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                                                                     EXHIBIT 4.3

                            FALCONSTOR SOFTWARE, INC.

                       2000 STOCK OPTION PLAN, AS AMENDED

1.    PURPOSE OF THE PLAN.

            This 2000 Stock Option Plan,  as amended (the "Plan") is intended as
an  incentive,  to  retain  in  the  employ  of  and  as  directors,  employees,
consultants and advisors to FALCONSTOR  SOFTWARE,  INC., a Delaware  corporation
(the "Company") and any Subsidiary of the Company, within the meaning of Section
424(f) of the United  States  Internal  Revenue  Code of 1986,  as amended  (the
"Code") or any  entities  affiliated  with the  Company who were formed or whose
principal  place of  business  is Taiwan  ("Affiliate"),  persons  of  training,
experience and ability,  to attract new employees,  directors,  consultants  and
advisors  whose  services are  considered  valuable,  to encourage  the sense of
proprietorship  and to  stimulate  the active  interest  of such  persons in the
development and financial success of the Company and its Subsidiaries.

            It is further  intended that certain options granted pursuant to the
Plan shall constitute  incentive stock options within the meaning of Section 422
of the Code (the  "Incentive  Options")  while  certain  other  options  granted
pursuant to the Plan shall be  nonqualified  stock  options  (the  "Nonqualified
Options").  Incentive Options and Nonqualified  Options are hereinafter referred
to collectively as "Options."

            In all cases, the terms,  provisions,  conditions and limitations of
the Plan shall be construed and interpreted consistent with the Company's intent
as stated in this Section 1.

2.    ADMINISTRATION OF THE PLAN.

            The Board of Directors of the Company (the  "Board") may appoint and
maintain as administrator of the Plan a Committee (the  "Committee")  consisting
of two or more  directors  that shall serve at the pleasure of the Board.  Until
such a Committee is appointed, the Board shall have the full power and authority
to take any and all actions hereunder. The Committee,  subject to Sections 3 and
5 hereof,  shall  have full  power and  authority  to  designate  recipients  of
Options,  to determine the terms and conditions of respective  Option agreements
(which need not be identical)  and to interpret the provisions and supervise the
administration  of the Plan.  The Committee  shall have the  authority,  without
limitation, to designate which Options granted under the Plan shall be Incentive
Options and which shall be Nonqualified  Options.  To the extent any Option does
not qualify as an Incentive Option, it shall constitute a separate  Nonqualified
Option.

            Subject to the  provisions of the Plan,  the Committee  and/or Board
shall interpret the Plan and all Options granted under the Plan, shall make such
rules as it deems  necessary for the proper  administration  of the Plan,  shall
make all other  determinations  necessary or advisable for the administration of
the Plan and shall  correct any defects or supply any omission or reconcile  any
inconsistency in the Plan or in any Options granted under the Plan in the manner
and to the extent  that the  Committee  or Board deems  desirable  to carry into
effect the Plan or any Options.  The act or  determination  of a majority of the
Committee or Board shall be the act or  determination of the Committee or Board,
as  applicable,  and any  decision  reduced to writing  and signed by all of the
members of the Committee or the Board shall be fully effective as if it had been
made by a majority  at a meeting  duly held.  Subject to the  provisions  of the
Plan,  any action  taken or  determination  made by the  Committee  and/or Board
pursuant to this and the other  Sections of the Plan shall be  conclusive on all
parties.

            Until a Committee is appointed,  or in the event that for any reason
the Committee is unable to act, or if there shall be no such Committee, then the
Plan shall be administered by the Board, and references  herein to the Committee
(except in the proviso to this sentence) shall be deemed to be references to the
Board.

3.           DESIGNATION OF OPTIONEES.

            The persons eligible for  participation in the Plan as recipients of
Options (the "Optionees")  shall include  employees,  officers and directors of,
and consultants  and advisors to, the Company or any  Subsidiary;  provided that
Incentive  Options  may only be  granted to  employees  of the  Company  and the
Subsidiaries. In selecting Optionees, and in determining the number of shares to
be covered by each Option  granted to Optionees,  the Committee may consider the
office or position held by the Optionee or the  Optionee's  relationship  to the
Company,  the Optionee's  degree of  responsibility  for and contribution to the
growth and success of the Company or any  Subsidiary,  the Optionee's  length of
service, age, promotions, potential and any other factors that the Committee may
consider  relevant.  An Optionee who has been granted an Option hereunder may be
granted an additional Option or Options, if the Committee shall so determine.

4.          STOCK RESERVED FOR THE PLAN.

            Subject to  adjustment  as provided in Section 7 hereof,  a total of
14,162,296 shares of the Company's Common Stock,  $.001 par value per share (the
"Stock"),  shall be subject to the Plan. The shares of Stock subject to the Plan
shall  consist  of  unissued  shares or  previously  issued  shares  held by any
Subsidiary or Affiliate of the Company, and such amount of shares of Stock shall
be and is hereby reserved for such purpose. Any of such shares of Stock that may
remain unsold and that are not subject to outstanding Options at the termination
of the Plan shall cease to be reserved for the  purposes of the Plan,  but until
termination  of the Plan the  Company  shall at all times  reserve a  sufficient
number of  shares of Stock to meet the  requirements  of the  Plan.  Should  any
Option expire or be canceled  prior to its exercise in full or should the number
of shares of Stock to be  delivered  upon the  exercise  in full of an Option be
reduced for any reason,  the shares of Stock theretofore  subject to such Option
may be subject to future Options under the Plan.

