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                                                                    EXHIBIT 10.1

                               REALNETWORKS, INC.

                       1998 EMPLOYEE STOCK PURCHASE PLAN,
                 AS AMENDED AND RESTATED EFFECTIVE APRIL 9, 2002

      REALNETWORKS, INC., a Washington corporation (the "Company"), hereby
establishes this 1998 Employee Stock Purchase Plan (the "Plan").

      1. PURPOSE OF PLAN. The purpose of the Plan is to enable Eligible
Employees (as defined in Section 3) who wish to become shareholders of the
Company a convenient and favorable method of doing so. The Plan is intended to
constitute an "employee stock purchase plan," as defined in Section 423(b) of
the Internal Revenue Code of 1986, as amended (the "Code"), and shall be
interpreted and administered to further that intent.

      2. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "Board"). Subject to the provisions of the Plan, the Committee will
have the complete authority to interpret the Plan, to adopt, amend and rescind
rules and procedures relating to the Plan, and to make all of the determinations
necessary or advisable for the administration of the Plan. All such
interpretations, rules, procedures and determinations will, in the absent of
fraud or patent mistake, be conclusive and binding on all persons with any
interest in the Plan.

      3. ELIGIBLE EMPLOYEES. The term "Eligible Employees" means all common law
employees of the Company and its current majority-owned subsidiaries (and each
other corporation designated by the Committee that hereafter becomes a
majority-owned subsidiary of the Company), except the following: (a) employees
who have been employed for less than 30 days; (b) employees whose customary
employment is 20 hours or less per week; and (c) employees whose customary
employment is for not more than five months in any calendar year. Except as
otherwise expressly provided in the Plan and permitted by Section 423 of the
Code, all Eligible Employees shall have the same rights and obligations under
the Plan.

      4. STOCK SUBJECT TO THE PLAN. The stock subject to the Plan shall be
shares of the Company's authorized but unissued voting Common Stock, $.001 par
value per share (the "Common Stock"). The aggregate number of shares of Common
Stock that may be purchased by Eligible Employees pursuant to the Plan is
1,000,000, subject to adjustment as provided in Section 13.

      5. OFFERING PERIODS. The Common Stock shall be offered under the Plan
during ten consecutive six-month periods (the "Offering Periods"). The first
Offering Period shall begin on January 1, 1998 and end on June 30, 1998.
Thereafter, the Offering Periods will begin on the first day and end on the last
day of each subsequent six-month period.

      6. PARTICIPANTS; PAYROLL DEDUCTIONS

           6.1 A person who is an Eligible Employee at the beginning of an
Offering Period may elect to have the Company make deductions from the person's
Compensation (as defined in Section 6.4), at a specified percentage rate, to be
used to purchase of shares of Common Stock pursuant to the Plan. Such election
shall be made prior to the beginning of the

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Offering Period in accordance with such procedures as the Committee may adopt
(each Eligible Employee who so elects to have such deductions made will be
referred to as a "Participant").

           6.2 The maximum rate of deduction that a Participant may elect for
any Offering Period is 10%, provided, however, that no Participant may apply
payroll deductions in excess of $10,000 toward the purchase of Common Stock
under the Plan during any calendar year. An amount equal to the elected
percentage shall be deducted from the Participant's pay each time during the
Offering Period that any Compensation is paid to the Participant. The Committee
may set such minimum level of payroll deductions as the Committee determines to
be appropriate. Any minimum level of deductions set by the Committee shall apply
equally to all Eligible Employees. A Participant's accumulated payroll
deductions shall remain the property of the Participant until applied toward the
purchase of shares of Common Stock under the Plan, but may be commingled with
the general funds of the Company. No interest will be paid on payroll deductions
accumulated under the Plan.

           6.3 A Participant in the Plan on the last day of an Offering Period
shall automatically continue to participate in the Plan during the next Offering
Period unless he or she withdraws in the manner described in Section 11.

           6.4 The term "Compensation" means all cash salary, wages, bonuses,
commissions and other amounts paid to or on behalf of a Participant for services
performed or on account of holidays, vacation, sick leave or other similar
events, including any amounts by which such amounts are reduced, at the election
of a Participant, pursuant to a cafeteria plan described in Section 125 of the
Code, a dependent care assistance program described in Section 129 of the Code,
a cash or deferred arrangement described in Section 401(k) of the Code, or any
similar plan, program or arrangement, but excluding the value of any noncash
benefits under any employee benefit plans and any special amounts paid to the
Participant that are specifically excluded by the Committee.

