power to amend the Plan.

         3. STOCK RESERVED FOR THE Plan. The shares subject to the Plan shall
consist of 45,000,000 unissued shares of Common Stock or previously issued
shares reacquired and held by the Company, and such amount of shares shall be
and is hereby reserved for issuance pursuant to this Plan. Any of such shares
which may remain unsold and which are not subject to 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 expire or be canceled prior to its exercise in full, the shares
theretofore subject to such option may again be made subject to an option under
the Plan.

         4 (a) GRANT OF OPTIONS. The Board shall, from time to time,
determine and designate those persons who are to receive options under the
Plan, the number of shares to be covered by such options and the terms
thereof. For options granted prior to November 23, 1994, the Board shall
thereupon grant options in accordance with such determinations as evidenced
by a written option agreement.

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Each Nonqualified Option granted on or after November 23, 1994, shall be
evidenced by a Nonqualified Stock Option Agreement in the form of a written
notice to the Participant receiving an option, which notice shall set forth
the applicable terms and conditions provided in this Plan and such other
provisions which the Board, in its discretion may deem appropriate. The
capitalized term "Nonqualified Stock Option Agreement" as used herein shall
mean any written notice, agreement, or other instrument or document
evidencing a Nonqualified Option and under which the Optionee may purchase
Common Stock pursuant to the terms of the Plan.

            (b) ELIGIBILITY.  Options may be granted only to officers and
employees  (including  officers and employees who are also directors) of the
Company or any of its Subsidiaries.

         5. TERMS AND CONDITIONS. Each option granted under the Plan shall be
evidenced by an agreement, in a form approved by the Board, pursuant to Section
4(a), which shall be subject to the following express terms and conditions and
to such other terms and conditions as the Board may deem appropriate.

            (a) OPTION PERIOD. Each option agreement shall specify the period
for which the option thereunder is granted (which in no event shall exceed
ten years and one day from the date of grant) and shall provide that the
option shall expire at the end of such period.

            (b) OPTION PRICE. The purchase price of each share of Common Stock
subject to each option granted pursuant to the Plan shall be determined by
the Board at the time the option is granted. In the case of any option
granted to an individual subject to Section 16 of the Securities Exchange Act
of 1934, such purchase price shall be not less than 50% of the fair market
value of such shares on such date. The term "fair market value" as used in
this paragraph shall mean the value of a share of Common Stock as determined
by the Board. The Board shall value as follows:

               (i) If the  Common  Stock  shall  not  then  be  listed  and
traded  upon a  recognized securities exchange or in the NASDAQ National
Market System, upon the basis of the mean between the bid and asked
quotations for such stock on the date of grant (as reported by a recognized
stock quotation service) or, in the event that there shall be no bid or asked
quotations on the date of grant, then upon the basis of the mean between the
bid an asked quotations on the date nearest preceding the date of grant;

               (ii) If the Common  Stock  shall then be listed an traded upon
a  recognized  securities exchange or in the NASDAQ National Market System,
upon the basis of the reported closing price at which shares of the Common
Stock were traded on such recognized securities exchange or system on the
date of grant or, if the Common Stock was not traded on said date, upon the
basis of the reported closing price on the date nearest preceding the date of
grant.

            (c) EXERCISE PERIOD. The Board may provide in any option agreement
that an option may be exercised in whole immediately or is to be exercisable
in increments.

            (d) PROCEDURE FOR EXERCISE. Options shall be exercised by notice
of intent to exercise the options delivered to the Company at its principal
office setting forth the number of whole shares with respect to which the
option is to be exercised. Such notice shall be accompanied by cash or
certified check, bank draft, postal or express money order payable to the
order of the Company, or, with the consent of the Board, in whole or in part
in Common Stock valued at Fair Market Value which is owned by optionee, for
an amount equal to the option price of such shares, and specifying the
address to which the certificates for such shares are to be mailed. As
promptly as practicable after receipt of such written notification and
payment, the Company shall deliver to the Optionee certificates for the
number of shares with respect to which such option has been so exercised,
issued in the Optionee's name; provided, however, that such delivery shall be
deemed effected for all purposes when a stock transfer agent of the Company
shall have deposited such certificates in the United States mail, addressed
to the Optionee, at the address specified pursuant to this paragraph 5(d).

