Document:

<PAGE>   1

                                                                   EXHIBIT 4.06

                         SERVICESOFT TECHNOLOGIES, INC.
                        1999 STOCK OPTION AND GRANT PLAN

        SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

        The name of the plan is the Servicesoft Technologies, Inc. 1999 Stock
Option and Grant Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, directors, consultants, advisors and other key
persons of Servicesoft Technologies, Inc. (the "Company") and its Subsidiaries
(as defined below) upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.

        The following terms shall be defined as set forth below:

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

        "Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards, and Unrestricted Stock Awards.

        "Board" means the Board of Directors of the Company.

        "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

        "Committee" has the meaning specified in Section 2.

        "Effective Date" means the date on which the Plan is approved by Board
of Directors as set forth in Section 13.

        "Fair Market Value" of the Stock on any given date means (i) if the
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall not be less than the average of the highest bid and lowest asked prices of
the Stock reported for such date or, if no bid and asked prices were reported
for such date, for the last day preceding such date for which such prices were
reported; or (ii) if the Stock is admitted to trading on a national securities
exchange or the NASDAQ National Market System, then clause (i) shall not apply
and the Fair Market Value on any date shall not be less than the closing price
reported for the Stock on such exchange or system for such date or, if no sales
were reported for such date, for the last date preceding such date for which a
sale was reported; or (iii) if the Stock is not publicly traded on a securities
exchange or traded in the over-the-counter market or, if traded or quoted, there
are no transactions or quotations within the last ten trading days or trading
has been halted for extraordinary reasons, the Fair Market Value on any given
date shall be determined in good faith by the Committee with reference to the
rules and principles of valuation set forth in Section 20.2031-2 of the Treasury
Regulations; and (iv) notwithstanding the foregoing, the Fair Market Value of
the Stock on the effective date of the Initial Public Offering shall be the
offering price to the public of the Stock on such date.

        "Incentive Stock Option" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.

        "Independent Director" means a member of the Board who is neither an
employee or officer of the Company or any Subsidiary.

        "Initial Public Offering" means the first underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Stock to the public.

        "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

<PAGE>   2

        "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

        "Restricted Stock Award" means any Award granted pursuant to Section 6.

        "Service Relationship" means any relationship as an employee, part-time
employee or consultant of the Company or any Subsidiary of the Company such
that, for example, a Service Relationship shall be deemed to continue without
interruption in the event the participant's status changes from full-time
employee to part-time employee or consultant.

        "Stock" means the Common Stock, par value $.01 per share, of the
Company, subject to adjustments pursuant to Section 3.

        "Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning with
the Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

        "Unrestricted Stock Award" means any Award granted pursuant to Section
7.

        SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS.

           (a) Committee. The Plan shall be administered by the Board of
Directors of the Company, or at the discretion of the Board, by a committee of
the Board consisting of not less than two Directors; provided, however, that if
each member of the Committee is not (i) a "Non-Employee Director" within the
meaning of Rule 16b-3(a)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (ii) an "Outside Director" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder, any
Awards granted to individuals subject to the reporting requirements of Section
16 of the Exchange Act shall be approved by the Board of Directors. All
references herein to the Committee shall be deemed to refer to the entity then
responsible for administration of the Plan at the relevant time (i.e., either
the Board of Directors or a committee of the Board, as applicable).

           (b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

               (1) to select the officers, employees, Independent Directors,
consultants, advisers and key persons of the Company and its Subsidiaries to
whom Awards may from time to time be granted;

               (2) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards and Unrestricted Stock Awards, or any combination of the foregoing,
granted to any one or more participants;

               (3) to determine the number of shares of Stock to be covered by
any Award;

               (4) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the Plan,
of any Award, which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;

               (5) to accelerate at any time the exercisability or vesting of
all or any portion of any Award and/or to include provisions in Awards providing
for such acceleration,

                                      -2-
<PAGE>   3

               (6) to impose any limitations on Awards granted under the Plan,
including limitations on transfers repurchase provisions and the like and to
exercise repurchase rights or obligations;

               (7) subject to the provisions of Section 5(a)(3), to extend at
any time the period in which Stock Options may be exercised;

               (8) to determine at any time whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the participant and
whether and to what extent the Company shall pay or credit amounts constituting
interest (at rates determined by the Committee) or dividends or deemed dividends
on such deferrals; and

               (9) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable, to interpret the terms and provisions of
the Plan and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to decide
all disputes arising in connection with the Plan; and to otherwise supervise the
administration of the plan.

               All decisions and interpretations of the Committee shall be
binding on all persons, including the Company and Plan participants.

           (c) Delegation of Authority to Grant Awards. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Committee
shall include a limitation as to the amount of Awards that may be granted during
the period of delegation and shall contain guidelines as to the determination of
the exercise price of any Option, the price of other Awards and the vesting
criteria. The Committee may revoke or amend the terms of a delegation at any
time but such action shall not invalidate any prior actions of the Committee's
delegate or delegates that were consistent with the terms of the Plan.

        SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

           (a) Stock Issuable. The maximum number of shares of Stock reserved
and available for issuance under the Plan shall initially be 1,876,498 shares of
Stock; provided that, on the consummation of the Company's initial public
offering of its Common Stock and on each January 1 during the term of the Plan,
commencing on January 1, 2001, unless the Board determines otherwise, the
maximum number of shares of Stock for which Awards may be granted under the Plan
shall be automatically increased (i) to the number which maintains the number of
shares reserved for issuance under the Plan and any other stock and/or option
plan of the Company at twenty percent (20%) of the issued and outstanding
capital stock of the Company calculated on an as-converted, fully-diluted basis
(the "Diluted Capital Stock") (after such increase) or (ii) by a number of
shares of Stock equal to four percent (4%) of the Diluted Capital Stock,
whichever is greater; provided further that, in no event shall the number of
shares reserved for issuance under the Plan exceed 10,000,000. For purposes of
the foregoing limitations, the shares of Stock underlying any Awards which are
forfeited, canceled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back to
the shares of stock available for issuance under the Plan. Subject to such
overall limitation, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award; provided, however, that from and after
the date the Plan is subject to Section 162(m) of the Code, Awards with respect
to no more than 1,000,000 shares of Stock may be granted to any one individual
participant during any one calendar year period. The shares available for
issuance under the Plan may be authorized but unissued shares of Stock or shares
of Stock reacquired by the Company.

           (b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction in the capital structure of the
Company without consideration, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of shares or

                                      -3-
<PAGE>   4

other securities of the Company or any successor company, or additional shares
or new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Stock or other securities,
the Committee shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options, or other Awards that can be granted to any one individual
participant, (iii) the number and kind of shares or other securities subject to
any then outstanding Awards under the Plan, and (iv) the price for each share
subject to any then outstanding Stock Options or other Awards under the Plan,
without changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of shares) as to which such Stock Options remain
exercisable and the repurchase price for shares subject to repurchase. No
fractional shares of Stock shall be issued under the Plan resulting from any
such adjustment, but will either be replaced by a cash payment equal to the fair
market value of such fraction of a share or will be rounded up to the nearest
whole share, as reasonably determined by the Committee. Any adjustment or
determination by the Committee shall be final, binding and conclusive.

           (c) Mergers and Other Corporate Transactions. In the case of (i) a
merger, reorganization or consolidation between the Company in which the Company
is not the surviving corporation and in which entity the holders of the
Company's outstanding voting stock immediately prior to the transaction hold
less than a majority of the outstanding voting stock of the surviving entity
immediately after the transaction, (ii) the sale of all or substantially all of
the assets of the Company to an unrelated person or entity, (iii) the sale of
all of the Stock of the Company to an unrelated person or entity, or (iv) the
acquisition, sale or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction (in each case, a "Corporate
Transaction"), unless provision is made in connection with the Corporate
Transaction for the assumption of Awards heretofore granted, or the substitution
of such Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment to the number and kind of shares, and if appropriate, the
per share exercise price as provided in Section 3(b) above, fifty percent (50%)
of the remaining unvested portion of the total Awards held by such participant
issued previously under the Plan shall vest immediately and become exercisable,
except with respect to such Awards as the Committee otherwise determines at the
time of grant of such Awards. If provision is made in connection with the
Corporate Transaction for the assumption of the Awards heretofore granted, or
the substitution of such Awards with new Awards of the successor entity or
parent thereof, and a participant's Service Relationship with such successor
entity or parent thereof is, on or within twelve (12) months after such
Corporate Transaction, terminated by such successor entity or parent thereof,
then fifty percent (50%) of the remaining outstanding Awards held by such
participant, to the extent not fully vested and exercisable, shall become fully
vested and exercisable. Notwithstanding the foregoing , in the event of a
Corporate Transaction, fifty percent (50%) of the remaining unvested portion of
the total number of Awards held by each director of the Company who is not an
employee of the Company, issued previously under the Plan shall vest immediately
upon such Corporate Transaction and become exercisable, whether or not provision
is made for the assumption of such Awards or the substitution of such Awards
with new Awards of the successor entity or parent thereof. Upon the
effectiveness of the Corporate Transaction, the Plan and all Awards granted
hereunder shall, unless assumed by the successor entity, terminate. In the event
of such termination, each optionee shall be permitted to exercise for a period
of at least 15 days prior to the date of such termination all outstanding Awards
held by such optionee which are then exercisable.

           (d) Substitute Awards. The Committee may grant Awards under the Plan
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.

        SECTION 4. ELIGIBILITY.

           Participants in the Plan will be such officers and other employees,
Independent Directors, consultants, advisors and other key persons of the
Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries as are
selected from time to time by the Committee, in its sole discretion.

                                      -4-
<PAGE>   5

        SECTION 5. STOCK OPTIONS.

           Any Stock Option granted under the Plan shall be pursuant to a stock
option agreement which shall be in such form as the Committee may from time to
time approve. Option agreements need not be identical.

           Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. Non-Qualified
Stock Options may be granted to officers, employees, Independent Directors,
advisors, consultants and other key persons of the Company and its Subsidiaries.
To the extent that any Option does not qualify as an Incentive Stock Option, it
shall be deemed a Non-Qualified Stock Option.

           No Incentive Stock Option shall be granted under the Plan after
November 1, 2009.

