Document:

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                                                                     Exhibit 4.1

                               KOMAG, INCORPORATED

                 AMENDED AND RESTATED 2002 QUALIFIED STOCK PLAN

                             (AS OF MAY 12, 2004)

     1.   Purposes of the Plan. The purposes of this Amended and Restated 2002
Qualified Stock Plan are:

          o    to attract and retain the best available personnel for positions
               of substantial responsibility,

          o    to provide additional incentive to Service Providers, and

          o    to promote the success of the Company's business.

          Awards granted under the Plan may be Incentive Stock Options,
Nonstatutory Stock Options, Stock Purchase Rights, Stock Appreciation Rights,
Performance Shares or Performance Units, as determined by the Administrator at
the time of grant.

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

          (a)  "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.

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

          (c)  "Award" means individually or collectively, a grant under the
Plan of Options, Stock Purchase Rights, Stock Appreciation Rights, Performance
Shares or Performance Units.

          (d)  "Award Agreement" means the written agreement setting forth the
terms and provisions applicable to each Award granted under the Plan. The Award
Agreement is subject to the terms and conditions of the Plan.

          (e)  "Awarded Stock" means the Common Stock subject to an Award.

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

          (g)  "Change in Control" means the occurrence of any of the following
events:

               (i)  Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act),

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directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities; or

               (ii) The consummation of the sale or disposition by the Company
of all or substantially all of the Company's assets;

               (iii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

               (iv) The consummation of 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 or its parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation.

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

          (i)  "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.

          (j)  "Common Stock" means the common stock of the Company, or in the
case of Performance Units, the cash equivalent thereof.

          (k)  "Company" means Komag, Incorporated, a Delaware corporation.

          (l)  "Consultant" means any natural person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.

          (m)  "Deferred Stock Unit" means a deferred stock unit Award granted
to a Service Provider pursuant to Section 13.

          (n)  "Director" means a member of the Board.

          (o)  "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.

          (p)  "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be treated as an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days,

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unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months following the 91st day of
such leave any Incentive Stock Option held by the Participant shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.

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

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

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

               (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems reliable; or

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

               (iv) Notwithstanding the preceding, for federal, state, and local
income tax reporting purposes and for such other purposes as the Administrator
deems appropriate, the Fair Market Value shall be determined by the
Administrator in accordance with uniform and nondiscriminatory standards adopted
by it from time to time.

          (s)  "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

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

          (u)  "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Award. The Notice of Grant is part
of the Award Agreement.

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

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

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

          (y)  "Participant" means the holder of an outstanding Award granted
under the Plan.

          (z)  "Performance Goals" means the goal(s) determined by the
Administrator (in its discretion) to be applicable to a Participant with respect
to an Award. As determined by the Administrator, the Performance Goals
applicable to an Award may provide for a targeted level or levels of achievement
using one or more of the following measures: (i) cash flow, (ii) customer
satisfaction, (iii) earnings, (iv) gross margin, (v) market price of stock, (vi)
market share, (vii) net income, (viii) operating income, (ix) operating margin,
(x) return on capital, (xi) return on equity, (xii) return on net assets, (xiii)
revenue and (xiv) sales. The Performance Goals may differ from Participant to
Participant and from Award to Award. Any criteria used may be measured, as
applicable, (i) in absolute terms, (ii) in relative terms (including, but not
limited to, passage of time and/or against another company or companies), (iii)
on a per-share basis, (iv) against the performance of the Company as a whole or
a segment of the Company, and (v) on a pre-tax or after-tax basis.

          (aa) "Performance Share" means a performance share Award granted to a
Service Provider pursuant to Section 11.

          (bb) "Performance Unit" means a performance unit Award granted to a
Service Provider pursuant to Section 12.

          (cc) "Plan" means this Amended and Restated 2002 Qualified Stock Plan.

          (dd) "Restricted Stock" means Shares, acquired upon exercise of a
Stock Purchase Right, that are subject to vesting, if any.

          (ee) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

          (ff) "Section 16(b) " means Section 16(b) of the Exchange Act.

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

          (hh) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 16 of the Plan.

          (ii) "Stock Appreciation Right" or "SAR" means an Award, granted alone
or in connection with a related Option, that pursuant to Section 10 is
designated as a SAR.

          (jj) "Stock Purchase Right" means the right to purchase Shares
pursuant to Section 9 of the Plan, as evidenced by a Notice of Grant.

          (kk) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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     3.   Stock Subject to the Plan. Subject to the provisions of Section 16 of
the Plan, the maximum aggregate number of Shares that may be issued under the
Plan is 3,925,000 Shares; provided, however, that in no event shall more than
40% of the Shares that remain available for issuable under the Plan as of March
10, 2004 be granted pursuant to Awards with an exercise price or purchase price
that is less than 100% of Fair Market Value on the date of grant. The Shares
many be authorized, but unissued, or reacquired Common Stock.

          If an Award expires or becomes unexercisable without having been
exercised in full, or, with respect to Restricted Stock, Performance Shares,
Performance Units or Deferred Stock Units, is forfeited back to or repurchased
by the Company, the unpurchased Shares (or for Awards other than Options and
SARs, the forfeited or repurchased Shares) which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan,
under any Award, shall not be returned to the Plan and shall not become
available for future distribution under the Plan, except that if Shares of
Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units
are repurchased by the Company at their original purchase price or are forfeited
to the Company, such Shares shall become available for future grant under the
Plan. To the extent an Award under the Plan is paid out in cash rather than
stock, such cash payment shall not result in reducing the number of Shares
available for issuance under the Plan.

