Document:

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                                                                    EXHIBIT 10.3

                               CAERE CORPORATION
                       1981 SUPPLEMENTAL STOCK OPTION PLAN

                            Adopted December 17, 1981
                 Approved by the Shareholders February 24, 1982
                              Amended June 25, 1985
                            Amended October 21, 1986
             Amendment Approved by the Shareholders October 20, 1987
                             Amended April 19, 1989
            Amendment Approved by the Stockholders September 26, 1989
                            Amended February 15, 1990
               Amendment Approved by the Stockholders May 3, 1990
                            Amended February 27, 1992
               Amendment Approved by the Stockholders May 5, 1992
                            Amended February 18, 1993
               Amendment Approved by the Stockholders May 4, 1993
                            Amended February 10, 1994
               Amendment Approved by the Stockholders May 25, 1994
                            Amended October 14, 1994
            Amendment Approved by the Stockholders December 20, 1994
                            Amended February 21, 1996
               Amendment Approved by the Stockholders May 14, 1996
                             Amended August 19, 1996

        1.      PURPOSE.

               (a) The purpose of the Plan is to provide a means by which
selected key employees and directors of and consultants to Caere Corporation, a
California corporation (the "Company"), and its affiliates, as defined in
subparagraph 1(b), may be given an opportunity to purchase stock of the Company.

               (b) The word "affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").

               (c) The Company, by means of the Plan, seeks to retain the
services of persons now holding key positions, to secure and retain the services
of persons capable of filling such positions, and to provide incentives for such
persons to exert maximum efforts for the success of the Company.

               (d) The Company intends that the options issued under the Plan
not be incentive stock options as that term is used in Section 422 of the Code.

        2.      ADMINISTRATION.

               (a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
committee, as provided in

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subparagraph 2(c). Whether or not the Board has delegated administration, the
Board shall have the final power to determine all questions of policy and
expediency that may arise in the administration of the Plan.

               (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

                             (1) To determine from time to time which of the
persons eligible under the Plan shall be granted options; when and how the
option shall be granted; the provisions of each option granted (which need not
be identical), including the time or times during the term of each option within
which all or portions of such option may be exercised; and the number of shares
for which an option shall be granted to each such person.

                             (2) To construe and interpret the Plan and options
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

                             (3) To amend the Plan as provided in paragraph 10.

                             (4) Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company.

               (c) The Board may delegate administration of the Plan to a
committee composed of one (1) or more members of the Board, all of the members
of which committee may (but need not) be, in the discretion of the Board,
non-employee directors and/or outside directors, as defined by the provisions of
subparagraphs 2(d) and 2(e), respectively. If administration is delegated to a
committee, the committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two or more outside directors any of the
administrative powers the committee is authorized to exercise, subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the committee at
any time and revest in the Board the administration of the Plan.

               (d) The term "non-employee director," as used in this Plan, shall
mean a director who either (i) is not a current employee or officer of the
Company or its parent or subsidiary, does not receive compensation (directly or
indirectly) from the Company or its parent or subsidiary for services rendered
as a consultant or in any capacity other than as a director (except for an
amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K ("Regulation S-K") promulgated pursuant to the Securities Act of
1933 (the "Securities Act"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").

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               (e) The term "outside director," as used in this Plan, shall mean
a director who either (i) is not a current employee of the Company or an
"affiliated corporation" (within the meaning of Treasury regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an
"affiliated corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an "affiliated corporation" at any time, and is not currently receiving
direct or indirect remuneration from the Company or an "affiliated corporation"
for services in any capacity other than as a director, or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.

        3.      SHARES SUBJECT TO THE PLAN.

               (a) Subject to the provisions of paragraph 9 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to
options granted under the Plan shall not exceed in the aggregate three million
five hundred ninety-five thousand (3,595,000) shares of the Company's common
stock; provided, however, that such aggregate number of shares shall be reduced
to reflect the number of shares of the Company's common stock that have been
sold pursuant to, or may be sold pursuant to outstanding options granted under,
the Company's 1981 Incentive Stock Option Plan to the same extent as if such
sales had been made or options had been granted pursuant to this Plan. If any
option granted under the Plan shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not purchased under such option
shall again become available for the Plan.

