Document:

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                                                                   Exhibit 10.34

                              AMENDMENT NO. 2 TO
                              ------------------
                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT
                   -----------------------------------------

          Reference is hereby made to the Agreement and Plan of Merger dated
October 30, 1997, as amended, among Sealy Corporation, a Delaware corporation
(the "Company"), Sandman Merger Corporation, a transitory Delaware merger
corporation ("Purchaser"), and Zell/Chilmark Fund, L.P., a Delaware limited
partnership, pursuant to which Purchaser was merged with and into the Company
with the Company being the surviving corporation (the "Merger").

          Effective as of March 4, 1996, Ronald L. Jones (the "Executive")
entered into a Stockholders Agreement with the Company (the "Stockholders
Agreement").

          Effective as of August 1, 1997, the Executive entered into an Amended
and Restated Employment Agreement with the Company (the "Employment Agreement").

          Effective as of the consummation of the Merger, the Executive entered
into an Amendment to Amended and Restated Employment Agreement and Termination
of Stockholders Agreement ("Amendment No. 1") amending the Employment Agreement
and terminating the Stockholders Agreement.

          Effective as of December 18, 1997, the Executive and the Company
entered into an "Executive Stock and Option Agreement" (the "Executive Stock and
Option Agreement") providing for the grant to the Executive of certain options
to purchase shares of "Class L Common" and "Class A Common" as defined in the
Executive Stock and Option Agreement.

          Effective as of December 18, 1997, the Company established the Sealy
Corporation 1998 Stock Option Plan (the "1998 Stock Option Plan") for the
benefit of certain of the Company's executives and key employees, including the
Executive.

          Effective as of March 18, 1998, the Company granted to the Executive a
nonqualified stock option to purchase additional shares of Class A Common under
the 1998 Stock Option Plan pursuant to that certain Sealy Corporation Agreement
Evidencing a Grant of a Nonqualified Stock Option under 1998 Stock Option Plan
between the Company and the Executive.

          NOW, THEREFORE, in consideration of the provisions contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, effective as of December 1, 1999, the parties hereto
agree as follows:

          A.  The Executive and the Company ratify and confirm the Employment
Agreement as amended by Amendment No. 1.
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          B.  A new Section 26 is added as follows:

              "26.  POST-MERGER OPTIONS.  The Company and the Employee hereby
                    -------------------
          agree that, notwithstanding any contrary provision of the Sealy
          Corporation 1998 Stock Option Plan (the "1998 Stock Option Plan"), the
          Sealy Corporation Agreement Evidencing a Grant of a Nonqualified Stock
          Option Under 1998 Stock Option Plan (the "1998 Option Agreement")
          between the Company and the Employee dated March 18, 1998, or any
          future option plan or agreement providing stock options to the
          Employee, any such grants shall be subject to this Section 26.
          Pursuant to this Section 26, the Company agrees that the Employee's
          rights with respect to any option granted to the Employee after the
          merger of Sandman Merger Corporation into the Company ("Post-Merger
          Option"), and the Employee's rights with respect to any stock acquired
          in connection with the exercise of any Post-Merger Option shall be no
          less than the Employee's rights with respect to the option and the
          shares issuable under the Executive Stock and Option Agreement (the
          "Executive Stock and Option Agreement") entered into by the Employee
          and the Company effective December 18, 1997, except for those put and
          related rights of the Employee applicable to the Executive Stock and
          Option Agreement pursuant to  Section 6(c)(v) of the Employment
          Agreement.  This Section 26 shall not prohibit terms more favorable to
          the Employee than those contained in the Executive Stock and Option
          Agreement. If any option plan or agreement or applicable law prevent
          strict compliance with the foregoing provisions of this Section 26,
          the Company agrees to place the Employee and the Employee's dependents
          in at least as good of an economic position as if such strict
          compliance were permissible, all in accordance with Section 14 hereof.