           (a) Terms of Stock Options. Stock Options granted under the plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan as
the Committee shall deem desirable:

               (1) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option shall be determined by the Committee at the time of
grant but shall not be less than 100% of the Fair Market Value in the case of
Incentive Stock Options. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the Code) more than 10%
of the combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the option price of such Incentive Stock Option shall be not less
than 110% of the Fair Market Value on the grant date.

               (2) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the Option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of Stock of the Company or any
parent or subsidiary corporation and an Incentive Stock Option is granted to
such employee, the term of such Option shall be no more than five years from the
date of grant.

               (3) Exercisability; Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Stock Options granted in lieu of cash compensation
shall be exercisable in full as of the grant date. The Committee may at any time
accelerate the exercisability of all or any portion of any Stock Option. An
optionee shall have the rights of a stockholder only as to shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock Options.

               (4) Method of Exercise. Stock Options may be exercised in whole
or in part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made by
one or more of the following methods; provided, however, that the methods set
forth in subsections (ii) and (iii) below shall become available only after the
closing of the Initial Public Offering:

                   (i) In cash by certified or bank check or other instrument
acceptable to the Committee;

                   (ii) In the form of shares of Stock that are not then subject
to restrictions under any Company plan and that have been held by the optionee
free of such restrictions for at least six months, if permitted by the Committee
in its discretion such surrendered shares shall be valued at Fair Market Value
on the exercise date;

                   (iii) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the purchase price; provided that in the event the optionee
chooses to

                                      -5-
<PAGE>   6

pay the purchase price as so provided, the optionee and the broker shall comply
with such procedures and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition of such payment
procedure; or

                   (iv) By the optionee delivering to the Company a promissory
note if the Board has authorized the loan of funds to the optionee for the
purpose of enabling or assisting the optionee to effect the exercise of his
Stock Option; provided that at least so much of the exercise price as represents
the par value of the Stock shall be paid other than with a promissory note.

           Payment instruments will be received subject to collection. The
delivery of certificates representing the shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price for
such shares and the fulfillment of any other requirements contained in the Stock
Option or applicable provisions of laws.

               (5) Termination. Unless otherwise provided in the option
agreement or determined by the Committee, upon the optionee's termination of
employment (or other business relationship) with the Company and its
Subsidiaries, the optionee's rights in his Stock Options shall automatically
terminate.

               (6) Annual Limit on Incentive Stock Options. To the extent
required for "incentive stock option" treatment under Section 422 of the Code,
the aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under this
Plan and any other plan of the Company or its parent and subsidiary corporations
become exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. To the extent that any Stock Option exceeds this
limit, it shall constitute a Non-Qualified Stock Option.

           (b) Non-transferability of Options. No Stock option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee; provided, however, that an optionee
may transfer, without consideration for the transfer, the Non-Qualified Stock
Options to members of his immediate family, to trusts for the benefit of such
family members, to partnerships in which such family members are the only
partners, or to charitable organization so long as the transferee agrees in
writing to be bound by the terms and conditions of this Plan and the applicable
Option Agreement.

           (c) Escrow; Pledge of Shares. To enforce any restrictions on a grant
of Stock, the Committee may require the recipient to deposit all certificates
representing the Stock together with stock powers or other instruments of
transfer approved by the Committee appropriately endorsed in blank, with the
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
recipient who is permitted to execute a promissory note as partial or full
consideration for the purchase of Stock under this Plan will be required to
pledge and deposit with the Company all or part of the Stock so purchased as
collateral to secure the payment of recipient's obligation to the Company under
the promissory note; provided, however, that the Committee may require or accept
other or additional forms of collateral to secure the payment of such obligation
and, in any event, the Company will have full recourse against the recipient
under the promissory note notwithstanding any pledge of the recipient's Stock or
other collateral. In connection with any pledge of the Stock, the recipient will
be required to execute and deliver a written pledge agreement in such form as
the Committee will from time to time approve. The Stock purchased with the
promissory not may be released from the pledge on a pro rata basis as the
promissory note is paid.

        SECTION 6. RESTRICTED STOCK AWARDS

           (a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other purchase
price determined by the Committee, shares of Stock subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Restricted
Stock").

                                      -6-
<PAGE>   7

Conditions may be based on continuing employment (or other business
relationship) and/or achievement or pre-established performance goals and
objectives.

           (b) Rights as a Stockholder. Upon execution of a written instrument
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(d) below.

           (c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates under the
conditions specified in the relevant instrument relating to the Award, or upon
such other event or events as may be stated in the instrument evidencing the
Award, the Company or its assigns shall have the right or shall agree, as may be
specified in the relevant instrument, to repurchase some or all of the shares of
Stock subject to the Award at such purchase price as is set forth in such
instrument.

           (d) Vesting of Restricted Stock. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which Restricted Stock
shall become vested, subject to such further rights of the Company or its
assigns as may be specified in the instrument evidencing the Restricted Stock
Award.

           (e) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.

        SECTION 7. UNRESTRICTED STOCK AWARDS

           (a) Grant or Sale of Unrestricted Stock. The Committee may, in its
sole discretion, grant (or sell at a purchase price determined by the Committee)
an Unrestricted Stock Award to any participant, pursuant to which such
participant may receive shares of Stock free of any vesting restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of any cash compensation due to such
individual.