               (b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

               (c) Subject to the provisions of paragraph 9 relating to
adjustments upon changes in stock, no person shall be eligible to be granted in
any calendar year options under this Plan covering more than an aggregate of
three hundred thousand (300,000) shares of the Company's common stock, when
combined with options granted in the same calendar year under the Company's 1981
Incentive Stock Option Plan. Shares subject to an option that is canceled shall
continue to be counted against the maximum number of shares that may be covered
by options granted to a person pursuant to this subparagraph 3(c). If an option
is amended, exchanged or otherwise altered in a manner that results in a
reduction of the exercise price, such transaction shall be deemed to be a
cancellation of the original option and the grant of a new option for purposes
of this subparagraph. In such event, both the original option and the new option
shall be counted in the applicable year against the maximum limitation specified
by this subparagraph in accordance with regulations promulgated under Section
162(m) of the Code.

        4.      ELIGIBILITY.

               Options may be granted only to key employees (including
officers), directors of or consultants to the Company or its affiliates.

        5.      OPTION PROVISIONS.

        Each option shall be in such form and shall contain such terms and
conditions as the Board or the committee shall deem appropriate. The provisions
of separate options need not

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be identical, but each option shall include (through incorporation of provisions
hereof by reference in the option or otherwise) the substance of each of the
following provisions:

               (a) The term of any option shall not be greater than ten (10)
years from the date it was granted.

               (b) The exercise price of each option shall be not less than
eighty-five percent (85%) of the fair market value of the stock subject to the
option on the date the option is granted.

               (c) The purchase price of stock acquired pursuant to an option
shall be paid, as specified in the option, either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Board or the committee,
(A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is
transferred pursuant to subparagraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the committee in their
discretion, either at the time of grant or exercise of the option.

               In the case of any deferred payment arrangement, interest shall
be payable at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

               (d) An option shall not be transferable except by will or by the
laws of descent and distribution, and shall be exercisable during the lifetime
of the person to whom the option is granted only by such person, unless
otherwise specified in the option, in which case the option may be transferred
upon such terms and conditions as are set forth in the option, as the Board or
the committee shall determine in its discretion, including (without limitation)
pursuant to a "domestic relations order" within the meaning of such rules,
regulations or interpretations of the Securities and Exchange Commission as are
applicable for purposes of Section 16 of the Exchange Act. Notwithstanding the
foregoing, the person to whom an option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the optionee, shall thereafter be
entitled to exercise the option.

               (e) The total number of shares of stock subject to an option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the option
may be exercised with respect to some or all of the shares allotted to that
period, and/or with respect to some or all of the shares allotted to any prior
period as to which the option was not fully exercised. During the remainder of
the term of the option (if its term extends beyond the end of the installment
periods), the option may be exercised from time to time with respect to any
shares then remaining subject to the option. The provisions of this subparagraph
5(e) are subject to any option provisions governing the minimum number of shares
as to which an option may be exercised.

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               (f) The Company may require any optionee, or any person to whom
an option is transferred under subparagraph 5(d), as a condition of exercising
any such option to give written assurances satisfactory to the Company stating
that such person is acquiring the stock subject to the option for such person's
own account not with any present intention of selling or otherwise distributing
the stock. The requirement of providing written assurances and any assurances
given pursuant to the requirement, shall be inoperative if (i) the issuance of
the shares upon the exercise of the option has been registered under a then
currently effective registration statement under the Securities Act, or (ii) a
determination is made by counsel for the Company that such written assurances
are not required in the circumstances under the then applicable federal
securities laws.

               (g) An option shall terminate three (3) months after termination
of the optionee's employment with the Company or an affiliate, unless (i) the
termination of employment of the optionee is due to such person's permanent and
total disability, within the meaning of Section 422(c)(6) of the Code, in which
case the option may, but need not, provide that it may be exercised at any time
within one (l) year following such termination of employment; or (ii) the
optionee dies while in the employ of the Company or an affiliate, or within not
more than three (3) months after termination of such employment, in which case
the option may, but need not, provide that it may be exercised at any time
within eighteen (18) months following the death of the optionee by the person or
persons to whom the optionee's rights under such option pass by will or by the
laws of descent and distribution; or (iii) the option by its terms specifies
either (a) that it shall terminate sooner than three (3) months after
termination of the optionee's employment, or (b) that it may be exercised more
than three (3) months after termination of the optionee's employment with the
Company or an affiliate. This subparagraph 5(g) shall not be construed to extend
the term of any option or to permit anyone to exercise the option after
expiration of its term, nor shall it be construed to increase the number of
shares as to which any option is exercisable from the amount exercisable on the
date of termination of the optionee's employment.