          If a Participant pays the exercise price (or purchase price, if
applicable) of an Award through the tender of Shares, or if Shares are tendered
or withheld to satisfy any Company withholding obligations, the number of Shares
so tendered or withheld shall again be available for issuance pursuant to future
Awards under the Plan.

     4.   Administration of the Plan.

          (a)  Procedure.

               (i)  Multiple Administrative Bodies. Different Committees with
respect to different groups of Service Providers may administer the Plan.

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

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

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

          (b)  Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
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               (i)  to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Awards may be
granted hereunder;

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

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

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

               (vi) to reduce the exercise price of any Option or SAR to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Award shall have declined since the date the Award was granted;

               (vii) to institute an exchange program whereby outstanding
Options and/or SARs are surrendered in exchange for Awards with a lower exercise
price;

               (viii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;

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

               (x)  to modify or amend each Award (subject to Section 18(c) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options or SARs longer than is otherwise provided for
in the Plan;

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

               (xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Award previously granted by
the Administrator;
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               (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c)  Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Participants.

     5.   Eligibility. Stock Purchase Rights, Performance Shares, Performance
Units, Stock Appreciation Rights, Deferred Stock Units and Nonstatutory Stock
Options may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.

     6.   Limitations.

          (a)  ISO $100,000 Rule. Each Option shall be designated in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

          (b)  No Rights as a Service Provider. Neither the Plan nor any Award
shall confer upon a Participant any right with respect to continuing his or her
relationship as a Service Provider, nor shall they interfere in any way with the
right of the Participant or the right of the Company or its Parent or
Subsidiaries to terminate such relationship at any time, with or without cause.

          (c)  162(m) Limitation. The following limitations shall apply to
Awards under the Plan:

               (i)  No Service Provider shall be granted, in any fiscal year of
the Company, (A) Option or SARs to purchase more than 1,500,000 Shares, (B)
Stock Purchase Rights to purchase more than 500,000 Shares, (C) Performance
Shares covering more than 500,000 Shares and (D) Performance Units with an
initial value in excess of $5,000,000.

               (ii) In connection with his or her initial service, a Service
Provider may be granted Options or SARS to purchase up to an additional
1,500,000 Shares, which shall not count against the limit set forth in
subsection (i) above.

               (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 16(a).

               (iv) If an Award is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 16(c)), the cancelled Award will be counted against the
limits set forth in subsections (i) and (ii) above.
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     7.   Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 18 of the Plan.

     8.   Stock Options.

          (a)  Term of Options. The term of each Option shall be ten (10) years
from the date of grant or such shorter term as may be provided in the Award
Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement.

          (b)  Option Exercise Price and Consideration.

               (i)  Exercise Price. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

                    (A)  In the case of an Incentive Stock Option

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

                         (b)  granted to any Employee other than an Employee
described in paragraph (a) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

                    (B)  In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

               (ii) The exercise price for the Shares to be issued pursuant to
an already granted Option may not be changed without the consent of the
Company's stockholders. This shall include, without limitation, a repricing of
the Option as well as an option exchange program whereby the Participant agrees
to cancel an existing Option in exchange for an Option, SAR or other Award.

          (c)  Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
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          (d)  Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration to the extent permitted by Applicable Laws may consist entirely
of:

               (i)  cash;

               (ii) check;

               (iii) promissory note;

               (iv) other Shares which meet the conditions established by the
Administrator to avoid adverse accounting consequences (as determined by the
Administrator);

               (v)  consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

               (vi) a reduction in the amount of any Company liability to the
Participant, including any liability attributable to the Participant's
participation in any Company-sponsored deferred compensation program or
arrangement;

               (vii) any combination of the foregoing methods of payment; or

               (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

          (e)  Exercise of Option.

               (i)  Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Award Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be suspended beginning on the 91st
day of a Participant's leave of absence and will resume on the date the
Participant returns to work on a regular schedule as determined by the Company;
provided, however, that no vesting credit will be awarded for the time vesting
has been suspended during such leave of absence. An Option may not be exercised
for a fraction of a Share.

     An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Award Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Award Agreement and the Plan. Shares issued upon exercise of an
Option shall be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Awarded Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued)

<PAGE>

such Shares promptly after the Option is exercised. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 16 of the Plan.

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

          (f)  Termination of Relationship as a Service Provider. If a
Participant ceases to be a Service Provider, other than upon the Participant's
death or Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In
the absence of a specified time in the Award Agreement, the Option shall remain
exercisable for ninety (90) days following the Participant's termination. If, on
the date of termination, the Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Participant does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

          (g)  Disability of Participant. If a Participant ceases to be a
Service Provider as a result of the Participant's Disability, the Participant
may exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option shall remain exercisable for twelve (12) months following
the Participant's termination. If, on the date of termination, the Participant
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Participant does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

          (h)  Death of Participant. If a Participant dies while a Service
Provider, the Option may be exercised following the Participant's death within
such period of time as is specified in the Award Agreement to the extent that
the Option is vested on the date of death (but in no event may the option be
exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant's designated beneficiary, provided such
beneficiary has been designated prior to Participant's death in a form
acceptable to the Administrator. If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant's estate or by the person(s) to whom the
Option is transferred pursuant to the Participant's will or in accordance with
the laws of descent and distribution. In the absence of a specified time in the
Award Agreement, the Option shall remain exercisable for twelve (12) months
following Participant's death. If, at the time of death, the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. If the Option is not
so exercised within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
<PAGE>

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

     9.   Stock Purchase Rights.

          (a)  Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, of the terms, conditions and restrictions
related to the offer, including the number of Shares that the offeree shall be
entitled to purchase, the price to be paid, and the time within which the
offeree must accept such offer. The offer shall be accepted by execution of an
Award Agreement in the form determined by the Administrator.