           (b) Elections to Receive Unrestricted Stock In Lieu of Compensation.
Upon the request of a participant and with the consent of the Committee, each
such participant may, pursuant to an advance written election delivered to the
Company no later than the date specified by the Committee, receive a portion of
the cash compensation otherwise due to such participant in the form of shares of
Unrestricted Stock either currently or on a deferred basis.

           (c) Restrictions on Transfers. The right to receive shares of
Unrestricted Stock on a deferred basis may not be sold, assigned, transferred,
pledged or otherwise encumbered, other than by will or the laws of descent and
distribution.

        SECTION 8. TAX WITHHOLDING

           (a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld

                                      -7-
<PAGE>   8

with respect to such income. The Company and its Subsidiaries shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.

           (b) Payment in Stock. Subject to approval by the Committee, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.

        SECTION 9. TRANSFER, LEAVE OF ABSENCE, ETC.

           For purposes of the Plan, the following events shall not be deemed a
termination of employment:

           (a) a transfer to the employment of the Company from a subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

           (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

        SECTION 10. AMENDMENTS AND TERMINATION

           The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price in a manner not inconsistent with the terms of the
Plan), but such price, if any, must satisfy the requirements which would apply
to the substitute or amended Award if it were then initially granted under this
Plan for the purpose of satisfying changes in law or for any other lawful
purpose, but no such action shall adversely affect rights under any outstanding
Award without the holder's consent. If and to the extent determined by the
Committee to be required by the Act to ensure that Incentive Stock Options
granted under the Plan are qualified under Section 422 of the Code, Plan
amendments shall be subject to approval by the Company's stockholders who are
eligible to vote at a meeting of stockholders.

        SECTION 11. STATUS OF PLAN

           With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

        SECTION 12. GENERAL PROVISIONS

           (a) No Distribution; Compliance with Legal Requirements. The
Committee may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof.

           No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop orders and restrictive legends on certificates for Stock and Awards, as it
deems appropriate.

                                      -8-
<PAGE>   9

           (b) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adopting of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary; and any Awards shall
not be considered compensation for purposes of determining any severance
benefits the participants may otherwise be entitled to.

        SECTION 13. EFFECTIVE DATE OF PLAN

        The Plan shall become effective on the date of its adoption by the Board
of Directors, but subject, nevertheless, to (a) approval, within twelve (12)
months thereof, by the stockholders representing at least a majority of the
voting stock of the Company or by such greater percentage as may from time to
time be required under the laws of the State of Delaware, and (b) such approvals
as may be required by any other public authorities. Options under this Plan may
be granted but not exercised until it is approved by the Company's shareholders.
In the event the Plan is not approved, the Plan shall terminate and all Options
granted shall be void and have no force or effect.

        SECTION 14. GOVERNING LAW

        This Plan shall be governed by Delaware law except to the extent such
law is preempted by federal law.

Adopted by the Board of Directors and Effective:  November 1, 1999

                                      -9-
<PAGE>   10

                      NON-QUALIFIED STOCK OPTION AGREEMENT
                           UNDER THE SERVICESOFT, INC.
                        1999 STOCK OPTION AND GRANT PLAN

Name of Optionee:                   <<Optionee>>

No. of Option Shares:               <<Shares_>> Shares of Common Stock

Grant Date:                         <<Grant_Date>>

Option Exercise Price/Share:        <<Grant_Date>>

           Pursuant to the Servicesoft, Inc. 1999 Stock Option and Grant Plan
(the "1999 Plan"), Servicesoft, Inc. a Delaware corporation (together with all
successors thereto, the "Company"), hereby grants to the person named above (the
"Optionee"), who is an officer, employee, director, consultant or other key
person of the Company or any of its Subsidiaries (as defined in the 1999 Plan),
an option (the "Stock Option") to purchase on or prior to the Expiration Date
(as defined below), all or any part of the number of shares of Common Stock, par
value $.01 per share ("Common Stock"), of the Company indicated above (the
"Option Shares," and such shares once issued shall be referred to as the "Issued
Shares"), at the option exercise price per share specified above (the "Option
Exercise Price"), subject to the terms and conditions set forth in this
Non-Qualified Stock Option Agreement (the "Agreement") and in the 1999 Plan. The
term of this option shall commence on the Grant Date (as set forth above) and
shall expire on the date ten (10) years from the Grant Date. This Stock Option
is not intended to qualify as an "incentive stock option" as defined in Section
422(b) of the Internal Revenue Code of 1986, as amended from time to time (the
"Code"). All capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the 1999 Plan.

1. VESTING, EXERCISABILITY, AND TERMINATION.

           (a) No portion of this Stock Option may be exercised until such
portion shall have vested.

           (b) Except as set forth below and in Section 6, and subject to the
determination of the Compensation Committee of the Board of Directors of the
Company or the Board of Directors of the Company, as applicable (the
"Committee"), in its sole discretion to accelerate the vesting schedule
hereunder, this Stock Option shall be vested and exercisable with respect to the
Option Shares on the respective dates as follows: (i) 25% of the Option Shares
on the first anniversary of the Grant Date (as set forth above) and (ii) 2.08%
of the Option Shares on the monthly anniversary of the Grant Date thereafter.