            (e) EFFECT OF TERMINATION AND LEAVE WITHOUT PAY.

               (i) If the Optionee's employment with the Company is
terminated for any reason other than death, disability, or retirement, the
Optionee's right to exercise any Stock Option shall terminate, and such
Option shall expire, on the earlier of (A) the first anniversary of such
termination of employment or (B) the date such Option would have expired had
it not been for the termination of employment. The Optionee shall have the
right to exercise such Option prior to such expiration to the extent it was
exercisable at the date of such termination of employment and shall not have
been exercised.

               (ii)  If the  Optionee's  employment  with  the  Company  is
terminated  by  reason  of disability or retirement, the Optionee's right to
exercise any Stock Option shall terminate and such Option shall expire, on
the earlier of (A) the third anniversary of such termination of employment or
(B) the date such Option would have expired had it not been for the
termination of employment. The Optionee shall have the right to exercise such
option prior to such expiration to the extent it was exercisable at the date
of such termination of employment and shall not have been exercised.

                (iii)  Notwithstanding  the foregoing,  the Board may in its
discretion  provide in any option agreement that such option shall terminate
at a date earlier or later than that set forth above, provided such date
shall not be beyond the earlier of (i) three years from the last day of
Optionee's employment or (ii) the date such option would have expired had it
not been for the termination of the Optionee's employment.

                 (iv) In the event of the death of an  Optionee  under the
Plan prior to  termination  of his employment, the options previously granted
to him may be exercised (to the extent he would have been entitled to do so
at the date of his death) at any time and from time to time prior to their
expiration by the executor or administrator of his estate or by the person or
persons to whom his rights under the option shall pass by will or the laws of
descent and distribution, but in no event may the option be exercised after
its expiration.

                                    3

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                 (v) The term "disability" as used in this paragraph means
total and permanent disability. The term "disability" and "retirement" shall
be determined in accordance with applicable Company personnel policies as
interpreted in the Board's direction.

                 (vi) No  transfer  of an option by an  Optionee  by will or
by the laws of  descent  and distribution shall be effective to bind the
Company unless the Company shall have been furnished with written notice of
the same and an authenticated copy of the will and/or such other evidence as
the Board may deem necessary to establish the validity of the transfer and
the acceptance of the transferee or transferees of the terms and conditions
of such option.

                 (vii) LEAVE WITHOUT PAY. Any time spent by a Participant
in the status of "leave without pay" shall be disregarded for purposes of
determining the extent to which an Option or any portion thereof has vested.
The meaning of the term "leave without pay" shall be determined by the
Committee and shall include but not be limited to periods during which the
Participant is receiving payments under the Company's Long-Term Disability
Plan.

           (f) ASSIGNABILITY. An option shall not be assignable or otherwise
transferable except by will or by the laws of descent and distribution. Each
option shall be exercisable during the Optionee's lifetime only by the
Optionee.

           (g) NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as
a stockholder with respect to shares covered by an option until the date of
issuance of a stock certificate for such shares; except as provided in
paragraph 9, no adjustment for dividends, or otherwise, shall be made if the
record date therefor is prior to the date of issuance of such certificate.

           (h) INVESTMENT REPRESENTATION. Each option agreement shall contain
an agreement that, upon demand by the Board for such a representation, the
Optionee (or any person acting under paragraph 5(e) shall deliver to the
Board at the time of any exercise of an option a written representation that
the shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof.
Upon such demand, delivery of such representation prior to the delivery of
any shares issued upon exercise of an option and prior to the expiration of
the option period shall be a condition precedent to the right of the Optionee
or such other person to purchase any shares.

         6. AMENDMENTS OR  TERMINATION.  The Board may amend,  alter or
discontinue  the Plan, but no amendment or alteration  shall be made which
would impair the rights of any  participant  under any option  theretofore
granted without his consent.