          (b)  Repurchase Option. Unless the Administrator determines otherwise,
the Award Agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's service with the
Company for any reason (including death or Disability). The purchase price for
Shares repurchased pursuant to the Award Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined
by the Administrator; provided, however, that such option shall lapse at a rate
no less than one-third (1/3) of the covered Shares each year. However, if the
Administrator determines it is desirable for the Award to qualify as
"performance-based compensation" for purposes of Section 162(m) of the Code, the
repurchase option shall lapse based upon the achievement of Performance Goals.

          (c)  Other Provisions. The Award Agreement shall contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion.

          (d)  Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 16
of the Plan.

     10.  Stock Appreciation Rights.

          (a)  Grant of SARs. Subject to the terms and conditions of the Plan,
SARs may be granted to Service Providers at any time and from time to time as
shall be determined by the Administrator, in its sole discretion. The
Administrator shall have complete discretion to determine the number of SARs
granted to any Participant.

          (b)  Exercise Price and other Terms. The Administrator, subject to the
provision of the Plan, shall have complete discretion to determine the terms and
conditions of SARs granted under the Plan; provided, however, that no SAR may
have a term of more than ten (10) years from the date of grant. The exercise
price for the Shares or cash to be issued pursuant to an already granted SAR may
not be changed without the consent of the Company's stockholders. This shall

<PAGE>

include, without limitation, a repricing of the SAR as well as an SAR exchange
program whereby the Participant agrees to cancel an existing SAR in exchange for
an Option, SAR or other Award.

          (c)  Payment of SAR Amount. Upon exercise of a SAR, a Participant
shall be entitled to receive payment from the Company in an amount determined by
multiplying:

               (i)  the difference between the Fair Market Value of a Share on
the date of exercise over the exercise price; times

               (ii) the number of Shares with respect to which the SAR is
exercised.

          (d)  Payment upon Exercise of SAR. At the discretion of the
Administrator, payment for a SAR may be in cash, Shares or a combination
thereof.

          (e)  SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, shall determine.

          (f)  Expiration of SARs. Subject to the term stated in Section 10(b),
a SAR granted under the Plan shall expire upon the date determined by the
Administrator, in its sole discretion, and set forth in the Award Agreement.

          (g)  Termination of Relationship as a Service Provider. If a
Participant ceases to be a Service Provider, other than upon the Participant's
death or Disability, the Participant may exercise his or her Stock Appreciation
Right within such period of time as is specified in the Award Agreement to the
extent that the Stock Appreciation Right is vested and exercisable on the date
of termination (but in no event later than the expiration of the term of such
Stock Appreciation Right as set forth in the Award Agreement). In the absence of
a specified time in the Award Agreement, the Stock Appreciation Right shall
remain exercisable for three (3) months following the Participant's termination.
If, on the date of termination, the Participant is not vested as to his or her
entire Stock Appreciation Right, the Shares covered by the unvested portion of
the Stock Appreciation Right shall revert to the Plan. If, after termination,
the Participant does not exercise his or her Stock Appreciation Right within the
time specified by the Administrator, the Stock Appreciation Right shall
terminate, and the Shares covered by such Stock Appreciation Right shall revert
to the Plan.

          (h)  Disability of Participant. If a Participant ceases to be a
Service Provider as a result of the Participant's Disability, the Participant
may exercise his or her Stock Appreciation Right within such period of time as
is specified in the Award Agreement to the extent the Stock Appreciation Right
is vested and exercisable on the date of termination (but in no event later than
the expiration of the term of such Stock Appreciation Right as set forth in the
Award Agreement). In the absence of a specified time in the Award Agreement, the
Stock Appreciation Right shall remain exercisable for twelve (12) months
following the Participant's termination. If, on the date of termination, the
Participant is not vested as to his or her entire Stock Appreciation Right, the
Shares covered by the unvested portion of the Stock Appreciation Right shall
revert to the Plan. If, after termination, the Participant does not exercise his
or her Stock Appreciation Right within the time specified herein, the Stock
Appreciation Right shall terminate, and the Shares covered by such Stock
Appreciation Right shall revert to the Plan.

<PAGE>

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

          (j)  Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares a Stock Appreciation Right previously
granted based on such terms and conditions as the Administrator shall establish
and communicate to the Participant at the time that such offer is made.

     11.  Performance Shares.

          (a)  Grant of Performance Shares. Subject to the terms and conditions
of the Plan, Performance Shares may be granted to Service Providers at any time
and from time to time as shall be determined by the Administrator, in its sole
discretion. The Administrator shall have complete discretion to determine (i)
the number of Shares subject to a Performance Share award granted to any
Participant, and (ii) the conditions that must be satisfied, which typically
will be based principally or solely on achievement of performance milestones but
may include a service-based component, upon which is conditioned the grant or
vesting of Performance Shares; provided, however, that (1) the performance
milestones will be based on Performance Goals if the Administrator desires that
the Award qualify as "performance-based compensation" under Section 162(m) of
the Code, and (2) any period for measuring performance will be at least 12
months. Performance Shares shall be granted in the form of units/rights to
acquire Shares. Each such unit/right shall be the equivalent of one Share for
purposes of determining the number of Shares subject to an Award. Until the
Shares are issued, no right to vote or receive dividends or any other rights as
a stockholder shall exist with respect to the units/rights to acquire Shares.