5.          TERMS AND CONDITIONS OF OPTIONS.

            Options  granted  under the Plan shall be  subject to the  following
conditions  and  shall  contain  such  additional  terms  and  conditions,   not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

            (a)  OPTION  PRICE.  The  purchase  price  of each  share  of  Stock
purchasable  under an Incentive  Option shall be  determined by the Committee or
the  Board at the time of  grant,  but  shall  not be less than 100% of the Fair
Market Value (as defined below) of such share of Stock on the date the Option is
granted;  provided,  however,  that with respect to an Optionee who, at the time
such Incentive Option is granted,  owns (within the meaning of Section 424(d) of
the Code) more than 10% of the total  combined  voting  power of all  classes of
stock of the Company or of any Subsidiary, the purchase price per share of Stock
shall be at least 110% of the Fair  Market  Value per share of Stock on the date
of  grant.  The  purchase  price  of each  share of  Stock  purchasable  under a
Nonqualified  Option shall not be less than 80% of the Fair Market Value of such
share of Stock on the date the Option is granted.  The  exercise  price for each
Option  shall be subject to  adjustment  as provided  in Section 7 below.  "Fair
Market Value" means the closing price of publicly  traded shares of Stock on the
principal securities exchange on which shares of Stock are listed (if the shares
of Stock are so listed),  or on the NASDAQ  Stock Market (if the shares of Stock
are  regularly  quoted  on the  NASDAQ  Stock  Market),  or, if not so listed or
regularly quoted,  the mean between the closing bid and asked prices of publicly
traded shares of Stock in the over-the-counter market, or, if such bid and asked
prices  shall  not  be  available,  as  reported  by any  nationally  recognized
quotation service selected by the Company,  or as determined by the Committee in
a manner  consistent  with the provisions of the Code.  Anything in this Section

5(a) to the contrary notwithstanding,  in no event shall the purchase price of a
share of Stock be less  than the  minimum  price  permitted  under the rules and
policies of any  national  securities  exchange on which the shares of Stock are
listed.

            (b)  OPTION  TERM.  The  term of each  Option  shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after the date
such  Option is granted  and in the case of an  Incentive  Option  granted to an
Optionee  who, at the time such  Incentive  Option is granted,  owns (within the
meaning  of  Section  424(d)  of the Code)  more than 10% of the total  combined
voting  power of all  classes of stock of the Company or of any  Subsidiary,  no
such Incentive  Option shall be exercisable  more than five years after the date
such Incentive Option is granted.

            (c) EXERCISABILITY; LOCK-UP. Subject to Section 5(j) hereof, Options
shall be  exercisable  at such  time or times  and  subject  to such  terms  and
conditions as shall be determined by the Committee at the time of grant.  Unless
otherwise  determined  by the  Committee or Board at grant,  each  Optionee will
agree  that  if so  requested  by  the  Company  or  any  representative  of the
underwriters  (the "Managing  Underwriter") in connection with a registration of
the offering of any equity securities of the Company under the Securities Act of
1933,  as  amended  (the  "Securities  Act"),  the  Optionee  shall  not sell or
otherwise  transfer  any Stock or other  securities  of the  Company  during the
180-day  period (or such  longer  period as may be  requested  in writing by the
Managing  Underwriter  and  agreed to in writing by the  Company)  (the  "Market
Standoff  Period")  following the effective date of a registration  statement of
the  Company  filed  under the  Securities  Act,  provided,  however,  that such
restriction shall apply only to the first registration  statement of the Company
to become effective under the Securities Act that includes securities to be sold
on behalf of the Company to the public in an underwritten  public offering under
the  Securities  Act.  The Company may impose  stop-transfer  instructions  with
respect to  securities  subject to the foregoing  restrictions  until the end of
such Market Standoff Period.