           (c) Except as set forth in the 1999 Plan with regard Corporate
Transactions, in the event that the Optionee's Service Relationship with the
Company and its Subsidiaries terminates for any reason or under any
circumstances, including the Optionee's resignation, retirement or termination
by the Company, upon the Optionee's death or disability, or for any other
reason, regardless of the circumstances thereof, this Stock Option may
thereafter be exercised, to the extent it was vested and exercisable on such
date of such termination, until the date specified in Section 1(d) below. Any
portion of the Stock Option that is not exercisable on the date of termination
of the Optionee's Service Relationship with the Company shall immediately expire
and be null and void.

           (d) Subject to the provisions of Section 6 below, once any portion of
this Stock Option becomes vested and exercisable, it shall continue to be
exercisable by the Optionee or his or her successors as contemplated herein at
any time or times prior to the earliest of (i) the date which is (A) 12 months
following the date on which the Optionee's Service Relationship with the Company
and its Subsidiaries terminates due to death or disability (as defined in
Section 422(c)(6) of the Code) or (B) 90 days following the date on which the
Optionee's Service Relationship with the Company terminates if the termination
is due to any other reason, provided however, if the Optionee's Service
Relationship with the Company is terminated for cause, this Stock Option shall
terminate immediately upon the date of the Optionee's termination, or (ii) the
date ten (10) years from the Grant Date (the

                                      -10-
<PAGE>   11

earlier to occur of such dates being the "Expiration Date"). For purposes of
this Agreement the Committee shall have sole discretion to determine the reason
for the termination of the Optionee's Service Relationship with the Company or
any Subsidiary.

2. EXERCISE OF STOCK OPTION.

           (a) The Optionee may exercise this Stock Option only in the following
manner: Prior to the Expiration Date (subject to Section 6), the Optionee may
deliver a Stock Option exercise notice (an "Exercise Notice") in the form of
Appendix A hereto indicating his or her election to purchase some or all of the
Option Shares with respect to which this Stock Option has vested at the time of
such notice. Such notice shall specify the number of Option Shares to be
purchased. Payment of the purchase price may be made by one or more of the
following methods; provided, however, that the methods set forth in subsections
(ii) and (iii) below shall become available only after the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), covering the offer and
sale of Common Stock of the Company to the public (and "Initial Public
Offering"):

               (i) In cash by certified or bank check or other instrument
acceptable to the Committee; or

               (ii) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held by the optionee free
of such restrictions for at least six months, if permitted by the Committee in
its discretion such surrendered shares shall be valued at Fair Market Value on
the exercise date;

               (iii) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity
and other agreements as the Committee shall prescribe as a condition of such
payment procedure;

               (iv) By the optionee delivering to the Company a promissory note
if the Board has authorized the loan of funds to the optionee for the purpose of
enabling or assisting the optionee to effect the exercise of his Stock Option;
provided that at least so much of the exercise price as represents the par value
of the Stock shall be paid other than with a promissory note

           (b) Certificates for the Option Shares so purchased will be issued
and delivered to the Optionee upon compliance to the satisfaction of the
Committee with all requirements under applicable laws or regulations in
connection with such issuance. Until the Optionee shall have complied with the
requirements hereof and of the 1999 Plan, the Company shall be under no
obligation to issue the Option Shares subject to this Stock Option, and the
determination of the Committee as to such compliance shall be final and binding
on the Optionee. The Optionee shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of stock subject
to this Stock Option unless and until this Stock Option shall have been
exercised pursuant to the terms hereof, the Company shall have issued and
delivered the Option Shares to the Optionee, and the Optionee's name shall have
been entered as a stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full dividend and other ownership rights with respect to
such Issued Shares, subject to the terms of this Agreement.

           (c) Notwithstanding any other provision hereof or of the 1999 Plan,
no portion of this Stock Option shall be exercisable after the Expiration Date,
including such date as is contemplated by Section 6 hereof.

3. INCORPORATION OF 1999 PLAN. Notwithstanding anything herein to the contrary,
this Stock Option shall be subject to and governed by all the terms and
conditions of the 1999 Plan.

4. TRANSFERABILITY. This Agreement is personal to the Optionee and is not
transferable by the Optionee in any manner other than by will or by the laws of
descent and distribution. This Stock Option may be exercised during the
Optionee's lifetime only by the Optionee (or by the Optionee's guardian or
personal representative in the event of

                                      -11-
<PAGE>   12

the Optionee's incapacity). The Optionee may elect to designate a beneficiary by
providing written notice of the name of such beneficiary to the Company, and may
revoke or change such designation at any time by filing written notice of
revocation or change with the Company; such beneficiary may exercise the
Optionee's Stock Option in the event of the Optionee's death to the extent
provided herein. If the Optionee does not designate a beneficiary, or if the
designated beneficiary predeceases the Optionee, the executor of the Optionee
may exercise this Stock Option to the extent provided herein in the event of the
Optionee's death.