          Without limiting the generality of the foregoing provisions of this
          Section 26, the following specific provisions shall be applicable to
          the nonqualified stock option granted to the Employee by the Company
          effective March 18, 1998 (the "1998 Option"), and, to the extent that
          any other Post-Merger Option granted to the Employee has provisions
          similar to the 1998 Option, to such other Post-Merger  Option as well:

          (a) Vesting of Options.  The 1998 Option will become vested and
              ------------------
              exercisable upon the first to occur of the date specified in
              Section 4 of the 1998 Option Agreement or upon a Change of Control
              as defined in the Employment Agreement without regard to that
              certain Amendment to Amended and Restated Employment Agreement and
              Termination of Stockholders Agreement (which indicates that there
              will be no future Change of Control for purposes of the Employment
              Agreement) effective as of the consummation of the merger of
              Sandman Merger Corporation into the Company (provided that (i)
              wherever the term "Zell/Chilmark Fund, L.P." appears in such
              definition, such term shall be replaced in such

                                       2
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              definition with "Bain Capital Fund V, L.P., Bain Capital Fund V-B,
              L.P., BCIP Associates, BCIP Trust Associates, L.P., Sealy
              Investors 1, LLC, Sealy Investors 2, LLC, Sealy Investors 3, LLC
              and Harvard Private Capital Holdings, Inc." and (ii) in no event
              shall a sale of shares of common stock of the Company to an
              underwriter or group of underwriters in connection with a public
              offering of such shares of common stock be deemed to be a "Change
              of Control").

          (b) Transferability of Options.  The 1998 Option and any stock issued
              --------------------------
              due to the exercise thereof shall be transferable as permitted
              under either Section 6 of the 1998 Option Agreement or Section
              4(a) of the Executive Stock and Option Agreement.

          (c) Administration.  The administrative provisions of the 1998 Option
              --------------
              Agreement (particularly including Section 7 thereof) shall be
              subject to the condition that all decisions of the Company, Board,
              Committee, and delegates, as provided for in Section 7 of the 1998
              Option Agreement, shall be subject to the requirements: (i) to be
              made in good faith, and (ii) without any presumption of the
              correctness of any such decision.

          (d) Noncompetition.  The noncompetition provisions of Section 14 of
              --------------
              the 1998 Option Agreement shall not be interpreted more
              restrictively against the Employee than the provisions of his
              Employment Agreement dealing with that matter.

          (e) Fair Market Value.  The determination of Fair Market Value for
              -----------------
              purposes of the 1998 Stock Option Plan shall be subject to the
              good faith requirement contained in the definition of "Fair Market
              Value" as set forth in Section 12 of the Executive Stock and
              Option Agreement.

          (f) Repurchase Right.  The Company's repurchase right with respect to
              ----------------
              shares acquired under the 1998 Stock Option Plan shall be subject
              to the limitations, restrictions and requirements imposed on the
              Company by Section 3 of the Executive Stock and Option Agreement,
              except for the requirement of reinstatement of the Employee's put
              right under Section 6(c)(v) of the Employment Agreement pursuant
              to Section 3(d)(y) of the Executive Stock and Option Agreement.

          (g) Transfer of Stock.  The transfer restrictions on stock acquired
              -----------------
              under the 1998 Option Agreement shall terminate upon a Qualified
              Initial Public Offering, as defined in the 1998 Stock Option Plan,
              or upon a Sale of the Company, as defined in the Executive Stock
              and Option Agreement. Furthermore, the Employee shall be granted
              piggy-back registration rights and the benefit of a registration
              statement as described in Section 4(b) of such Executive Stock and
              Option Agreement.

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          (h) Organic Change.  In the event of an Organic Change, as described
              --------------
              in the 1998 Stock Option Plan, the Employee shall have all of the
              protections which he would have in the event of an Organic Change
              under the Executive Stock and Option Agreement.

          (i) Adjustment for Change in Common Stock.  In the event of a
              -------------------------------------
              recapitalization or other event which may result in an adjustment
              in the 1998 Option under Section 6.5 of the 1998 Stock Option
              Plan, the Employee shall have all of the protections which he
              would have in such event under Section 9 of the Executive Stock
              and Option Agreement, specifically including the provision for
              maintenance of economic position."

          IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 2 to Amended and Restated Employment Agreement as of January 30, 2001.