               (h) The option may, but need not, include a provision whereby the
optionee may elect at any time during the term of his or her employment with the
Company or any affiliate to exercise the option as to any part or all of the
shares subject to the option prior to the stated vesting date of the option or
of any installment or installments specified in the option. Any shares so
purchased from any unvested installment or option may be subject to a repurchase
right in favor of the Company or to any other restriction the Board or the
committee determines to be appropriate.

               (i) To the extent provided by the terms of an option, the
optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such option by any of the following means or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold from the shares of the common stock otherwise issuable to
the participant as a result of the exercise of the stock option a number of
shares having a fair market value less than or equal to the amount of the
withholding tax obligation; or (3) delivering to the Company owned and
unencumbered shares of the common stock having a fair market value less than or
equal to the amount of the withholding tax obligation.

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        6.      COVENANTS OF THE COMPANY.

               (a) During the terms of the options granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such options.

               (b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the options granted
under the Plan; provided, however, that this undertaking shall not require the
Company to register under the Securities Act either the Plan, any option granted
under the Plan or any stock issued or issuable pursuant to any such option. If
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such options
unless and until such authority is obtained.

        7.      USE OF PROCEEDS FROM STOCK.

               Proceeds from the sale of stock pursuant to options granted under
the Plan shall constitute general funds of the Company.

        8.      MISCELLANEOUS.

               (a) The Board or the committee shall have the power to accelerate
the time during which an option may be exercised, or the time during which an
option or any portion thereof will vest pursuant to subparagraph 5(e),
notwithstanding the provisions in the option stating the time during which it
may be exercised.

               (b) Neither an optionee nor any person to whom an option is
transferred under subparagraph 5(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
option unless and until such person has satisfied all requirements for exercise
of the option pursuant to its terms.

        9.      ADJUSTMENTS UPON CHANGES IN STOCK.

               (a) If any change is made in the stock subject to the Plan, or
subject to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), appropriate adjustments
will be made in the class(es) and maximum number of shares subject to the Plan
pursuant to subparagraph 3(a), the class(es) and maximum number of shares that
may be subject to options pursuant to subparagraph 3(c) and the class(es) and
number of shares and price per share of stock subject to outstanding options.

               (b) In the event of: (l) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other

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capital reorganization in which more than fifty percent (50%) of the shares of
the Company entitled to vote are exchanged then, at the sole discretion of the
Board to the extent permitted by law, (i) any surviving corporation shall either
assume options outstanding under the Plan or substitute similar options for
those outstanding under the Plan, (ii) the time during which options outstanding
under the Plan may be exercised shall be accelerated and the options terminated
if not exercised prior to such event, or (iii) options outstanding under the
Plan shall continue in full force and effect.

        10.     AMENDMENT OF THE PLAN.

               (a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 9 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

                      (i) Increase the number of shares reserved for options
under the Plan; or

                      (ii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act.

               (b) Rights and obligations under any option granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan, except with the consent of the person to whom the option was granted.

               (c) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m) of
the Code and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

        11.     TERMINATION OR SUSPENSION OF THE PLAN.

               (a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on January 31, 2000. No
options may be granted under the Plan while the Plan is suspended or after it is
terminated.

               (b) Rights and obligations under any option granted while the
Plan is in effect shall not be altered or impaired by suspension or termination
of the Plan, except with the consent of the person to whom the option was
granted.

        12.     EFFECTIVE DATE OF PLAN.

        The Plan shall become effective as determined by the Board, but no
options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders and, if required, an appropriate permit has
been issued by the Commissioner of Corporations of the State of California.