            (d) METHOD OF EXERCISE.  Options to the extent then  exercisable may
be exercised in whole or in part at any time during the option period, by giving
written  notice to the  Company  specifying  the number of shares of Stock to be
purchased,  accompanied by payment in full of the purchase price, in cash, or by
check  or such  other  instrument  as may be  acceptable  to the  Committee.  As
determined by the Committee, in its sole discretion,  at or after grant, payment
in full or in part may be made at the  election of the  Optionee (i) in the form
of Stock owned by the  Optionee  (based on the Fair Market Value of the Stock on
the trading day before the Option is exercised)  which is not the subject of any
pledge or security interest, (ii) in the form of shares of Stock withheld by the
Company  from the shares of Stock  otherwise to be received  with such  withheld
shares of Stock having a Fair Market Value on the date of exercise  equal to the
exercise  price  of the  Option,  or  (iii) by a  combination  of the  forgoing,
provided that the combined value of all cash and cash  equivalents  and the Fair
Market Value of any shares  surrendered to the Company is at least equal to such
exercise  price and except with  respect to (ii)  above,  such method of payment
will not cause a  disqualifying  disposition  of all or a  portion  of the Stock
received upon exercise of an Incentive  Option.  Not withstanding the foregoing,
an Optionee may not take any actions which are prohibited by the  Sarbanes-Oxley
Act of 2002 and the rules and  regulations  promulgated  by the  Securities  and
Exchange  Commission or any other agency thereunder.  An Optionee shall have the
right to dividends and other rights of a  stockholder  with respect to shares of
Stock  purchased  upon  exercise of an Option at such time as the  Optionee  has
given  written  notice of exercise and has paid in full for such shares and (ii)
has satisfied such conditions that may be imposed by the Company with respect to
the withholding of taxes.

            (e) NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised  solely by the Optionee  during his lifetime or after his death
by the person or persons  entitled thereto under his will or the laws of descent
and distribution.  The Committee, in its sole discretion,  may permit a transfer
of a Nonqualified  Option to (i) a trust for the benefit of the Optionee or (ii)
a member of the Optionee's immediate family (or a trust for his or her benefit).
Any attempt to transfer,  assign,  pledge or otherwise dispose of, or to subject
to  execution,  attachment  or  similar  process,  any  Option  contrary  to the
provisions  hereof shall be void and  ineffective and shall give no right to the
purported transferee.

            (f)  TERMINATION  BY  DEATH.  Unless  otherwise  determined  by  the
Committee at grant, if any Optionee's  employment with or service to the Company
or any  Subsidiary or Affiliate  terminates  by reason of death,  the Option may
thereafter be exercised,  to the extent then exercisable (or on such accelerated
basis  as the  Committee  shall  determine  at or  after  grant),  by the  legal
representative of the estate or by the legatee of the Optionee under the will of
the Optionee, for a period of one year after the date of such death or until the
expiration  of the  stated  term of such  Option  as  provided  under  the Plan,
whichever period is shorter.

            (g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined
by the Committee at grant,  if any Optionee's  employment with or service to the
Company  or any  Subsidiary  or  Affiliate  terminates  by  reason  of total and
permanent  disability,  any  Option  held by such  Optionee  may  thereafter  be
exercised,  to the extent it was  exercisable at the time of termination  due to
Disability (or on such accelerated  basis as the Committee shall determine at or
after grant), but may not be exercised after three months after the date of such
termination  of  employment  or service or the  expiration of the stated term of
such  Option,  whichever  period is shorter;  provided,  however,  that,  if the
Optionee dies within such three month  period,  any  unexercised  Option held by
such  Optionee  shall  thereafter be  exercisable  to the extent to which it was
exercisable at the time of death for a period of one year after the date of such
death or for the stated term of such Option, whichever period is shorter.

            (h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined
by the Committee at grant,  if any Optionee's  employment with or service to the
Company or any  Subsidiary or Affiliate  terminates by reason of Normal or Early
Retirement (as such terms are defined  below),  any Option held by such Optionee
may thereafter be exercised to the extent it was exercisable at the time of such
Retirement (or on such accelerated  basis as the Committee shall determine at or
after grant), but may not be exercised after three months after the date of such
termination  of  employment  or service or the  expiration of the stated term of
such  Option,  whichever  period is shorter;  provided,  however,  that,  if the
Optionee dies within such three month  period,  any  unexercised  Option held by
such Optionee  shall  thereafter be  exercisable,  to the extent to which it was
exercisable  at the time of death,  for a period  of one year  after the date of
such death or for the stated term of such Option, whichever period is shorter.

       For  purposes  of this  paragraph  (h)  "Normal  Retirement"  shall  mean
retirement  from  active  employment  with  the  Company  or any  Subsidiary  or
Affiliate on or after the normal  retirement  date  specified in the  applicable
Company or  Subsidiary  pension  plan or if no such  pension  plan,  age 65, and
"Early Retirement" shall mean retirement from active employment with the Company
or any Subsidiary or Affiliate  pursuant to the early  retirement  provisions of
the  applicable  Company or Subsidiary  pension plan or if no such pension plan,
age 55.

            (i) OTHER TERMINATION.  Unless otherwise determined by the Committee
at grant,  if any  Optionee's  employment  with or service to the Company or any
Subsidiary or Affiliate  terminates for any reason other than death,  Disability
or Normal or Early Retirement, the Option shall thereupon terminate, except that
the portion of any Option that was  exercisable on the date of such  termination
of  employment  or service may be exercised  for the lesser of 30 days after the
date of  termination  or the  balance of such  Option's  term if the  Optionee's
employment  or  service  with the  Company or any  Subsidiary  or  Affiliate  is
terminated by the Company or such Subsidiary without cause (the determination as
to whether termination was for cause to be made by the Committee).  The transfer
of an Optionee  from the employ of or service to the Company to the employ of or
service to a Subsidiary or Affiliate,  or vice versa,  or from one Subsidiary or
Affiliate  to  another,  shall not be  deemed to  constitute  a  termination  of
employment or service for purposes of the Plan.