                              // Ronald L. Jones
                              ------------------------------------------
                              Ronald L. Jones

                              SEALY CORPORATION

                              By:  // Kenneth L. Walker
                                   -------------------------------------
                              Kenneth L. Walker
                              Vice President, General Counsel & Secretary

                                       4PACIFICA BANK
                           EMPLOYEE STOCK OPTION PLAN

         SECTION 1. Purpose. The purpose of this Employee Stock Option Plan
(this "Plan") is to provide a means whereby Pacifica Bank (the "Company") or any
parent or subsidiary of the Company, as defined in Subsection 5.8 (the "related
entities"), may continue to attract, motivate and retain selected employees,
officers and independent contractors who can materially contribute to the
Company's growth and success, and to encourage stock ownership in the Company
through granting incentive stock options or nonqualified stock options, or both,
to purchase the Common Stock of the Company (as defined in Section 3), so that
such key employees and other persons and entities will more closely identify
their interests with those of the Company and its shareholders.

         SECTION 2. Administration. This Plan shall be administered by the Board
of Directors of the Company (the "Board") or, in the event the Board shall
appoint or authorize a committee to administer this Plan, by such committee. The
administrator of this Plan shall hereinafter be referred to as the "Plan
Administrator."

         2.1 Procedures. The Board may designate one of the members of the Plan
Administrator as chairperson. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members of
the Plan Administrator present at meetings at which a quorum exists, or acts
reduced to or approved in writing by all Plan Administrator members, shall be
valid acts of the Plan Administrator.

         2.2 Responsibilities. Except for the terms and conditions explicitly
required in this Plan, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted under
this Plan, including selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price, and all other
terms and conditions of the options. Grants under this Plan need not be
identical in any respect, even when made simultaneously. The interpretation and
construction by the Plan Administrator of any terms or provisions of this Plan
or any option issued under this Plan, or of any rule or regulation promulgated
in connection with this Plan, shall be conclusive and binding on all interested
parties, so long as such interpretation and construction with respect to
incentive stock options correspond to the requirements of Section 422 of the
Internal Revenue Code (the "Code"), as amended, and the regulations thereunder.

         2.3 Section 16(b) Compliance and Bifurcation of Plan. In the event the
Company registers any of its equity securities pursuant to Section I2(b) or
12(g) of the Exchange Act, it is the intention of the Company that this Plan,
and options granted under this Plan, comply in all respects with Rule 16b-3
under the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Section, the provision shall be deemed null and void, and
in all events this Plan shall be construed in favor of its meeting the
requirements of Rule I6b-3. Notwithstanding anything in this Plan to the
contrary, the Board, in its absolute discretion, may bifurcate this Plan so as
to restrict, limit or condition the use of any provision of this Plan to

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participants who are officers and directors subject to Section 16(b) of the
Exchange Act without so restricting, limiting or conditioning other Plan
participants.

         SECTION 3. Stock Subject to This Plan. The stock subject to this Plan
shall be the Company's Common Stock (the "Common Stock"), presently authorized
but unissued or now held or subsequently acquired by the Company as treasury
shares. Subject to adjustment as provided in Section 7 of this Plan, the
aggregate amount of Common Stock to be delivered upon the exercise of all
options granted under this Plan shall not exceed 450,000 shares as such Common
Stock was constituted on the effective date of this Plan. If any option granted
under this Plan expires or is surrendered, canceled, terminated or exchanged for
another option for any reason without having been exercised in full, the
unpurchased shares subject to such option shall again be available for purposes
of this Plan, including use as replacement options that may be granted in
exchange for such surrendered, canceled or terminated options. In any one
calendar year, no single individual may receive options under this Plan for an
aggregate number of shares in excess of 50,000 shares of Common Stock.

         SECTION 4. Eligibility. An incentive stock option may be granted only
to an individual who, at the time the option is granted, is an employee of the
Company (or a corporate related entity, as described in Section 5.8) and who the
Board may from time to time select for participation in this Plan. Members of
the Board shall not be eligible for grants of incentive stock options unless
they are also employees of the Company. At the discretion of the Plan
Administrator, employees and independent contractors of the Company (including
nonemployee directors) or any related entity may receive nonqualified stock
options. Any party to whom an option is granted under this Plan shall be
referred to in this Plan as an "Optionee."