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                                                                    EXHIBIT 10.4

                               CAERE CORPORATION

                 1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                          Adopted on February 27, 1992
                    Approved by the Stockholders May 5, 1992
                Amended by the Board of Directors August 25, 1994
                 Amended by the Board of Directors March 2, 1995
                    Approved by the Stockholders May 5, 1995
               Amended by the Board of Directors February 21, 1996
                    Approved by the Stockholders May 14, 1996
                             Amended August 19, 1996

1.      PURPOSE.

        (a) The purpose of the 1992 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Caere Corporation,
a Delaware corporation (the "Company"), who is not otherwise an employee of the
Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.

        (b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").

        (c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

        (d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.

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2.      ADMINISTRATION.

        (a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c).

        (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

               (1) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

               (2) To amend the Plan as provided in paragraph 11.

               (3) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company.

        (c) The Board may delegate administration of the Plan to a committee
composed of one (1) or more members of the Board (the "Committee"), all of the
members of which Committee may (but need not) be, in the discretion of the
Board, "non-employee directors" within the meaning of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan,

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as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.

3.      SHARES SUBJECT TO THE PLAN.

        (a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate Two Hundred Thirty Thousand
(230,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.

        (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4.      ELIGIBILITY.
        Options shall be granted only to Non-Employee Directors of the Company.

5.      NON-DISCRETIONARY GRANTS.

        (a) Each person who is, after March 2, 1996 (the "Amendment Effective
Date"), elected for the first time to be a Non-Employee Director of the Company
shall, upon the date of his or her initial election to be a Non-Employee
Director by the Board or stockholders of the Company, be automatically granted
an option to purchase Thirty Thousand (30,000) shares of common stock of the
Company on the terms and conditions set forth herein. Thereafter, so long as any
such person remains a Non-Employee Director of the Company and the Plan remains
in effect, he or she shall, on each three-year anniversary of such initial
grant, be automatically granted an option to purchase Thirty Thousand (30,000)
shares of common stock of the Company on the terms and conditions set forth
herein.

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        (b) Each person who is, as of the Amendment Effective Date, a
Non-Employee Director of the Company shall, on each three-year anniversary of
such person's receipt of an option grant covering shares of common stock of the
Company that most recently preceded the Amendment Effective Date (the "Preceding
Option"), be automatically granted an option to purchase Thirty Thousand
(30,000) shares of common stock of the Company on the terms and conditions set
forth herein.

        (c) Each person who is, on the Amendment Effective Date, a Non-Employee
Director of the Company shall, on the Amendment Effective Date, be automatically
granted an option to purchase, on the terms and conditions set forth herein, the
number of shares of common stock of the Company (rounded to the nearest whole
share) determined by multiplying Three Thousand Three Hundred Thirty-Three
(3,333) shares by a fraction (which may exceed one), the numerator of which is
the number of days remaining, as of the Amendment Effective Date, until the
third anniversary of such person's receipt of his or her Preceding Option and
the denominator of which is 365.

6.      OPTION PROVISIONS.

        Each option (including options outstanding on the Amendment Effective
Date) shall contain the following terms and conditions, to the extent
applicable:

        (a) No option shall be exercisable after the expiration of ten (10)
years from the date it was granted.

        (b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.

        (c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (1)
in cash at the time the option is

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exercised, or (2) by delivery to the Company of shares of common stock of the
Company that have been held for the requisite period necessary to avoid a charge
to the Company's reported earnings and valued at the fair market value on the
date of exercise, or (3) by a combination of such methods of payment.

        (d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his or her
guardian or legal representative, unless otherwise specified in the option, in
which case the option may be transferred upon such terms and conditions as are
set forth in the option, as the Board or the Committee shall determine in its
discretion, including (without limitation) pursuant to a "domestic relations
order" within the meaning of such rules, regulations or interpretations of the
Securities and Exchange Commission as are applicable for purposes of Section 16
of the Exchange Act. Notwithstanding the foregoing, the person to whom an option
is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the optionee, shall thereafter be entitled to exercise the option.