            (j) LIMIT ON VALUE OF INCENTIVE  OPTION.  The aggregate  Fair Market
Value,  determined as of the date the Incentive Option is granted,  of Stock for
which  Incentive  Options  are  exercisable  for the first time by any  Optionee
during any calendar  year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.

            (k) TRANSFER OF INCENTIVE OPTION SHARES.  The stock option agreement
evidencing any Incentive  Options  granted under this Plan shall provide that if
the Optionee  makes a  disposition,  within the meaning of Section 424(c) of the
Code and  regulations  promulgated  thereunder,  of any share or shares of Stock
issued to him upon exercise of an Incentive Option granted under the Plan within
the two-year  period  commencing  on the day after the date of the grant of such
Incentive  Option or within a one-year  period  commencing  on the day after the
date of transfer of the share or shares to him  pursuant to the exercise of such
Incentive  Option, he shall,  within 10 days after such disposition,  notify the
Company  thereof  and  immediately  deliver to the  Company any amount of United
States federal, state and local income tax withholding required by law.

            (l) LIMIT ON GRANTS. No Optionee shall be granted, in total, Options
to purchase more than 15% of the shares of Stock reserved for the Plan.

6.          TERM OF PLAN.

            No Option  shall be granted  pursuant to the Plan on or after May 1,
2010, but Options theretofore granted may extend beyond that date.

7.          CAPITAL CHANGE OF THE COMPANY.

            In  the  event  of  any   merger,   reorganization,   consolidation,
recapitalization,  stock  dividend,  or  other  change  in  corporate  structure
affecting  the Stock,  the  Committee  shall make an  appropriate  and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number  and option  price of shares  subject to  outstanding  Options
granted  under  the Plan,  to the end that  after  such  event  each  Optionee's
proportionate  interest shall be maintained as immediately before the occurrence
of such event.

8.          PURCHASE FOR INVESTMENT.

            Unless  the  Options  and  shares  covered  by the  Plan  have  been
registered  under the Securities  Act, or the Company has  determined  that such
registration is unnecessary, each person exercising an Option under the Plan may
be  required  by the  Company to give a  representation  in  writing  that he is
acquiring the shares for his own account for  investment and not with a view to,
or for sale in connection with, the distribution of any part thereof.

9.          TAXES.

            The Company  may make such  provisions  as it may deem  appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any taxes or any other tax matters.

10.         EFFECTIVE DATE OF PLAN.

            The Plan shall be effective on May 1, 2000, as approved by the Board
and by majority vote of the Company's stockholders as of such date.

11.         AMENDMENT AND TERMINATION.

            The Board may amend,  suspend, or terminate the Plan, except that no
amendment  shall be made that would impair the rights of any Optionee  under any
Option theretofore  granted without the Optionee's  consent,  and except that no
amendment shall be made which,  without the approval of the  stockholders of the
Company would:

            (a)  materially  increase  the  number of shares  that may be issued
under the Plan, except as is provided in Section 7;

            (b) materially increase the benefits accruing to the Optionees under
the Plan;

            (c)  materially  modify  the  requirements  as  to  eligibility  for
participation in the Plan;

            (d) decrease the exercise price of an Incentive  Option to less than
100% of the Fair Market Value per share of Stock on the date of grant thereof or
the exercise price of a Nonqualified  Option to less than 80% of the Fair Market
Value per share of Stock on the date of grant thereof; or

            (e)  extend  the term of any  Option  beyond  that  provided  for in
Section 5(b).

            The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without the Optionee's  consent.  The Committee may also substitute

new Options for previously  granted  Options,  including  options  granted under
other plans applicable to the participant and previously  granted Options having
higher option prices, upon such terms as the Committee may deem appropriate.

12.         GOVERNMENT REGULATIONS.

            The Plan, and the grant and exercise of Options  hereunder,  and the
obligation of the Company to sell and deliver  shares under such Options,  shall
be subject to all applicable laws, rules and regulations,  and to such approvals
by any  governmental  agencies,  national  securities  exchanges and interdealer
quotation systems as may be required.

13.         GENERAL PROVISIONS.

            (a)  CERTIFICATES.  All  certificates  for shares of Stock delivered
under  the Plan  shall  be  subject  to such  stop  transfer  orders  and  other
restrictions  as the Committee may deem advisable  under the rules,  regulations
and other  requirements  of the  Securities  and Exchange  Commission,  or other
securities  commission  having  jurisdiction,  any  applicable  Federal or state
securities  law, any stock exchange or interdealer  quotation  system upon which
the  Stock is then  listed  or traded  and the  Committee  may cause a legend or
legends to be placed on any such  certificates to make appropriate  reference to
such restrictions.