         SECTION 5. Terms and Conditions of Options. Options granted under this
Plan shall be evidenced by written agreements that contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan. Notwithstanding the
foregoing, options shall include or incorporate by reference the following terms
and conditions:

                  5.1 Number of Shares. The maximum number of shares that may be
purchased pursuant to the exercise of each option, which number shall be as
established by the Plan Administrator.

                  5.2 Price of Shares. The price per share at which each option
is exercisable (the "exercise price") shall be as established by the Plan
Administrator, provided that the Plan Administrator shall act in good faith to
establish the exercise price as follows:

                           5.2.1 Incentive Stock Options and Nonqualified Stock
Options. With respect to incentive stock options intended to qualify under
Section 422 of the Code, and subject to Subsection 5.2.2 below, the exercise
price shall be not less than the fair market value per share of the Common Stock
at the time the option is granted, except with respect to the substitution of a
new option for an old option, or an assumption of an old option, in accordance
with Code

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Section 424(a). With respect to nonqualified stock options, the exercise price
shall be the amount set by the Plan Administrator.

                           5.2.2 Incentive Stock Options to Greater than 10%
Shareholders. With respect to incentive stock options granted to greater than
10% shareholders of the Company, the exercise price shall be as required by
Section 6.

                           5.2.3 Fair Market Value. The fair market value per
share of the Common Stock for the purpose of determining the exercise price
under this Section 5.2 shall be determined as follows:

                           (a) if the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the 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 system or exchange for the last market trading date
prior to the time of determination as reported in The Wall Street Journal or
such other source as the Plan Administrator deems reliable;

                           (b) if the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the fair
market value shall be the mean between the high and low asked prices for the
Common Stock on the last market trading date prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Plan
Administrator deems reliable; or

                           (c) In the absence of an established market for the
Common Stock, fair market value shall be determined by the Plan Administrator in
good faith at the time the option is granted.

                  5.3 Term and Maturity. Subject to the restrictions contained
in Section 6 with respect to granting incentive stock options to greater than
10% shareholders of the Company, the term of each incentive stock option shall
be 10 years from the date it is granted unless a shorter period of time is
established by the Plan Administrator, but in no event shall the term of any
incentive stock option exceed 10 years. The term of each nonqualified stock
option shall be 10 years from the date it is granted, unless a shorter period of
time is established by the Plan Administrator in the individual option
agreement. To ensure that the Company or related entities will achieve the
purpose and receive the benefits contemplated in this Plan, any option granted
under this Plan shall, unless this condition is waived or modified by the Plan
Administrator in the agreement evidencing the option, or by subsequent
resolution of the Plan Administrator, be exercisable according to the following
schedule:

Page 3 - STOCK OPTION PLAN

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Period of Optionee's Continuous Relationship           Portion of Total Option
With the Company or Related Entity from the            Which is Exercisable
Date the Option is Granted

          After one year                                         20%
          After two years                                        40%
          After three years                                      60%
          After four years                                       80%
          After five years                                      100%

                  5.4 Exercise. Subject to the vesting schedule described in
subsection 5.3 above, if any, and to any additional holding period required by
applicable law, each option may be exercised in whole or in part; provided,
however, that only whole shares will be issued pursuant to the exercise of any
option and that the exercise price shall not be less than the par value per
share of the Common Stock at the time the option is exercised. During an
Optionee's lifetime, any stock options granted under this Plan are personal to
him or her and are exercisable solely by such Optionee, except as provided in
Section 5.7. Options shall be exercised by delivery to the Company of notice of
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.

                  5.5 Payment of Exercise Price. Payment of the option exercise
price shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's check
or personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for the Common Stock
being purchased.