5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The shares of stock covered by
this Stock Option are shares of Common Stock of the Company. Subject to Section
6 hereof, if the shares of Common Stock as a whole are increased, decreased,
changed or converted into or exchanged for a different number or kind of shares
or securities of the Company or any successor entity (or a parent or Subsidiary
thereof), whether through merger or consolidation, sale of all or substantially
all of the assets of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, combination of shares, exchange
of shares, change in corporate structure or the like, an appropriate and
proportionate adjustment shall be made in the number and kind of shares and in
the per share exercise price of shares subject to any unexercised portion of
this Stock Option. In the event of any such adjustment in this Stock Option, the
Optionee thereafter shall have the right, subject to Section 6, to purchase the
number of shares under this Stock Option at the per share price, as so adjusted,
which the Optionee could purchase at the total purchase price applicable to this
Stock Option immediately prior to such adjustment, all references herein to
Common Stock shall be deemed to refer to the security that is subject to
acquisition upon exercise of this Stock Option and all references to the Company
shall be deemed to refer to the issuer of such security. Adjustments under this
Section 5 shall be determined by the Committee, whose determination as to what
adjustment shall be made, and the extent thereof, shall be conclusive. No
fractional shares of Common Stock shall be issued under the 1999 Plan resulting
from any such adjustment, but the Company in its discretion may make a cash
payment in lieu of fractional shares.

6. EFFECT OF CORPORATE TRANSACTIONS. In the event of a Corporate Transaction (as
defined in the 1999 Plan), this Option shall be subject to termination,
assumption, substitution, adjustment and/or limitation as provided in Section
3(c) of the 1999 Plan.

7. WITHHOLDING TAXES. The Optionee shall, not later than the date as of which
the exercise of this Stock Option becomes a taxable event for federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Committee
for payment of any federal, state and local taxes required by law to be withheld
on account of such taxable event. Subject to approval by the Committee, the
Optionee may elect to have the minimum withholding obligation satisfied, in
whole or in part, by authorizing the Company to withhold from shares of Common
Stock to be issued or transferring to the Company, a number of shares of Common
Stock-with an aggregate fair market value that would satisfy the withholding
amount due. The Optionee acknowledges and agrees that the Company or any
Subsidiary of the Company has the right to deduct from payments of any kind
otherwise due to the Optionee, or from the Option Shares to be issued in respect
of an exercise of this Stock Option, any federal, state or local taxes of any
kind required by law to be withheld with respect to the issuance of Option
Shares to the Optionee.

8. COMPANY'S RIGHT OF FIRST REFUSAL.

           (a) Exercise of Right. If the Optionee desires to transfer all or any
part of the Issued Shares, or any other shares of Common Stock owned by the
Optionee, to any person other than the Company (an "Offeror"), the Optionee
shall: (i) obtain in writing an irrevocable and unconditional bona fide offer
(the "Offer") for the purchase thereof from the Offeror; and (ii) give written
notice (the "Option Notice") to the Company setting forth the Optionee's desire
to transfer such shares, which Option Notice shall be accompanied by a photocopy
of the Offer and shall set forth the name and address of the Offeror and the
price and terms of the Offer. Upon receipt of the Option Notice, the Company
shall have an assignable option to purchase any or all of such Issued Shares
(the "Company Option Shares") specified in the Option Notice, such option to be
exercisable by giving, within 30 days after receipt of the Option Notice, a
written counternotice to the Optionee. If the Company elects to purchase any or
all of such Company Option Shares, it shall be obligated to purchase, and the
Optionee shall be obligated to sell to the Company, such Company Option Shares
at the price and terms indicated in the Offer within 30 days from the date of
delivery by the Company of such counternotice.

                                      -12-
<PAGE>   13

           (b) Sale of Company Option Shares to Offeror. The Optionee may, for
60 days after the expiration of the 30-day option period as set forth in Section
8(a), sell to the Offeror, pursuant to the terms of the Offer, any or all of
such Company Option Shares not purchased or agreed to be purchased by the
Company or its assignee. If any or all of such Company Option Shares are not
sold pursuant to an Offer within the time permitted above, the unsold Company
Option Shares shall remain subject to the terms of this Section 8.

           (c) Adjustments for Changes in Capital Structure. If there shall be
any change in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination or
exchange of shares, or the like, the restrictions contained in this Section 8
shall apply with equal force to additional and/or substitute securities, if any,
received by the Optionee in exchange for, or by virtue of his or her ownership
of, Issued Shares.

           (d) Failure to Deliver Option Shares. If the Optionee fails or
refuses to deliver on a timely basis duly endorsed certificates representing the
Company Option Shares to be sold to the Company or its assignee pursuant to this
Section 8, the Company shall have the right to deposit the purchase price for
such Company Option Shares in a special account with any bank or trust company,
giving notice of such deposit to the Optionee, whereupon such Company Option
Shares shall be deemed to have been purchased by the Company. All such monies
shall be held by the bank or trust company for the benefit of the Optionee. All
monies deposited with the bank or trust company but remaining unclaimed for two
years after the date of deposit shall be repaid by the bank or trust company to
the Company on demand, and the Optionee shall thereafter look only to the
Company for payment. The Company may place a legend on any certificate for
Issued Shares delivered to the Optionee reflecting the restrictions on transfer
provided in this Section 8.