        (e) Except as otherwise provided in this subparagraph 6(e), an option
shall vest with respect to each optionee in three (3) equal annual installments
commencing on the date one year after the date of grant of the option, provided
that the optionee has, during the entire one year period prior to such vesting
date, continuously served as a Non-Employee Director of the Company whereupon
such option shall become fully exercisable in accordance with its terms with
respect to that portion of the shares represented by that installment.
Notwithstanding the foregoing:

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               (1) An option granted on the Amendment Effective Date pursuant to
subparagraph 5(c) shall vest, subject to the service conditions specified above,
on the third anniversary of the optionee's Preceding Option as to 3,333 shares
and on the second anniversary of the optionee's Preceding Option as to the
remaining balance of the shares in excess of 3,333.

               (2) In the event of the voluntary resignation from the Board of
Directors or the death of a Non-Employee Director, his or her options shall vest
in full and shall be exercisable in their entirety, provided that the optionee
has, during the entire five-year period prior to such voluntary resignation or
death, continuously served as a Non-Employee Director of the Company.

        (f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (1) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws.

        (g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the

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Securities Act or, if such shares are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.

7.      COVENANTS OF THE COMPANY.

        (a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.

        (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.

8.      USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.

9.      MISCELLANEOUS.

        (a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.

                                       7
<PAGE>   8

        (b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.

        (c) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him or her, shall
have any right, title or interest in or to any option reserved for the purposes
of the Plan except as to such shares of common stock, if any, as shall have been
reserved for him or her pursuant to an option granted to him or her.

        (d) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or an affiliate of such Non-Employee Director, or to
evidence the removal of any restrictions on transfer, that such Non-Employee
Director make arrangements satisfactory to the Company to insure that the amount
of any federal or other withholding tax required to be withheld with respect to
such sale or transfer, or such removal or lapse, is made available to the
Company for timely payment of such tax.

10.     ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to

                                       8
<PAGE>   9

the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options.

        (b) In the event of: (1) a dissolution or liquidation of the Company or
sale of all or substantially all of the assets of the Company; (2) a
reorganization, merger or consolidation with respect to which persons who were
the stockholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
Combined Voting Power (as defined below) of the reorganized, merged or
consolidated company's then outstanding voting securities; (3) the acquisition
(other than from the Company) by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding for this
purpose, the Company or its Affiliates, or any employee benefit plan of the
Company or its Affiliates), of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of common stock of the Company or (ii) the Combined Voting
Power; or (4) individuals who, as of the Amendment Effective Date constitute the
Board (the "Incumbent Board") ceasing for any reason to constitute at least a
majority of the Board, then the time during which such options may be exercised
shall be automatically accelerated and such options shall be exercisable in
their entirety immediately prior to such event. In addition, in the case of a
dissolution or liquidation of the Company, or a reorganization, merger or
consolidation in which the Company is not the surviving corporation or in which
more than fifty percent (50%) of the shares of the Company's common stock
outstanding immediately preceding such transaction are converted into other
property (whether in the form of securities, cash or otherwise), at the sole
discretion of the Board and to the extent permitted by applicable law, any
surviving corporation may elect to assume such options outstanding under the
Plan or may substitute similar options

                                       9
<PAGE>   10

for those outstanding under the Plan, and any options outstanding hereunder will
terminate if not exercised or assumed prior to such event. For purposes of this
subparagraph 10(b), "Combined Voting Power" means the combined voting power of
the Company's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at elections of
directors; and any person who becomes a director subsequent to the Amendment
Effective Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be considered as though such person were a member
of the Incumbent Board.

11.     AMENDMENT OF THE PLAN.

        (a) The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

               (1) Increase the number of shares reserved for options under the
Plan;

               (2) Modify the requirements as to eligibility for participation
in the Plan (to the extent such modification requires stockholder approval in
order for the Plan to comply with the requirements of Rule 16b-3 promulgated
under the Exchange Act); or

                                       10
<PAGE>   11

               (3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act.

        (b) Rights and obligations under any option granted before any amendment
of the Plan shall not be altered or impaired by such amendment of the Plan
unless (i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.

12.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on February 27, 2002. No options may
be granted under the Plan while the Plan is suspended or after it is terminated.

        (b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.

                                       11
<PAGE>   12

13.     EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.

        (a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.

        (b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.

                                       12

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