                  The Plan Administrator can determine at the time the option is
Granted for incentive stock options, or at any time before exercise for
nonqualified stock options, that additional forms of payment will be permitted,
including installment payments on such terms and over such period as the Plan
Administrator may determine in its discretion. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:

                  (a) delivery of shares of stock of the Company held by an
Optionee having a fair market value equal to the exercise price, such fair
market value to be determined in good faith by the Plan Administrator;

                  (b) delivery of a full-recourse promissory note executed by
the Optionee, provided that (i) such note delivered in connection with an
incentive stock option shall, and such note delivered in connection with a
nonqualified stock option may, in the sole discretion of the Plan Administrator,
bear interest at a rate specified by the Plan Administrator but in no case less
than the rate required to avoid imputation of interest (taking into account any
exceptions to the

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imputed interest rules) for federal income tax purposes; (ii) the Plan
Administrator in its sole discretion shall specify the term and other provisions
of such note at the time an incentive stock option is granted or at any time
prior to exercise of a nonqualified stock option; (iii) the Plan Administrator
may require that the Optionee pledge the Optionee's shares to the Company for
the purpose of securing the payment of such note and may require that the
certificate representing such shares be held in escrow in order to perfect the
Company's security interest; (iv) the note provides that 90 days following the
Optionee's termination of employment with the Company or a related entity, the
entire outstanding balance under the note shall become due and payable, if not
previously due and payable; and (v) the Plan Administrator in its sole
discretion may at any time restrict or rescind this right upon notification to
the Optionee;

                  (c) delivery of a properly executed exercise notice, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price and any federal, state
or local withholding tax obligations that may arise in connection with the
exercise; provided, that the Plan Administrator, in its sole discretion, may at
any time determine that this Subparagraph (c), to the extent the instructions to
the broker call for an immediate sale of the shares, shall not be applicable to
any Optionee who is subject to Section 16(b) of the Exchange Act if such
transaction would result in a violation of Section 16(b), or is not an employee
at the time of exercise;

                  (d) delivery of a properly executed exercise notice, together
with a request by the Optionee for the Company to pay the exercise price by
withholding from the shares that would otherwise be issued that number of shares
having a fair market value equal to the option exercise price; provided, the
Plan Administrator retains complete discretion to honor or deny the Optionee's
request for such a method of exercise.

                  5.6 Withholding Tax Requirement. The Company or any related
entity shall have the right to retain and withhold from any payment of cash or
Common Stock under this Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. At its
discretion, the Company may require an Optionee receiving shares of Common Stock
to reimburse the Company or a related entity for any such taxes required to be
withheld and may withhold any distribution in whole or in part until the
Company, or related entity, is so reimbursed. In lieu of such withholding or
reimbursement, the Company (or related entity) shall have the right to withhold
from any other cash amounts due or to become due from the Company (or related
entity) to the Optionee an amount equal to such taxes or to retain and withhold
a number of shares having a market value not less than the amount of such taxes
required to be withheld as reimbursement for any such taxes and cancel (in whole
or in part) any such shares so withheld.

                  5.7 Nontransferability of Option. Options granted under this
Plan and the rights and privileges conferred by this Plan may not be
transferred, assigned, pledged or hypothecated in any manner (whether by
operation of law or otherwise) other than by will or by the applicable laws of
descent and distribution; provided, with respect to a non-qualified stock
option, an Optionee may transfer the option to a revocable trust created by the
Optionee for the benefit of

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his or her descendants, to an immediate family member or to a partnership in
which only immediate family members or such trusts are partners. Options under
this Plan shall not be subject to execution, attachment or similar process. Any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
option under this Plan or of any right or privilege conferred by this Plan,
contrary to the Code or to the provisions of this Plan, or the sale or levy or
any attachment or similar process upon the rights and privileges conferred by
this Plan shall be null and void. Notwithstanding the foregoing, an Optionee may
during the Optionee's lifetime, designate a person who may exercise the option
after the Optionee's death by giving written notice of such designation to the
Plan Administrator. Such designation may be changed from time to time by the
Optionee by giving written notice to the Plan Administrator revoking any earlier
designation and making a new designation.