            (b)  EMPLOYMENT  MATTERS.  The adoption of the Plan shall not confer
upon any Optionee of the Company or any  Subsidiary  or  Affiliate  any right to
continued employment or, in the case of an Optionee who is a director, continued
service as a director,  with the Company or a Subsidiary  or  Affiliate,  as the
case may be, nor shall it  interfere in any way with the right of the Company or
any Subsidiary or Affiliate to terminate the employment of any of its employees,
the service of any of its directors or the  retention of any of its  consultants
or advisors at any time.

            (c)  LIMITATION  OF  LIABILITY.  No  member  of  the  Board  or  the
Committee,  or any officer or  employee  of the Company  acting on behalf of the
Board or the Committee, shall be personally liable for any action, determination
or interpretation  taken or made in good faith with respect to the Plan, and all
members of the Board or the  Committee  and each and any  officer or employee of
the Company  acting on their behalf  shall,  to the extent  permitted by law, be
fully  indemnified  and  protected by the Company in respect of any such action,
determination or interpretation.

            (d)  REGISTRATION OF STOCK.  Notwithstanding  any other provision in
the Plan,  no Option  may be  exercised  unless and until the Stock to be issued
upon the  exercise  thereof has been  registered  under the  Securities  Act and
applicable  state  securities  laws,  or are,  in the  opinion of counsel to the
Company,  exempt from such registration in the United States.  The Company shall
not be under any  obligation  to  register  under  applicable  federal  or state
securities  laws any Stock to be issued upon the  exercise of an Option  granted
hereunder in order to permit the exercise of an Option and the issuance and sale
of the Stock  subject  to such  Option,  although  the  Company  may in its sole
discretion  register such Stock at such time as the Company shall determine.  If
the Company  chooses to comply with such an  exemption  from  registration,  the
Stock issued  under the Plan may, at the  direction  of the  Committee,  bear an
appropriate  restrictive  legend restricting the transfer or pledge of the Stock
represented  thereby,  and the Committee may also give appropriate stop transfer
instructions with respect to such Stock to the Company's transfer agent.

                                          FALCONSTOR SOFTWARE, INC.sec document

                                                                     Exhibit 4.5

                            FALCONSTOR SOFTWARE, INC.

                    2004 OUTSIDE DIRECTORS STOCK OPTION PLAN

      1.    PURPOSE. The FalconStor Software,  Inc. 2004 Outside Directors Stock
            Option Plan (the "Plan") is established effective as of the 26th day
            of  March,   2004,  (the  "Effective  Date")  to  create  additional
            incentive  for the non employee  directors of  FalconStor  Software,
            Inc., a Delaware corporation,  and any successor corporation thereto
            (collectively referred to as the "Company") to promote the financial
            success and progress of the Company and any present or future parent
            and/or subsidiary  corporations of the Company.  For purposes of the
            Plan, a parent corporation and a subsidiary  corporation shall be as
            defined in sections  424(e) and 424(f) of the Internal  Revenue Code
            of 1986, as amended (the "Code").

      2.    ADMINISTRATION.  The Plan  shall  be  administered  by the  Board of
            Directors of the Company (the  "Board")  and/or by a duly  appointed
            committee  of the Board  having such powers as shall be specified by
            the Board. Any subsequent  references herein to the Board shall also
            mean the committee if such committee has been appointed and,  unless
            the powers of the  committee  have been  specifically  limited,  the
            committee  shall have all of the powers of the Board granted herein,
            including,  without limitation,  the power to terminate or amend the
            Plan at any time subject to the terms of the Plan and any applicable
            limitations  imposed  by law.  The Board  shall  have no  authority,
            discretion  or power to select  the  non-employee  directors  of the
            Company who will receive options under the Plan, to set the exercise
            price of the options granted under the Plan, to determine the number
            of shares of common stock to be granted  under option or the time at
            which such options are to be granted,  to establish  the duration of
            option  grants,  or to alter other terms or conditions  specified in
            the Plan,  except in the sense of administering  the Plan subject to
            the provisions of the Plan. All questions of  interpretation  of the
            Plan or of any options granted under the Plan (an "Option") shall be
            determined by the Board, and such determinations  shall be final and
            binding  upon all persons  having an interest in the Plan and/or any
            Option.  Any officer of the Company  shall have the authority to act
            on  behalf  of  the  Company  with  respect  to any  matter,  right,
            obligation,  or election which is the  responsibility of or which is
            allocated to the Company  herein,  provided the officer has apparent
            authority  with  respect  to  such  matter,  right,  obligation,  or
            election.

      3.    ELIGIBILITY  AND TYPE OF  OPTION.  Options  may be  granted  only to
            directors  of the Company  who,  at the time of such grant,  are not
            employees of the Company or of any parent or subsidiary  corporation
            of the Company  ("Outside  Directors").  Options  granted to Outside

            Directors shall be nonqualified stock options; that is, options that
            are not treated as having been granted under  section  422(b) of the
            Code. A person  granted an Option is  hereinafter  referred to as an
            "Optionee".