         7. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant
and exercise of options thereunder, and the obligation of the Company to sell
and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
governmental or regulatory agency or national securities exchange as may be
required. The Company shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of such shares under any federal or state law,
or any ruling or regulation of
                                     4
<Page>

any government body or national securities exchange which the Company shall,
in its sole discretion, determine to be necessary

         8. EFFECTIVENESS AND EXPIRATION OF PLAN. The Plan shall be effective
on the date the Board adopts the Plan. The Plan shall expire ten years and
one day after the effective date of the Plan and thereafter no option shall
be granted pursuant the Plan.

         9. ADJUSTMENTS AND CHANGE IN CONTROL.

            (a) ADJUSTMENT. The total number of shares of Common Stock
available for options under the Plan or which may be allocated to any one
employee, the number of shares of Common Stock subject to outstanding options
and the exercise price for such options shall be appropriately adjusted by
the Board for an increase or decrease in the number of outstanding shares of
Common Stock resulting from a stock dividend, subdivision or combination of
shares or reclassification, as may be necessary to maintain the proportionate
interest of the option holder. In the event of a merger or consolidation of
the Company or a tender offer for shares of Common Stock, the Board may make
such adjustments with respect to options under the Plan and take such other
action as it deems necessary or appropriate to reflect or in anticipation of
such merger, consolidation or tender offer including, without limitation, the
substitution of new options, the termination or adjustment of outstanding
options, and the acceleration of options.

           (b) IMMEDIATE VESTING. Notwithstanding any other provision of the
Plan to the contrary, upon a Change in Control, as defined below, all
outstanding options shall vest and become immediately exercisable or payable,
or have all restrictions lifted as may apply to the type of Award; provided,
however, that unless otherwise determined by the Committee at the time of
award or thereafter, if it is determined that the Net After-Tax Amount to be
realized by any optionee, taking into account the accelerated vesting
provided for by this paragraph 7.02 as well as all other payments to be
received by such optionee in connection with such Change in Control, would be
higher if options did not vest in accordance with the foregoing paragraph
7.02, then and to such extent the options shall not vest. The determination
of whether any such option should not vest shall be made by a nationally
recognized accounting firm selected by the Company, which shall be instructed
to consider that (i) stock options shall be vested in the order in which they
were granted and within each grant in the order in which they would otherwise
have vested and (ii) unless and to the extent any other plan, arrangement or
contract of the Company pursuant to which any such payment is to be received
provides to the contrary, such other payment shall be deemed to have occurred
after any acceleration of options.

           (c) CHANGE IN CONTROL. A "Change in Control" shall be deemed to
have occurred if: (i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, (the "Exchange Act") (other
than the Company, an trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or more
of the combined voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years (not including any period
prior to January 18, 1989), individuals who at the beginning of such period
constitute the Board of Directors, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i) , (iii) , or (iv) of
this paragraph whose election by the Board of Directors or nomination for
election by

                                    5

<Page>

the Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning
of the two year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority of the Board of Directors; the stockholders of the Company approve
merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 30% of the
combined voting power of the Company's then outstanding securities shall not
constitute a Change in Control of the Company; or (iv) the stockholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets.

           (b) NET AFTER-TAX AMOUNT. "Net After-Tax Amount" shall mean the
net amount of compensation, assuming for this purpose only that all vested
options are exercised upon such Change in Control, to be received (or deemed
to have been received) by such optionee in connection with such Change of
Control under any option agreement and under any other plan, arrangement or
contract of the company to which such optionee is a party, after giving
effect to all income and excise taxes applicable to such payments.

         10. Miscellaneous.

           (a) EMPLOYMENT. Nothing in the Plan, any Option granted pursuant
to the Plan, or in any Incentive Stock Option Agreement or Nonqualified Stock
Option Agreement shall confer upon any employee the right to continue in the
employ of the Company or any Subsidiary.

           (b) OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other stock option, incentive or other compensation plans in
effect for the Company or any Subsidiary or preclude the Company from
establishing any other forms of incentive or other compensation for employees
of the Company or any Subsidiary.

           (c) PLAN BINDING ON SUCCESSORS. The Plan shall be binding on the
successors and assigns of the Company.

           (d) USE OF PROCEEDS. The proceeds from the sale of Common Stock,
pursuant to Options granted under the Plan, shall constitute general funds of
the Company.

                                        6

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