                  5.8 Termination of Relationship. If the Optionee's employment
relationship with the Company or any related entity ceases for any reason other
than termination for cause, death or permanent and total disability, and unless
by its terms the option sooner terminates or expires, then the Optionee may
exercise, for a period of 90 days after such cessation, that portion of the
Optionee's option which is exercisable at the time of such cessation. The
Optionee's option, however, shall terminate at the end of the 90-day period
following such cessation as to all Shares for which it has not been exercised,
unless such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator. If, in the case of an incentive
stock option, an Optionee's relationship with the Company or related entity
changes (i.e., from employee to nonemployee, such as a consultant), such change
shall constitute a termination of an Optionee's employment with the Company or
related entity and the Optionee's incentive stock option shall terminate in
accordance with this subsection. Upon the expiration of the 90-day period
following cessation of employment, the Plan Administrator shall have sole
discretion in a particular circumstance to extend the exercise period following
such cessation beyond that specified above. If, however, in the case of an
incentive stock option, the Optionee does not exercise the Optionee's option
within 90 days after cessation of employment, the option will no longer qualify
as an incentive stock option under the Code.

                  Upon an Optionee's termination of employment for cause, all of
the optionee's outstanding (i.e., unexercised) options issued under this Plan
shall immediately expire and no longer be available for exercise. For purposes
of this Plan, a termination shall be considered for "cause" if the termination
is attributable to the Optionee's: (a) Embezzlement; (b) use of illegal drugs or
alcohol that materially impairs the Optionee's ability to fulfill his or her
duties as an employee or independent contractor; (c) willful disclosure of trade
secrets or confidential information of the Company; (d) dishonesty which results
in substantial harm to the Company; or (e) conviction or confession of a
criminal felony.

                  If an Optionee's relationship with the Company or any related
entity ceases because of a permanent and total disability, the Optionee's option
shall not terminate, and in the case of an incentive stock option, shall not
cease to be treated as an incentive stock option, until the end of the 365-day
period following such cessation (unless by its terms it sooner terminates and
expires). As used in this Plan, the term "permanent and total disability" has
the same meaning provided in Code Section 22(e)(3).

Page 6 - STOCK OPTION PLAN

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                  For purposes of this subsection 5.8, a transfer of
relationship between or among the Company and/or any related entity shall not be
deemed to constitute a cessation of relationship with the Company or any of its
related entities. For purposes of this subsection 5.9, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.

                  As used in this Plan, the term "related entity," when
referring to a subsidiary, shall mean any corporation (other than the Company)
which, at the time of the granting of the option, is in an unbroken chain of
corporations ending with the Company, if stock or voting interests possessing
50% or more of the total combined voting power of all classes of stock or other
ownership interests of each of the corporations other than the Company is owned
by one of the other corporations in such chain. When referring to a parent
entity, the term "related entity" shall mean any corporation in an unbroken
chain of corporations ending with the Company if, at the time of the granting of
the option, each of the corporations other than the Company owns stock or other
ownership interests possessing 50% or more of the total combined voting power of
all classes of stock (or other ownership interests) in one of the other
corporations in such chain.

                  5.9 Death of Optionee. If an Optionee dies while he or she has
a relationship with the Company or any related entity or dies within the 90-day
period (or 365-day period in the case of totally disabled Optionees) following
cessation of such relationship, any option held by such Optionee to the extent
that the Optionee would have been entitled to exercise such option, may be
exercised within 365 days after his or her death by the personal representative
of his or her estate or by the person or persons to whom the Optionee's rights
under the option shall pass by will or by the applicable laws of descent and
distribution.

                  5.10 Status of Shareholder. Neither the Optionee nor any party
to which the Optionee's rights and privileges under the option may pass shall
be, or have any of the rights or privileges of, a shareholder of the Company
with respect to any of the shares issuable upon the exercise of any option
granted under this Plan unless and until such option has been exercised.

                  5.11 Continuation of Employment. Nothing in this Plan or in
any option granted pursuant to this Plan shall confer upon any Optionee any
right to continue in the employ of the Company or of a related entity, or to
interfere in any way with the right of the Company or of any related entity to
terminate his or her employment or other relationship with the Company or a
related entity at any time.

                  5.12 Modification and Amendment of Option. Subject to the
requirements of Code Section 422 with respect to incentive stock options and to
the terms and conditions and within the limitations of this Plan, the Plan
Administrator may modify or amend outstanding options granted under this Plan.
The modification or amendment of an outstanding option shall not, without the
consent of the Optionee, impair or diminish any of his or her rights or any of
the

Page 7 - STOCK OPTION PLAN

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obligations of the Company under such option. Except as otherwise provided in
this Plan, no outstanding option shall be terminated without the consent of the
Optionee. Unless the Optionee agrees otherwise, any changes or adjustments made
to outstanding incentive stock options granted under this Plan shall be made in
such a manner so as not to constitute a "modification" as defined in Code
Section 424(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as defined
in Code Section 422(b).