      4.    SHARES  SUBJECT  TO OPTION.  Options  shall be for the  purchase  of
            shares of authorized but unissued common stock or treasury shares of
            common stock of the Company (the "Stock"),  subject to adjustment as
            provided in paragraph 8 below. The maximum number of shares of Stock
            which may be issued under the Plan shall be Three  Hundred  Thousand
            (300,000) shares.  In the event that any outstanding  Option for any
            reason  expires or is  terminated  and/or shares of Stock subject to
            repurchase are repurchased by the Company,  the shares  allocable to
            the unexercised  portion of such Option, or such repurchased shares,
            may again be subject to an Option grant.

      5.    TIME FOR GRANTING OPTIONS.  All Options shall be granted, if at all,
            within three years from the Effective Date.

      6.    TERMS,  CONDITIONS AND FORM OF OPTIONS.  Options granted pursuant to
            the Plan shall be evidenced  by written  agreements  specifying  the
            number of shares of Stock covered thereby, in substantially the form
            attached hereto as Exhibit A (the "Option Agreement"), which written
            agreement  may  incorporate  all or any of the  terms of the Plan by
            reference  and shall  comply  with and be subject  to the  following
            terms and conditions:

            a.   AUTOMATIC GRANT OF OPTIONS.  Subject to execution by an Outside
                 Director of an appropriate  Option Agreement,  Options shall be
                 granted  automatically and without further action of the Board,
                 as follows:

                 i.   Each  person  who is  newly  elected  or  appointed  as an
                      Outside  Director on or after the Effective  Date shall be
                      granted an Option on the day of such  initial  election or
                      appointment to purchase Fifty Thousand  (50,000) shares of
                      Stock.

                 ii.  On the date of each Annual Meeting of  Stockholders of the
                      Company  occurring  after the Effective Date, each Outside
                      Director  shall be  granted  an  Option  to  purchase  Ten
                      Thousand (10,000) shares of Stock; provided, however, that
                      in the event an Outside  Director was elected or appointed
                      as an Outside  Director and was granted an Option pursuant
                      to the provisions of subparagraph 6(a)(i) above within six
                      months prior to the Annual Meeting of  Stockholders,  that
                      Outside  Director shall be ineligible to receive an Option
                      with respect to such Annual Meeting of Stockholders.

                iii.  On the date of each Annual Meeting of  Stockholders of the
                      Company,   each   Outside   Director  who  served  as  the
                      Chairperson  of any  committee of the  Company's  Board of
                      Directors  for at least six months  during  the  Company's
                      most  recently  concluded  fiscal year shall be granted an
                      Option to purchase Five Thousand  (5,000) shares of Stock.
                      In the event an Outside Director served as the Chairperson
                      for two or more Committees, such Outside Director shall be
                      granted an option to purchase Five Thousand (5,000) shares
                      of Stock for each committee for which the Outside Director
                      served as Chairperson.

                iv.   Notwithstanding the foregoing, any person may elect not to
                      receive an Option to be granted pursuant to this paragraph
                      6(a) by delivering  written notice of such election to the
                      Board  no later  than  the day  prior to the date on which
                      such  Option  would  otherwise  be  granted.  A person  so
                      declining  an Option  shall  receive  no  payment or other
                      consideration  in lieu of such declined  Option.  A person
                      who has  declined  an Option may revoke  such  election by
                      delivering  written notice of such revocation to the Board
                      no  later  than the day  prior  to the date on which  such
                      Option would be granted pursuant to paragraph 6(a).

                v.    Notwithstanding  any  other  provision  of the Plan to the
                      contrary,  no Option shall be granted to any individual on
                      a day when he or she is no longer  serving  as an  Outside
                      Director of the Company.

            b.   OPTION  EXERCISE  PRICE.  The exercise price per share of Stock
                 subject to an Option  shall be the fair market value of a share
                 of the  Stock  on the  close  of  business  on the  date of the
                 granting of the Option.  Where there is a public market for the
                 common stock of the Company, the fair market value per share of
                 Stock  shall be the  mean of the bid and  asked  prices  of the
                 common  stock of the Company on the date of the granting of the
                 Option,  as reported in the Wall Street  Journal (or, if not so
                 reported,  as otherwise reported by the National Association of
                 Securities Dealers Automated  Quotation  ("NASDAQ") System) or,
                 in the event the common  stock of the  Company is listed on the
                 NASDAQ  National  Market System or a securities  exchange,  the
                 fair market value per share of Stock shall be the closing price
                 on such  National  Market  System  or  exchange  on the date of
                 granting of the Option, as reported in the Wall Street Journal.
                 If the date of the granting of an Option does not fall on a day
                 on which the common  stock of the Company is trading on NASDAQ,
                 the NASDAQ National Market System or securities  exchange,  the
                 date on which the Option  exercise  price shall be  established
                 shall be the last day on which the common  stock of the Company
                 was so traded prior to the date of the granting Option.

            c.   EXERCISE  PERIOD  AND  EXERCISABILITY  OF  OPTIONS.  An  Option
                 granted pursuant to the Plan shall be exercisable for a term of
                 ten years.  Options  granted  pursuant  to the Plan shall first
                 become  exercisable  on the day (the  "Initial  Vesting  Date")
                 which  is one  year  from the  date on  which  the  Option  was
                 granted. The Option shall first be exercisable on and after the
                 Initial  Vesting Date and prior to termination of the Option in
                 an amount equal to the number of Option  Shares  multiplied  by
                 the Vested Ratio (as  hereinafter  defined) as set forth below,
                 less the number of shares previously  acquired upon exercise of
                 any portion of the Option.