          (b)  Other Terms. The Administrator, subject to the provisions of the
Plan, shall have complete discretion to determine the terms and conditions of
Performance Shares granted under the Plan. Performance Share grants shall be
subject to the terms, conditions, and restrictions determined by the
Administrator at the time the stock is awarded, which may include such
performance-based milestones as are determined appropriate by the Administrator.
The Administrator may require the recipient to sign a Performance Shares
agreement as a condition of the award. Any certificates representing the Shares
of stock awarded shall bear such legends as shall be determined by the
Administrator.

<PAGE>

          (c)  Performance Share Award Agreement. Each Performance Share grant
shall be evidenced by an agreement that shall specify such other terms and
conditions as the Administrator, in its sole discretion, shall determine.

     12.  Performance Units.

     (a)  Grant of Performance Units. Performance Units are similar to
Performance Shares, except that they shall be settled in a cash equivalent to
the Fair Market Value of the underlying Shares, determined as of the vesting
date. Subject to the terms and conditions of the Plan, Performance Units may be
granted to Service Providers at any time and from time to time as shall be
determined by the Administrator, in its sole discretion. The Administrator shall
have complete discretion to determine (i) the number of Shares subject to a
Performance Unit award granted to any Participant, and (ii) the conditions that
must be satisfied, which typically will be based principally or solely on
achievement of performance milestones but may include a service-based component,
upon which is conditioned the grant or vesting of Performance Units; provided,
however, that (1) the performance milestones will be based on Performance Goals
if the Administrator desires that the Award qualify as performance-based
compensation under Section 162(m) of the Code, and (2) any period for measuring
performance will be at least 12 months. Performance Units shall be granted in
the form of units/rights to acquire Shares. Each such unit/right shall be the
cash equivalent of one Share of Common Stock. No right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Performance Units or the cash payable thereunder.

     (b)  Other Terms. The Administrator, subject to the provisions of the Plan,
shall have complete discretion to determine the terms and conditions of
Performance Units granted under the Plan. Performance Unit grants shall be
subject to the terms, conditions, and restrictions determined by the
Administrator at the time the stock is awarded, which may include such
performance-based milestones as are determined appropriate by the Administrator.
The Administrator may require the recipient to sign a Performance Unit agreement
as a condition of the award. Any certificates representing the Shares of stock
awarded shall bear such legends as shall be determined by the Administrator.

     (c)  Performance Unit Award Agreement. Each Performance Unit grant shall be
evidenced by an agreement that shall specify such terms and conditions as the
Administrator, in its sole discretion, shall determine.

     13.  Deferred Stock Units. Deferred Stock Units shall consist of a
Restricted Stock, Performance Share or Performance Unit Award that the
Administrator, in its sole discretion permits to be paid out in installments or
on a deferred basis, in accordance with rules and procedures established by the
Administrator.

     14.  Non-Transferability of Awards. Unless determined otherwise by the
Administrator, an Award 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
recipient, only by the recipient. If the Administrator makes an Award
transferable, such Award shall contain such additional terms and conditions as
the Administrator deems appropriate.

<PAGE>

     15.  Leaves of Absence. Subject to any other provision of the Plan, unless
the Administrator provides otherwise or as otherwise required by Applicable
Laws, vesting of Awards granted hereunder shall cease commencing on the first
day of any unpaid leave of absence and shall recommence only upon return to
active service.

     16.  Adjustments Upon Changes in Capitalization, Dissolution, Merger, or
Asset Sale.

          (a)  Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each outstanding
Award, 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 upon cancellation or expiration of an Award, the number of Shares as
well as the price per share of Common Stock covered by each such outstanding
Award, and the 162(m) annual share issuance limits under Section 6(c) shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; 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 Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Award.

          (b)  Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for a Participant
to have the right to exercise his or her Option or SAR until ten (10) days prior
to such transaction as to all of the Awarded Stock covered thereby, including
Shares as to which the Award would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option or forfeiture
rights applicable to any Award shall lapse 100% , and that any Award vesting
shall accelerate 100%, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised (with respect to Options and SARs) or vesting (with respect
to other Awards), an Award will terminate immediately prior to the consummation
of such proposed action.

          (c)  Merger or Change in Control.

               (i)  Options and SARs. In the event of a merger or Change in
Control, each outstanding Option and SAR shall be assumed or an equivalent
option or SAR substituted by the successor corporation or a Parent or Subsidiary
of the successor corporation. In the event that the successor corporation
refuses to assume or substitute for the Option or SAR, the Participant shall
fully vest in and have the right to exercise the Option or SAR as to all of the
Awarded Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or SAR becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or Change in Control, the
Administrator shall notify the Participant in writing or electronically that the
Option or SAR shall be fully vested and exercisable for a period of fifteen (15)
days from the date of such notice, and the Option or SAR shall terminate upon
the expiration of such period. For the

<PAGE>

purposes of this paragraph, the Option or SAR shall be considered assumed if,
following the merger or Change in Control, the option or stock appreciation
right confers the right to purchase or receive, for each Share of Awarded Stock
subject to the Option or SAR immediately prior to the merger or Change in
Control, the consideration (whether stock, cash, or other securities or
property) received in the merger or Change in Control by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale or assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or SAR, for each Share of Awarded Stock
subject to the Option or SAR, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or Change in
Control.