      7. PURCHASE OF SHARES

           7.1 At the end of an Offering Period, a Participant's accumulated
payroll deductions for the Offering Period will, subject to the limitations in
Section 9 and the termination provisions of Section 16, be applied toward the
purchase of shares of Common Stock at a purchase price (the "Purchase Price")
equal to the lesser of ---

           (a) 85% of the Market Price (as defined in Section 8.1) of the Common
      Stock on the first Business Day (as defined in Section 8.2) of the
      Offering Period; or

           (b) 85% of the Market Price for the Common Stock on the last Business
      Day of the Offering Period;

in either event rounded to the nearest whole cent.

           7.2 Shares of Common Stock may be purchased under the Plan only with
a Participant's accumulated payroll deductions. Fractional shares cannot be
purchased. Any portion of a Participant's accumulated payroll deductions for an
Offering Period not used for the purchase of Common Stock shall be applied to
the purchase of Common Stock in the next Offering Period, if the Participant is
participating in the Plan during that Offering Period, or returned to the
Participant.

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           7.3 Each Participant who purchases shares of Common Stock under the
Plan shall thereby be deemed to have agreed that the Company or the subsidiary
of the Company that employs the Participant shall be entitled to withhold, from
any other amounts that may be payable to the Participant at or around the time
of the purchase, such federal, state, local and foreign income, employment and
other taxes may be required to be withheld under applicable laws. In lieu of
such withholding, the Company or such subsidiary may require the Participant to
remit such taxes to the Company or such subsidiary as a condition of the
purchase.

      8. MARKET PRICE

           8.1 For purposes of the Plan, the term "Market Price" on any day
means, if the Common Stock is publicly traded, the last sales price (or, if no
last sales price is reported, the average of the high bid and low asked prices)
for a share of Common Stock on that day as reported by the principal exchange on
which the Common Stock is listed, or, if the Common Stock is publicly traded but
not listed on an exchange, as reported by The Nasdaq Stock Market, or, if such
prices or quotations are not reported by The Nasdaq Stock Market, as reported by
any other available source of prices or quotations selected by the Committee.

           8.2 For purposes of the Plan, the term "Business Day" means a day on
which prices or quotations for the Common Stock are reported by a national
securities exchange, the Nasdaq Stock Market, or any other available source of
prices or quotations selected by the Committee, whichever is applicable pursuant
to the preceding paragraph.

           8.3 If the Market Price of the Common Stock must be determined for
purposes of the Plan at a time when the Common Stock is not publicly traded,
then the term "Market Price" shall mean the fair market value of the Common
Stock as determined by the Committee, after taking into consideration all the
factors it deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated at arm's
length.

      9. LIMITATIONS ON SHARE PURCHASES

           9.1 Notwithstanding Section 3, an employee will not be an Eligible
Employee for purposes of the Plan if the employee owns stock possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company. For purposes of this 5% limitation, an employee shall be treated as
owning any stock the ownership of which is attributed to him or her under the
rules of Section 424(d) of the Code, as well as any stock that, in the absence
of this paragraph, the employee could purchase under the Plan with his or her
payroll deductions held pursuant to Section 6 but not yet applied to the
purchase of shares of Common Stock under the Plan.

           9.2 During any calendar year, the maximum value of the Common Stock
that may be purchased by a Participant under the Plan is $25,000, said value to
be determined on the basis of the Market Price of the Common Stock on the first
Business Day of each Offering Period that ends in the calendar year.

           9.3 The limitations in Section 9.1 and Section 9.2 are intended to
and shall be interpreted in such a manner as will comply with Section 423(b)(3)
and Section 423(b)(8) of the Code, respectively.

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      10. CHANGES IN PAYROLL DEDUCTIONS. The rate of payroll deductions for an
Offering Period may not be increased or decreased by a Participant during the
Offering Period. However, the Participant may change the rate of payroll
deduction for a subsequent Offering Period. In addition, a Participant may
withdraw in full from the Plan in the manner described in Section 11.