            The "Vested  Ratio"  shall mean,  on any  relevant  date,  except as
otherwise provided herein, the ratio determined as follows:

                                                          Vested Ratio
                                                          ------------

                (i) Prior to Initial Vesting Date:              0

                On Initial  Vesting Date,                     1/3
                provided the  Optionee's
                Service has not terminated
                prior to such date:
PLUS

                (ii) For each full month
                of the Optionee's  continuous
                Service  from the Initial
                Vesting Date until the
                Vested Ratio equals 1/1, an
                additional:                                   1/24

For purposes of the Plan,  "Service" shall mean the Optionee's  service with the
Company, whether in the capacity of an employee, a director or a consultant. The
Optionee's  Service shall not be deemed to have  terminated  merely because of a
change in the  capacity in which the  Optionee  renders  Service to the Company,
provided that there is no interruption or termination of the Optionee's Service.

            d.   TERMINATION  OF  OPTIONEE.   In  the  event  of  an  Optionee's
                 termination of Service for any reason other than as a result of
                 death or disability of the Optionee,  in which case all Options

                 that have become vested will remain exercisable for the earlier
                 of 36 months or the expiration date of the Options, all Options
                 that have not become vested and  exercisable  as of the date of
                 such  cessation of Service shall be forfeited and to the extent
                 that such Options have become vested and exercisable as of such
                 date, such Options must be exercised,  if at all, within ninety
                 (90) days after the Optionee's  termination  of Service,  after
                 which  time  such  Options   shall   automatically   terminate;
                 provided,  however,  in the event an  Optionee  ceases  being a
                 director  because the  Optionee's  Service was  terminated  for
                 cause,  all  Options  granted  hereunder   (whether  vested  or
                 unvested) shall terminate immediately.

            e.   PAYMENT OF OPTION  EXERCISE.  Payment of the exercise price for
                 the number of shares of Stock being  purchased  pursuant to any
                 Option shall be made (i) in cash, by check, or cash equivalent,
                 (ii) by the assignment of the proceeds of a sale of some or all
                 of the shares  being  acquired  upon the  exercise of an Option
                 (including,  without limitation,  through an exercise complying
                 with the provisions of Regulation T as promulgated from time to
                 time by the Board of Governors of the Federal Reserve  System),
                 (iii) by the  delivery  to the Company of shares of Stock which
                 have been  owned by the  holder of the Option for more than six
                 months and which have an aggregate value equal to such exercise
                 price,  or  (iv)  by  any  combination   thereof.  The  Company
                 reserves,  at any and all times,  the right,  in the  Company's
                 sole and absolute discretion, to establish,  decline to approve
                 and/or  terminate any program and/or procedure for the exercise
                 of Options by means of an  assignment of the proceeds of a sale
                 of some or all the  shares  of Stock to be  acquired  upon such
                 exercise or the delivery of previously owned shares of Stock.

            f.   TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to
                 have  occurred  in the event any of the  following  occurs with
                 respect to the Company:

                 (i)   a merger or consolidation in which the Company is not the
                       surviving corporation;

                 (ii)  a merger or  consolidation  in which the  Company  is the
                       surviving  corporation  where  the  stockholders  of  the
                       Company  before  such  merger  or  consolidation  do  not
                       retain,  directly or  indirectly,  at least a majority of
                       the  beneficial  interest  in  the  voting  stock  of the
                       Company after such merger or consolidation;

                (iii)  the sale,  exchange,  or transfer of all or substantially
                       all of the  assets  of the  Company  other  than a  sale,
                       exchange,   or  transfer   to  one  or  more   subsidiary
                       corporations  (as  defined in  paragraph  1 above) of the
                       Company;

                (iv)   the  direct  or   indirect   sale  or   exchange  by  the
                       stockholders of the Company of all or  substantially  all
                       of the stock of the Company where the stockholders of the
                       Company  before  such  sale or  exchange  do not  retain,
                       directly  or  indirectly,  at  least  a  majority  of the
                       beneficial  interest  in the voting  stock of the Company
                       after such sale or exchange; or

                (v)    a liquidation or dissolution of the Company.