                  5.13 Limitation on Value for Incentive Stock Options. As to
all incentive stock options granted under the terns of this Plan, to the extent
that the aggregate fair market value (determined at the time the incentive stock
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the Optionee during any calendar year
(under this Plan and all other incentive stock option plans of the Company, a
related entity or a predecessor corporation) exceeds $100,000, those options (or
the portion of an option) beyond the $100,000 threshold shall be treated as
nonqualified stock options. The previous sentence shall not apply if the
Internal Revenue Service publicly rules, issues a private ruling to the Company,
any Optionee, or any legatee, personal representative or distributee of an
Optionee or issues regulations changing or eliminating such annual limit.

         SECTION 6. Greater Than 10% Shareholders.

                  6.1 Exercise Price and Term of Incentive Stock Options. If
incentive stock options are granted under this Plan to employees who own more
than 10% of the total combined voting power of all classes of stock of the
Company or any related entity, the term of such incentive stock options shall
not exceed five years and the exercise price shall be not less than 110% of the
fair market value of the Common Stock at the time the incentive stock option is
granted. This provision shall control notwithstanding any contrary terms
contained in an option agreement or any other document.

                  6.2 Attribution Rule. For purposes of subsection 6.1, in
determining stock ownership, an employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. If an
employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion of
the option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock actually issued and outstanding immediately before the
grant of the incentive stock option to the employee.

         SECTION 7. Adjustments Upon Changes in Capitalization. The aggregate
number and class of shares for which options may be granted under this Plan, the
number and class of shares covered by each outstanding option and the exercise
price per share thereof (but not the total price), and each such option, shall
all be proportionately adjusted for any increase or decrease in

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<PAGE>

the number of issued shares of Common Stock of the Company resulting from a
split-up or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend.

                  7.1 Effect of Liquidation.Reorganization or Change in Control.

                           7.1.1 Cash. Stock or Other Property for Stock. Except
as provided in subsection 7.1.2, upon a merger (other than a merger of the
Company in which the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere reincorporation
or the creation of a holding company) or liquidation of the Company, as a result
of which the shareholders of the Company receive cash, stock or other property
in exchange for or in connection with their shares of Common Stock, any option
granted under this Plan shall terminate. Notwithstanding the foregoing, the
Optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such option in whole or in part, to the extent the
vesting requirements set forth in this Plan have been satisfied, unless stated
otherwise in the Optionee's individual option agreement.

                           7.1.2 Conversion of Options on Stock for Stock
Exchange. If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted under this Plan shall be converted into
options to purchase shares of Exchange Stock unless the Company and the
corporation issuing the Exchange Stock, in their sole discretion, determine that
any or all such options granted under this Plan shall not be converted into
options to purchase shares of Exchange Stock, but instead shall terminate in
accordance with the provisions of subsection 7.1.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted under this Plan in the same proportion as used for determining
the number of shares of Exchange Stock the holders of the Common Stock receive
in such merger, consolidation, acquisition of property or stock, separation or
reorganization. Unless accelerated by the Board, the vesting schedule set forth
in the option agreement shall continue to apply for the Exchange Stock.

                           7.1.3 Chance in Control. In the event of a "Change in
Control," as defined in Section 7.1.4 below, of the Company after the Company
has registered any of its . equity securities pursuant to Section 13(b) or 12(g)
of the Exchange Act, unless otherwise determined by the Board prior to the
occurrence of such Change in Control, any options or portions of such options
outstanding as of the date such Change in Control is determined to have occurred
that are not yet fully vested shall not become fully vested merely by the
occurrence of a Change in Control.

Page 9 - STOCK OPTION PLAN

<PAGE>

                           7.1.4 Definition of "Change in Control." For purposes
of this Plan, a "Change in Control" shall mean (a) the first approval by the
Board or by the stockholders of the Company of an Extraordinary Event, (b) a
Purchase, or (c) a Board Change.