               (ii) Officer Adjustment. Officers subject to the short-swing
profit restrictions of Applicable Laws may, in the Administrator's sole
discretion, be granted limited Stock Appreciation Rights in tandem with their
outstanding Options. Upon the occurrence of a Hostile Take-Over, each
outstanding Option with such a limited stock appreciation right in effect for at
least six (6) months shall automatically be cancelled and the recipient shall in
be entitled to a cash distribution from the Company in an amount equal to the
excess of (a) the Take-Over Price of the Shares subject to the cancelled Option
(whether or not such Shares are exercisable) over (b) the aggregate exercise
price payable for such Shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of
the Hostile Take-Over. Neither the approval of the Administrator nor the consent
of the Board shall be required in connection with such Option cancellation and
cash distribution. The Shares subject to any Option cancelled for an
appreciation distribution pursuant to this Section shall not be available for
subsequent grant under the Plan.

               (iii) Hostile Take-Over. A Hostile Take-Over shall be deemed to
occur in the event (a) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Company) directly or indirectly acquires
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 pursuant to a tender or exchange
offer which the Board does not recommend the Company's stockholders to accept,
and (b) more than fifty percent (50%) of the securities so acquired in such
tender or exchange offer are accepted from holders other than Company Officers
and Directors subject to the short-swing profit restrictions of Applicable Laws.

     The Take-Over Price per share shall be deemed to be equal to the greater of
(a) the Fair Market Value per share on the date of cancellation, or (b) the
highest reported price per share paid in effecting such Hostile Take-Over;
provided, however, that if the cancelled option is an Incentive Stock Option,
the Take-Over Price shall not exceed the Fair Market Value per share on the date
of cancellation.

                    (iv) Restricted Stock, Performance Shares, Performance Units
and Deferred Stock Units. In the event of a merger or Change in Control, each
outstanding Restricted
<PAGE>

Stock, Performance Share, Performance Unit and Deferred Stock Unit award shall
be assumed or an equivalent Restricted Stock, Performance Share, Performance
Unit and Deferred Stock Unit award substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Restricted Stock,
Performance Share, Performance Unit or Deferred Stock Unit award, the
Participant shall fully vest in the Restricted Stock, Performance Share,
Performance Unit or Deferred Stock Unit including as to Shares (or with respect
to Performance Units, the cash equivalent thereof) which would not otherwise be
vested. For the purposes of this paragraph, a Restricted Stock, Performance
Share, Performance Unit and Deferred Stock Unit award shall be considered
assumed if, following the merger or Change in Control, the award confers the
right to purchase or receive, for each Share (or with respect to Performance
Units, the cash equivalent thereof) subject to the Award immediately prior to
the merger or Change in Control, the consideration (whether stock, cash, or
other securities or property) received in the merger or Change in Control by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or Change
in Control is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received, for each Share and each unit/right
to acquire a Share subject to the Award, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or Change in
Control.

     17.  Date of Grant. The date of grant of an Award shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each recipient within a
reasonable time after the date of such grant.

     18.  Amendment and Termination of the Plan.

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

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

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

     19.  Conditions Upon Issuance of Shares.

          (a)  Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Award unless the exercise of the Award or the issuance and
delivery of such Shares (or with respect

<PAGE>

to Performance Units, the cash equivalent thereof) shall comply with Applicable
Laws and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

          (b)  Investment Representations. As a condition to the exercise or
receipt of an Award, the Company may require the person exercising or receiving
such Award to represent and warrant at the time of any such exercise or receipt
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.

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

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

     22.  Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted by the Board. Such stockholder approval shall be obtained in the manner
and to the degree required under Applicable Laws.<PAGE>
                                                                  EXHIBIT 4.1

                         VSUS TECHNOLOGIES INCORPORATED
                         ------------------------------

                             2003 STOCK OPTION PLAN
                             ----------------------

1.       PURPOSE

         The purpose of this plan (this "Plan") is to secure for VSUS
TECHNOLOGIES INCORPORATED (the "Company") and its shareholders the benefits
arising from capital stock ownership by employees, officers, directors,
consultants and other service providers of the Company or any parent or
subsidiary of the Company (each an "Affiliate") who are expected to contribute
to the Company's future growth and success. This Plan is also designed to
attract and retain other persons who will provide services to the Company. Those
provisions of this Plan which make express reference to Section 422 of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code"), shall apply only to Incentive Stock Options (as that term is defined
herein).

2.       TYPE OF OPTIONS AND ADMINISTRATION

         (a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors (the "Board") of the Company (or
the committee appointed by the Board in accordance with Section 2(b) below) and
may be either incentive stock options ("Incentive Stock Options") intended to
meet the requirements of Section 422 of the Code or non-statutory options which
are not intended to meet the requirements of Section 422 of the Code
("Non-Qualified Options").