            In the event of a Transfer of Control, any unexercisable or unvested
portion of the outstanding  Options shall be immediately  exercisable and vested
in full as of the date ten (10) days prior to the expected  date of the Transfer
of Control. The exercise or vesting of any Option that was permissible solely by
reason of this paragraph 6(f) shall be conditioned  upon the consummation of the
Transfer of Control.  In addition,  the  surviving,  continuing,  successor,  or
purchasing  corporation or parent corporation  thereof,  as the case may be (the
"Acquiring Corporation"), may either assume the Company's rights and obligations
under outstanding  Options or substitute for outstanding  Options  substantially
equivalent options for the Acquiring  Corporation's  stock. For purposes of this
paragraph 6(e), an Option shall be deemed assumed if,  following the Transfer of
Control,  the Option  confers the right to acquire in accordance  with its terms
and conditions,  for each share of Stock subject to the Option immediately prior
to the Transfer of Control,  the  consideration  (whether  stock,  cash or other
securities  or property) to which a holder of a share of Stock on the  effective

date of the  Transfer of Control  was  entitled.  Any Options  which are neither
assumed nor substituted for by the Acquiring  Corporation in connection with the
Transfer  of Control  nor  exercised  as of the date of the  Transfer of Control
shall  terminate  and cease to be  outstanding  effective  as of the date of the
Transfer of Control.

            g.   STOCKHOLDER  APPROVAL. No Option may be granted pursuant to the
                 Plan prior to obtaining stockholder approval of the Plan.

      7.    AUTHORITY  TO VARY TERMS.  The Board shall have the  authority  from
            time to time to vary the terms of the  Option  Agreements  either in
            connection  with the grant of an individual  Option or in connection
            with the  authorization  of a new standard  form or forms of Option;
            provided,  however, that the terms and conditions of such revised or
            amended standard form or forms of stock option agreement shall be in
            accordance with the terms of the Plan. Such authority shall include,
            but not be limited  to, the  authority  to grant  Options  which are
            immediately exercisable subject to the Company's right to repurchase
            any unvested shares of Stock acquired by the Optionee on exercise of
            an Option in the event such  Optionee's  service as  director of the
            Company is terminated for any reason.

      8.    EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN.  Appropriate  adjustments
            shall be made in the number and class of shares of Stock  subject to
            the Plan,  the number of shares to be granted  under the Plan and to
            any  outstanding  Options  and in the Option  exercise  price of any
            outstanding  Options in the event of a stock dividend,  stock split,
            recapitalization,      reverse     stock     split,     combination,
            reclassification,  or like  change in the capital  structure  of the
            Company.

      9.    TRANSFERABILITY OF OPTIONS.

            a.   Except  as  provided  in  paragraph  9(b),  an  Option  may  be
                 exercised  during  the  lifetime  of the  Optionee  only by the
                 Optionee or the Optionee's guardian or legal representative and
                 may not be assigned or transferred in any manner except by will
                 or by the laws of descent and distribution.

            b.   Notwithstanding  the foregoing,  with the consent of the Board,
                 in its sole  discretion,  an  Optionee  may  transfer  all or a
                 portion of the Option to: (i) an  Immediate  Family  Member (as
                 defined below),  (ii) a trust for the exclusive  benefit of the
                 Optionee and/or one or more Immediate  Family Members,  (iii) a
                 partnership in which the Optionee  and/or one or more Immediate
                 Family Members are the only partners, or (iv) such other person
                 or entity as the Board may permit  (individually,  a "Permitted
                 Transferee").  For purposes of this paragraph  9(b)  "Immediate
                 Family  Members"  shall  mean  the  Optionee's  spouse,  former
                 spouse, children or grandchildren,  whether natural or adopted.
                 As a condition to such transfer,  each Permitted  Transferee to
                 whom the Option or any interest  therein is  transferred  shall
                 agree in writing (in a form  satisfactory to the Company) to be
                 bound  by  all of  the  terms  and  conditions  of  the  Option
                 Agreement   evidencing   such   Option   and   any   additional
                 restrictions   or   conditions  as  the  Company  may  require.
                 Following the transfer of an Option,  the term "Optionee" shall
                 refer to the Permitted Transferee, except that, with respect to
                 any  requirements  of continued  Service or  provision  for the
                 Company's tax withholding obligations, such term shall refer to
                 the original Optionee.  The Company shall have no obligation to
                 notify  a  Permitted  Transferee  of  any  termination  of  the
                 transferred  Option,  including an early termination  resulting
                 from the  termination  of Service of the Original  Optionee.  A
                 Permitted   Transferee   shall  be  prohibited  from  making  a
                 subsequent  transfer  of a  transferred  Option  except  to the
                 original  Optionee  or to another  permitted  Transferee  or as
                 provided in paragraph 9(a).

      10.        RE-PRICING OF OPTIONS / REPLACEMENT OPTIONS

                 The  Company  shall  not  re-price  any  Options  or issue  any
                 replacement  Options  unless  the Option  re-pricing  or Option
                 replacement  shall  have  been  approved  by the  holders  of a
                 majority of the outstanding shares of the Company.

      11.        TERMINATION OR AMENDMENT OF PLAN.

                 The Board, including any duly appointed committee of the Board,
                 may terminate or amend the Plan at any time; provided, however,
                 that without the approval of the  stockholders  of the Company,
                 there  shall be no  increase  in the total  number of shares of
                 Stock   covered  by  the  Plan  (except  by  operation  of  the
                 provisions  of paragraph 8 above).  In any event,  no amendment
                 may  adversely  affect  any  then  outstanding  Option,  or any
                 unexercised  portion  thereof,   without  the  consent  of  the
                 Optionee.

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