           (e) Expiration of Company's Right of First Refusal. The first refusal
rights of the Company set forth above shall remain in effect until the closing
of an Initial Public Offering or such other event as a result of or following
which the Common Stock shall be publicly held.

9. LOCKUP PROVISION. The Optionee agrees, if requested by the Company and any
underwriter engaged by the Company, not to sell or otherwise transfer or dispose
of any securities of the Company (including, without limitation pursuant to Rule
144 under the Act) held by him or her for such period following the effective
date of any registration statement of the Company filed under the Act as the
Company or such underwriter shall specify reasonably and in good faith, not to
exceed 180 days in the case of the Company's Initial Public Offering or 90 days
in the case of any other public offering.

10. MISCELLANEOUS PROVISIONS.

           (a) Employment. This Option does not confer upon the Optionee any
rights with respect to employment or continuation of employment or the Service
Relationship with the Company, nor shall it interfere with any right of the
Company to terminate such employment or Service Relationship at anytime.

           (b) Equitable Relief. The parties hereto agree and declare that legal
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.

           (c) Change and Modifications. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.

           (d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (or the state of
incorporation of any successor corporation) without regard to conflict of law
principles.

           (e) Headings. The headings are intended only for convenience in
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.

                                      -13-
<PAGE>   14

           (f) Saving Clause. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.

           (g) Notices. All notices, requests, consents and other communications
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage prepaid. Notices to the Company or the Optionee shall be
addressed as set forth underneath their -signatures below, or to such other
address or addresses as may have been furnished by such party in writing to the
other.

           (h) Benefit and Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors, permitted assigns, and legal representatives. The Company has the
right to assign this Agreement, and such assignee shall become entitled to all
the rights of the Company hereunder to the extent of such assignment.

           (i) Counterparts. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.

                            [SIGNATURE PAGE FOLLOWS]

                                      -14-
<PAGE>   15

The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned as of the date first above written.

                                        Servicesoft, Inc..

                                        By:
                                           ------------------------------------
                                           Name:
                                           Title:

                                        Address:
                                                 Two Apple Hill Drive
                                                 Natick, MA 01760

The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned as of the date first above written.

                                    OPTIONEE:

                                    -------------------------------------------
                                    <<Optionee>>

                                    Optionee's Address:
                                    -------------------------------------------
                                    -------------------------------------------
                                    -------------------------------------------

                                    DESIGNATED BENEFICIARY:

                                    -------------------------------------------
                                    Name:

                                    Beneficiary's Address:

                                    -------------------------------------------
                                    -------------------------------------------
                                    -------------------------------------------

<PAGE>   16

                                   APPENDIX A

                          STOCK OPTION EXERCISE NOTICE

Servicesoft, Inc.
Attention: Chief Financial Officer
Two Apple Hill Drive
Natick, MA 01760

Pursuant to the terms of my Non-Qualified Stock Option Agreement dated
[____________ ] (the "Agreement") under the Servicesoft, Inc. 1999 Stock Option
and Grant Plan, I, ____________ [Insert name], hereby [Circle One]
partially/fully exercise such option by including herein payment in the amount
of $_______ representing the purchase price for ______________[Fill in number of
Option Shares] _____ option shares. I have chosen the following form(s) of
payment:

                  [  ]       1.     Cash;
                  [  ]       2.     Certified or bank check payable to
                                    Servicesoft, Inc. or
                  [  ]       3.     Other (as described in the Agreement
                                    (please describe)

                                     ------------------------------------------

                                        Sincerely yours,

                                        ---------------------------------------
                                        <<Optionee>>

                                        Address:

                                        ---------------------------------------
                                        ---------------------------------------<PAGE>   1

                                                                   EXHIBIT 4.07

                         SERVICESOFT TECHNOLOGIES, INC.

                                 AMENDMENT NO. 1

                                       TO

                        1999 STOCK OPTION AND GRANT PLAN

                                FEBRUARY 10, 2000

                              W I T N E S S E T H:

WHEREAS, the Board of Directors and the Stockholders of Servicesoft
Technologies, Inc. (the "Company") approved and adopted the 1999 Stock Option
and Grant Plan (the "Plan") of the Company, dated November 1, 1999;

WHEREAS, the Board of Directors and the Stockholders of the Company have
determined that it is in the best interest of the Company to amend the Plan in
order to provide for the issuance of Awards under the Plan to officers and other
employees, Independent Directors, consultants, and key persons of the Company
and its Subsidiaries who are legal residents of the State of California and to
clarify certain provisions of the Plan;

NOW, THEREFORE, the Plan is amended as follows:

1.         Amendment to Section 1. Section 1 of the Plan shall be amended to
           include the following definition:

           "Cause" means a vote of the Board of Directors of the Company or the
           successor entity, as the case may be, resolving that the grantee
           should be dismissed as a result of (i) any material breach by the
           grantee of any agreement to which the grantee and the Company are
           parties, (ii) any act (other than retirement) or omission to act by
           the grantee which would reasonably be likely to have a material
           adverse effect on the business of the Company or its Subsidiaries or
           successor entity, as the case may be, or on the grantee's ability to
           perform services for the Company or its Subsidiaries or successor
           entity, as the case may be, including, without limitation, the
           conviction of any crime (other than ordinary traffic violations), or
           (iii) any material misconduct or willful and deliberate
           non-performance of duties by the grantee in connection with the
           business or affairs of the Company or its Subsidiaries or successor
           entity, as the case may be.