         (b) Administration. The Plan will be administered by the Board or by a
committee consisting of two or more directors each of whom shall be a
"non-employee director," within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule ("Rule 16b-3"), and an "outside director", within the meaning of
Treasury Regulation Section 1.162-27(e)(3) promulgated under Section 162(m) of
the Code, (the "Committee") appointed by the Board, in each case whose
construction and interpretation of the terms and provisions of the Plan shall be
final, conclusive and binding upon the optionee and all other persons interested
or claiming interests under the Plan. If the Board determines to create a
Committee to administer the Plan, the delegation of powers to the Committee
shall be consistent with applicable laws or regulations (including, without
limitation, applicable state law and Rule 16b-3). The Board or the Committee may
in its sole discretion grant options to purchase any class of the Company's
shares (the "Shares"), and issue Shares upon exercise of such options as
provided herein. The Board or the Committee shall have authority, subject to the
express provisions of the Plan, to construe the respective option agreements and
the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective option agreements,
which need not be identical; and to make all other determinations in the
judgment of the Board or the Committee necessary or desirable for the
administration of the Plan. The Board or the Committee may correct any defect or
supply any omission or reconcile any inconsistency herein or in any option

<PAGE>

agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board shall be
liable for any action or determination under the Plan made in good faith.

3.       ELIGIBILITY

         Options may be granted to persons who are, at the time of grant,
employees, officers, directors, consultants or other service providers of the
Company or any Affiliate, provided that Incentive Stock Options may only be
granted to individuals who are employees (within the meaning of Section 3401(c)
of the Code) of the Company or any Affiliate. Options may also be granted to
other persons, provided that such options shall be Non-Qualified Options. A
person who has been granted an option may, if he or she is otherwise eligible,
be granted additional options if the Board or the Committee shall so determine.

4.       STOCK SUBJECT TO PLAN

         The Shares subject to options granted under the Plan shall be
authorized but unissued Shares or reacquired Shares. Subject to adjustment as
provided in Section 15 below, the maximum number of Shares of the Company which
may be issued and sold under the Plan is 15,000,000. If an option granted under
the Plan shall expire, terminate or is cancelled for any reason without having
been exercised in full, the unpurchased Shares subject to such option shall
again be available for subsequent option grants under the Plan.

5.       FORMS OF OPTION AGREEMENTS

         As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not inconsistent
with the Plan and as may be approved by the Board or the Committee. The terms of
such option agreements may differ among recipients.

6.       PURCHASE PRICE

         (a) General. The purchase price per Share issuable upon the exercise of
an option shall be determined by the Board or the Committee at the time of grant
of such option, provided, however, that such exercise price in the case of
Incentive Stock Options, shall not be less than 100% of the Fair Market Value
(as hereinafter defined) of such Shares at the time of grant of such option, and
for Incentive Stock Options granted to a "10% Shareholder" (as defined in
Section 11(b)), shall not be less than 110% of such Fair Market Value. "Fair
Market Value" of a Share as of a specified date for purposes of the Plan shall
mean the closing price of a Share on the principal securities exchange
(including, but not limited to, the Nasdaq SmallCap Market or the Nasdaq
National Market) on which such Shares are traded on the day immediately
preceding the date as of which Fair Market Value is being determined, or on the
next preceding date on which such Shares are traded if no Shares were traded on
such immediately preceding day, or if the Shares are not traded on a securities
exchange, Fair Market Value shall be deemed to be the average of the high bid
and low asked prices of the Shares in the over-the-counter market on the day
immediately preceding the date as of which Fair Market Value is being determined
or on the

                                       2

<PAGE>

next preceding date on which such high bid and low asked prices were recorded.
If the Shares are not publicly traded, Fair Market Value of a Share (including,
in the case of any repurchase of Shares, any distributions with respect thereto
which would be repurchased with the Shares) shall be determined in good faith by
the Board taking into consideration prices at which the Company has issued
Shares during the preceding six months. In no case shall Fair Market Value be
determined with regard to restrictions other than restrictions which, by their
terms, will never lapse.

         (b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or by any other means which the Board determines are consistent with
the purpose of the Plan and with applicable laws and regulations (including,
without limitation, the provisions of Rule 16b-3).

7.       OPTION EXERCISE PERIOD

         Subject to earlier termination as provided herein, each option and all
rights thereunder shall expire on such date as determined by the Board or the
Committee and set forth in the applicable option agreement, provided that such
date shall not be later than ten (10) years after the date on which the option
is granted, or as prescribed by Section 11(b) hereinbelow.

8.       EXERCISE OF OPTIONS

         Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the option agreement evidencing such option, subject to the provisions
of the Plan. Subject to the requirements in the immediately preceding sentence,
if an option is not at the time of grant immediately exercisable, the Board or
the Committee may (i) in the agreement evidencing such option, provide for the
acceleration of the exercise date or dates of the subject option upon the
occurrence of specified events and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such option.

9.       NONTRANSFERABILITY OF OPTIONS

         No option granted under this Plan shall be assignable or otherwise
transferable by the optionee, except by will or by the laws of descent and
distribution. An option may be exercised during the lifetime of the optionee
only by the optionee.

10.      EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP

         (a) Except as provided in Section 11(b) with respect to Incentive Stock
Options and except as may otherwise be determined by the Board or the Committee
at the date of grant of an option, and subject to the provisions of the Plan, an
optionee may exercise an option at any time within three (3) months following
the termination of the optionee's employment or other relationship with the
Company and its Affiliates or within one (1) year if such termination was due to
the death or disability (within the meaning of Section 22(e)(3) of the Code or
any successor provisions thereto) of the optionee (to the extent such option is
otherwise exercisable

                                       3

<PAGE>

at the time of such termination) but in no event later than the expiration date
of the option.