                  For purposes of this Plan, an "Extraordinary Event" shall mean
any of the following actions:

                  (i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of common
stock immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger;

                  (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
the assets of the Company; or

                  (iii) the adoption of any plan or proposal for liquidation or
dissolution of the Company.

                  For purposes of the Plan, a "Purchase" shall mean the
acquisition by any person (as such term is defined in Section 13(d) of the
Exchange Act) of any shares of Common Stock or securities convertible into
Common Stock) without the prior approval of a majority of the Continuing
Directors (as defined below) of the Company, if after making such acquisition
such person is the beneficial owner (as such term is defined in Rule 13d-3 under
the Exchange Act) directly or indirectly of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities (calculated as provided in paragraph (d) of such Rule
13d-3).

                  For purposes of the Plan, a "Board Change" shall have occurred
if individuals who constitute the Board of the Company at the time of adoption
of this Plan (the "Continuing Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a Director
subsequent to the date of adoption of this Plan whose nomination for election
was approved by a vote of at least a majority of the Continuing Directors (other
than a nomination of an individual whose initial assumption of office is in
connection with an actual 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 under the Exchange Act) shall be deemed to be a Continuing
Director.

                  7.2 Fractional Shares. In the event of any adjustment in the
number of shares covered by any option, any fractional shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.

                  7.3 Determination of Board to Be Final. All Section 7
adjustments shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent of such

Page 10 - STOCK OPTION PLAN

<PAGE>

adjustments, shall be final, binding and conclusive. Unless an Optionee agrees
otherwise, any change or adjustment to an incentive stock option shall be made
in such a manner so as not to constitute a "modification" as defined in Code
Section 424(h) and so as not to cause his or her incentive stock option issued
under this Plan to fail to continue to qualify as an incentive stock option as
defined in Code Section 422(b).

         SECTION 8. Securities Regulation. Shares shall not be issued with
respect to an option granted under this Plan unless the exercise of such option
and the issuance and delivery of such shares pursuant to the exercise of such
option shall comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of any shares under this Plan. Inability
of the Company to obtain from any regulatory body having jurisdiction, the
authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares under this Plan or the unavailability of an
exemption from registration for the issuance and sale of any shares under this
Plan shall relieve the Company of any liability in respect of the nonissuance or
sale of such shares as to which such requisite authority shall not have been
obtained.

                  As a condition to the exercise of an option, the Company may
require the Optionee to represent and warrant at the time of any such exercise
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.

                  Should any of the Company's capital stock of the same as the
stock subject to options granted under this Plan be listed on a national
securities exchange, all stock issued under this Plan if not previously listed
on such exchange shall be authorized by that exchange for listing on such
exchange prior to the issuance of such stock.

         SECTION 9. Amendment and Termination.

                  9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan, provided that except as set forth in Section 7, the
approval of the Company's shareholders

Page 11 - STOCK OPTION PLAN

<PAGE>

Is necessary within 365 days before or after the adoption of the Board of any
amendment which will:

                           (a) increase the number of shares which are to be
reserved for the issuance of options under this Plan;

                           (b) permit the granting of stock options to a class
of persons other than those presently permitted to receive stock options under
this Plan; or

                           (c) require shareholder approval under applicable
law, including Section 16(b) of the Exchange Act.

                  Any amendment to this Plan that would constitute a
"modification" to incentive stock options outstanding on the date of such
amendment shall not be applicable to outstanding incentive stock options, but
shall have prospective effect only, unless individual Optionees agree otherwise.

                  9.2 Automatic Termination. Unless sooner terminated by the
Board, this Plan shall terminate ten years from the earlier of (a) the date on
which this Plan is adopted by the Board or (b) the date on which this Plan is
approved by the shareholders of the Company. No option may be granted after such
termination or during any suspension of this Plan. The amendment or termination
of this Plan shall not, without the consent of the option holder, alter or
impair any rights or obligations under any option previously granted under this
Plan.

         SECTION 10. Effectiveness of This Plan. This Plan shall become
effective upon adoption by the Board so long as it is approved by the Company's
shareholders any time within 365 days before or after the adoption of this Plan.

Page 12 - STOCK OPTION PLAN

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