2. Amendment to Section 3(b). Clauses (i) and (ii) of Section 3(b) of the Plan
entitled "Recapitalization" shall be amended to add the underscored language and
delete the stricken language, as set forth below:

           "(i) the maximum number of shares initially reserved for issuance
           under the Plan and the maximum number that may subsequently be
           reserved for issuance under the Plan, (ii) the number of Stock
           Options that can be granted to any one individual participant,"

3. Amendment to Add Appendix A. An appendix A to the Plan in substantially the
form attached hereto as Exhibit A is hereby adopted and approved.

4. Capitalized Terms. Capitalized terms used herein not otherwise defined herein
shall have the meanings set forth in the Plan.

DATE APPROVED BY THE BOARD OF DIRECTORS: February 10, 2000

<PAGE>   2

                                                                      EXHIBIT A

                                   APPENDIX A

                                       to

                         SERVICESOFT TECHNOLOGIES, INC.
                        1999 STOCK OPTION AND GRANT PLAN

                          FOR CALIFORNIA RESIDENTS ONLY

This Appendix to the Servicesoft Technologies, Inc. 1999 Stock Option and Grant
Plan (the "Plan") shall have application only to optionees receiving Incentive
Stock Options or Non-Qualified Stock Options under the Plan who are residents of
the State of California. Capitalized terms contained herein shall have the same
meanings given to them in the Plan, unless otherwise provided in this Appendix.
Notwithstanding any provisions contained in the Plan to the contrary and to the
extent required by applicable law, the following terms and conditions shall
apply to all Awards granted to residents of the State of California, until such
time as the Common Stock becomes a "listed security" under the Securities Act of
1933, as amended.

        1. Non-Qualified Stock Options shall have an exercise price that is not
less than 85% of the Fair Market Value of the stock at the time the Option is
granted, as determined by the Board, except that the exercise price shall be
110% of the Fair Market Value in the case of any person who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporation.

        2. The purchase price for any Restricted Stock Awards that may be
purchased under the Plan shall be at least 85% of the Fair Market Value of the
stock at the time the optionee is granted such Award, or at the time the
purchase is consummated. Notwithstanding the foregoing, the purchase price shall
be 100% of the Fair Market Value of the stock at the time the optionee is
granted such Award or at the time the purchase is consummated in the case of any
person who owns stock possessing more than 10% of the total combined voting
power of all classes of the Company or its parent or subsidiary corporations.

        3. Options shall have an exercise period of not more than ten years from
the date the Option is granted.

        4. No Award shall be transferable by a participant other than by will or
the laws of descent and distribution; provided, however, that the Committee, in
its sole discretion, may permit a participant to transfer an Option (a) by gift
to members of his immediate family, or (b) to an inter vivos or testamentary
trust pursuant to which the Option is to be passed to beneficiaries upon the
death of the settlor.

        5. Options shall become exercisable at the rate of at least 20% per year
over five years from the date the Option is granted, subject to reasonable
conditions such as continued employment. However, in the case of the Option
granted to officers, directors or consultants of the Company or any of its
affiliates, the Option may become fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company or any of its affiliates.

        6. Unless employment is terminated for Cause, the right to exercise an
Option in the event of termination of employment, to the extent that the
participant is otherwise entitled to exercise an Option on the date employment
terminates, shall be:

           a. at least six months from the date of termination if the
participant's employment was terminated as a result of death or disability; and

           b. at least 30 days from the date of termination if the participant's
employment was terminated other than on account of death or disability;

<PAGE>   3

           c. but in no event later than the remaining term of the Option.

        7. No Award may be granted to a resident of California more than ten
years after the earlier of the date of adoption of the Plan and the date the
Plan is approved by the shareholders.

        8. Any Award exercised before shareholder approval is obtained shall be
rescinded if shareholder approval is not obtained within 12 months before or
after the Plan is adopted. Such shares shall not be counted in determining
whether such approval is obtained.

        9. The Company shall provide annual financial statements of the Company
to each California resident holding an outstanding Award under the Plan. Such
financial statements need not be audited and need not be issued to key employees
whose duties at the Company assure them access to equivalent information.

        10. Any right of repurchase on behalf of the Company in the event of an
optionee's termination of employment or other business relationship shall be at
such purchase price as is set forth in the instrument, provided that the right
to repurchase at the original purchase price lapses at the rate of at least 20%
of the shares per year over five years from the date the Award is granted
(without respect to the date the Award was exercised or became exercisable) and
the right to repurchase shall be exercised for cash or cancellation of
indebtedness for the shares within 90 days of termination of employment (or in
case of securities issued upon exercise of Options after the date of
termination, within 90 days after the date of the exercise). The foregoing
notwithstanding, the securities held by an officer, director or consultant of
the Company or an affiliate of the Company may be subject to additional or
greater restrictions.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]