         (b) Notwithstanding the foregoing and except as may otherwise be
determined by the Board or the Committee, if the termination of the optionee's
employment or other relationship with the Company and/or its Affiliate is for
cause, the option shall expire immediately upon such termination. The Board or
the Committee shall have the power to determine, in its sole discretion, what
constitutes a termination for cause, whether an optionee has been terminated for
cause, and the date upon which such termination for cause occurs. Any such
determinations shall be final and conclusive and binding upon the optionee and
all other persons interested or claiming interests under the Plan.

11.      INCENTIVE STOCK OPTIONS

         Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:

         (a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.

         (b) 10% Shareholder. If any employee to whom an Incentive Stock Option
is to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:

                  (i) the purchase price per Share subject to such Incentive
Stock Option shall not be less than 110% of the Fair Market Value of one Share
at the time of grant; and

                  (ii) the option exercise period shall not exceed five (5)
years from the date of grant.

         (c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for Shares with an aggregate Fair Market Value, as of the
respective date or dates of grant, of more than $100,000.

         (d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company or an Affiliate, except that:

                  (i) an Incentive Stock Option may be exercised within the
period of three (3) months after the date the optionee ceases to be an employee
of the Company or an Affiliate (or

                                       4

<PAGE>

within such lesser period as may be specified in the applicable option
agreement), to the extent it is otherwise exercisable at the time of such
cessation,

                  (ii) if the optionee dies while in the employ of the Company
or an Affiliate, or within three (3) months after the optionee ceases to be such
an employee, the Incentive Stock Option may be exercised by the person to whom
it is transferred by will or the laws of descent and distribution within the
period of one (1) year after the date of death (or within such lesser period as
may be specified in the applicable option agreement), to the extent it is
otherwise exercisable at the time of the optionee's death, and

                  (iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provisions thereto) while in the
employ of the Company or an Affiliate, the Incentive Stock Option may be
exercised within the period of one (1) year after the date the optionee ceases
to be such an employee because of such disability (or within such lesser period
as may be specified in the applicable option agreement), to the extent it is
otherwise exercisable at the time of such cessation.

         For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no Incentive Stock Option may be
exercised after its expiration date.

12.      ADDITIONAL PROVISIONS

         (a) Additional Option Provisions. The Board or the Committee may, in
its sole discretion, include additional provisions in option agreements covering
options granted under the Plan, including without limitation, restrictions on
transfer, repurchase rights, rights of first refusal, commitments to pay cash
bonuses or to make, arrange for or guaranty loans or to transfer other property
to optionees upon exercise of options, or such other provisions as shall be
determined by the Board or the Committee, provided that such additional
provisions shall not be inconsistent with the requirements of applicable law and
such additional provisions shall not cause any Incentive Stock Option granted
under the Plan to fail to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Code.

         (b) Acceleration, Extension, Etc. The Board or the Committee may, in
its sole discretion (i) accelerate the date or dates on which all or any
particular option or options granted under the Plan may be exercised, or (ii)
extend the dates during which all, or any particular, option or options granted
under the Plan may be exercised, provided, however, that no such acceleration or
extension shall be permitted if it would (i) cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code, or (ii) cause the Plan or any option
granted under the Plan to fail to comply with Rule 16b-3 (if applicable to the
Plan or such option).

13.      GENERAL RESTRICTIONS

         (a) Investment Representations. The Board or the Committee may require
any person to whom an option is granted, as a condition of exercising such
option or award, to give written

                                       5

<PAGE>

assurances in substance and form satisfactory to the Board or the Committee to
the effect that such person is acquiring the Shares subject to the option or
award for his or her own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Board or the Committee deems necessary or appropriate in order to
comply with applicable federal and state securities laws, or with covenants or
representations made by the Company in connection with any public offering of
its Shares, including any "lock-up" or other restriction on transferability.

         (b) Compliance With Securities Law. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the Shares subject to such option
or award upon any securities exchange or automated quotation system or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition, is necessary as a condition of, or in
connection with the issuance or purchase of Shares thereunder, except to the
extent expressly permitted by the Board, such option or award may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board or the
Committee. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration, qualification, consent or approval, or to
satisfy such condition. In addition, Shares issued upon the exercise of options
may bear such legends as the Company may deem advisable to reflect restrictions
which may be imposed by law, including, without limitation, the Securities Act
of 1933, as amended, any state "blue sky" or other applicable federal or state
securities law.

14.      RIGHTS AS A SHAREHOLDER

         The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option (including, without limitation, any
right to vote or to receive dividends or non-cash distributions with respect to
such shares) until the effective date of exercise of such option and then only
to the extent of the Shares so purchased. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date of
exercise.

15.      ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS, REORGANIZATIONS AND
         RELATED TRANSACTIONS

         (a) Recapitalizations, Reorganizations and Related Transactions. If,
through or as a result of any recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction (i) the
outstanding Shares are increased, decreased or exchanged for a different number
or kind of shares or other securities of the Company, or (ii) additional Shares
or new or different shares or other non-cash assets are distributed with respect
to such Shares or other securities, an appropriate and proportionate adjustment
shall be made in (x) the maximum number and kind of Shares reserved for issuance
under or otherwise referred to herein, (y) the number and kind of Shares or
other securities subject to any then-outstanding options under the Plan, and (z)
the price for each Share subject to any then-outstanding options under the Plan,
without changing the aggregate purchase price as to which such options remain
exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant
to this Section 15 if such

                                       6

<PAGE>

adjustment (A) would cause any Incentive Stock Option granted under the Plan to
fail to qualify as an Incentive Stock Option within the meaning of Section 422
of the Code, (B) would cause the Plan or any option granted under the Plan to
fail to comply with Rule 16b-3 (if applicable to the Plan or such option), or
(C) would be considered as the adoption of a new plan requiring shareholder
approval.

         (b) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board or the Committee, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.

16.      NO EMPLOYMENT RIGHTS

         Nothing contained herein or in any option agreement shall confer upon
any optionee any right with respect to the continuation of his or her employment
or other relationship with the Company or an Affiliate or interfere in any way
with the right of the Company or an Affiliate at any time to terminate such
employment or relationship or to increase or decrease the compensation of the
optionee.

17.      AMENDMENT, MODIFICATION OR TERMINATION OF THE PLAN

         (a) The Board may at any time modify, amend or terminate the Plan,
provided that to the extent required by applicable law, any such modification,
amendment or termination shall be subject to the approval of the shareholders of
the Company.

         (b) The modification, amendment or termination of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected, the
Board or the Committee may amend or modify outstanding option agreements in a
manner not inconsistent with the Plan. Notwithstanding the foregoing, the Board
shall have the right (but not the obligation), without the consent of the
optionee affected, to amend or modify (i) the terms and provisions of the Plan
and of any outstanding Incentive Stock Option agreements to the extent necessary
to qualify any or all such options for such favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, (ii) the terms and
provisions of the Plan and the option agreements entered into in connection with
any outstanding options to the extent necessary to ensure the qualification of
the Plan and such options under Rule 16b-3 (if applicable to the Plan and such
options), and (iii) the terms and provisions of the Plan and the option
agreements entered into in connection with any outstanding options to the extent
that the Board determines necessary to preserve the deduction of compensation
paid to certain optionees who are "covered employees," within the meaning of
Treasury Regulation Section 1.162-27(c)(2), as a result of the grant or exercise
of options under the Plan.

18.      WITHHOLDING

         (a) The Company shall have the right to deduct and withhold from
payments or distributions of any kind otherwise due to the optionee any federal,
state or local taxes of any

                                       7

<PAGE>

kind required by law to be so deducted and withheld with respect to any Shares
issued upon exercise of options under the Plan. Subject to the prior approval of
the Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part by (i)
causing the Company to withhold Shares otherwise issuable pursuant to the
exercise of an option, (ii) delivering to the Company Shares already owned by
the optionee, or (iii) delivering to the Company cash or a check to the order of
the Company in an amount equal to the amount required to be so deducted and
withheld. The Shares delivered in accordance with method (ii) above or withheld
in accordance with method (i) above shall have a Fair Market Value equal to such
withholding obligation as of the date that the amount of tax to be withheld is
to be determined. An optionee who has made (with the Company's approval) an
election pursuant to method (i) or (ii) of this Section 18(a) may only satisfy
his or her withholding obligation with Shares which are not subject to any
repurchase, forfeiture, unfulfilled vesting or other similar requirements.

         (b) The acceptance of Shares upon exercise of an Incentive Stock Option
shall constitute an agreement by the optionee (i) to notify the Company if any
or all of such Shares are disposed of by the optionee within two (2) years from
the date the option was granted or within one (1) year from the date the shares
were issued to the optionee pursuant to the exercise of the option, and (ii) if
required by law, to remit to the Company, at the time of and in the case of any
such disposition, an amount sufficient to satisfy the Company's federal, state
and local withholding tax obligations with respect to such disposition, whether
or not, as to both (i) and (ii), the optionee is in the employ of the Company or
an Affiliate at the time of such disposition.

19.      CANCELLATION AND NEW GRANT OF OPTIONS, ETC.

         The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected optionee(s) the (i)
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan (or any successor stock
option plan of the Company) covering the same or different numbers of Shares and
having an option exercise price per Share which may be lower or higher than the
exercise price per share of the cancelled options, or (ii) amendment of the
terms of the option agreements entered into in connection with any and all
outstanding options under the Plan to provide an option exercise price per share
which is higher or lower than the then-current exercise price per Share of such
outstanding options.

20.      EFFECTIVE DATE AND DURATION OF THE PLAN

         (a) Effective Date. The Plan shall become effective when adopted by the
Board, but no Incentive Stock Option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve (12)
months after the date of the Board's adoption of the Plan, no options previously
granted under the Plan shall be deemed to be Incentive Stock Options and no
Incentive Stock Options shall be granted thereafter. Amendments to the Plan
shall become effective as of the latest of (i) the date of adoption by the
Board, (ii) the date set forth in the amendments or (iii) in the case of any
amendment requiring shareholder approval (as set forth in Section 17), the date
such amendment is approved by the Company's shareholders.

                                       8

<PAGE>

Notwithstanding the foregoing, no Incentive Stock Option granted on or after the
effective date of such amendment shall become exercisable unless and until such
amendment shall have been approved by the Company's shareholders. If such
shareholder approval is not obtained within twelve (12) months of the Board's
adoption of such amendment, no options granted on or after the effective date of
such amendment shall be deemed Incentive Stock Options and no Incentive Stock
Options shall be granted thereafter. Subject to above limitations, options may
be granted under the Plan at any time after the effective date of the Plan and
before the date fixed for termination of the Plan.

         (b) Termination. Unless sooner terminated by the Board, the Plan shall
terminate upon the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board. After termination of the
Plan, no further options may be granted under the Plan; provided, however, that
such termination will not affect any options granted prior to termination of the
Plan.

21.      GOVERNING LAW

         The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of Delaware without regard to the
principles thereof relating to the conflicts of laws.

                                       9

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