      11. WITHDRAWAL FROM THE PLAN

           11.1 A Participant may elect to withdraw from the Plan, effective for
the Offering Period in progress, by delivering to the Committee written notice
thereof prior to the end of the Offering Period. If a Participant so withdraws,
all of the Participant's payroll deductions for that Offering Period will be
promptly returned to the Participant. If a Participant's payroll deductions are
interrupted by any legal process, the Participant will be deemed to have elected
to withdraw from the Plan for the Offering Period in which the interruption
occurs.

           11.2 A Participant may elect to withdraw from the Plan, effective for
an Offering Period that has not yet commenced, by delivering to the Committee
written notice thereof prior to the first day of the Offering Period.

           11.3 Following withdrawal from the Plan, in order to participate in
the Plan for any subsequent Offering Period, the Participant must again elect to
participate in the manner described in Section 6.1.

      12. ISSUANCE OF COMMON STOCK.

           12.1 Certificates for the shares of Common Stock purchased by
Participants will be delivered by the Company's transfer agent as soon as
practicable after each Offering Period. In lieu of issuing certificates for such
shares directly to Participants, the Company shall be entitled to issue such
shares to a bank, broker-dealer or similar custodian (the "Custodian") that has
agreed to hold such shares for the accounts of the respective Participants. Fees
and expenses of the Custodian shall be paid by the Company or allocated among
the respective Participants in such manner as the Committee determines.

           12.2 A Participant may direct, in accordance with such procedures as
the Committee may adopt, that shares purchased by the Participant shall be
issued (or, if such shares are issued to the Custodian, that the account for
such shares be held) in the names of the Participant and one other person
designated by the Participant, as joint tenants with right of survivorship,
tenants in common, or community property, to the extent and in the manner
permitted by applicable law.

           12.3 A Participant may at any time, in the manner described in
Section 18, undertake a disposition (as that term is defined in Section 424(c)
of the Code), whether by sale, exchange, gift or other transfer of legal title,
of any or all of the shares held for the Participant by the Custodian. In the
absence of such a disposition of the shares, the shares shall continue to be
held by the Custodian until the holding period set forth in Section 423(a) of
the Code has been satisfied. If a Participant so requests, shares for which such
holding period has been satisfied will be transferred to another brokerage
account specified by the Participant, or a stock certificate for such shares
will be issued and delivered to the Participant or his or her designee.

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      13. CHANGES IN CAPITALIZATION

           13.1 Upon the happening of any of the following described events, a
Participant's right to purchase shares of Common Stock under the Plan shall be
adjusted as hereinafter provided:

           (a) If the shares of Common Stock are subdivided or combined into a
      greater or smaller number of shares of Common Stock or if, upon a
      recapitalization, split-up or other reorganization of the Company, the
      shares of Common Stock are exchanged for other securities of the Company,
      the rights of each Participant shall be modified so that the Participant
      is entitled to purchase, in lieu of the shares of Common Stock that the
      Participant would otherwise have been entitled to purchase for the
      Offering Period in progress at the time of such subdivision, combination
      or exchange (the "Offering Period Shares"), such number of shares of
      Common Stock or such number and type of other securities as the
      Participant would have received if such Offering, Period Shares had been
      issued and outstanding at the time of such subdivision, combination or
      exchange (unless in the case of an exchange the Committee determines that
      the nature of the exchange is such that it is not feasible or advisable
      that the rights of Participants be so modified, in which event the
      exchange shall be deemed a Terminating Event under Section 14); and

           (b) If the Company issues any of its shares as a stock dividend upon
      or with respect to the Common Stock, each Participant who purchases shares
      of Common Stock under the Plan at the end of the Offering Period in
      progress on the record date for the stock dividend shall be entitled to
      receive the shares so purchased (the "Purchased Shares") and shall also be
      entitled to receive at no additional cost, but only if the Purchase Price
      for the Purchased Shares was determined with reference to the Market Price
      of the Common Stock on the first Business Day of the Offering Period, the
      number of shares of the class of stock issued as a stock dividend, and the
      amount of cash in lieu of fractional shares, that the Participant would
      have received if he or she had been the holder of the Purchased Shares on
      the record date for the stock dividend.

           13.2 Upon the happening of an event specified in clause (a) or (b)
above, the class and aggregate number of shares available under the Plan, as set
forth in Section 4, shall be appropriately adjusted to reflect the event.
Notwithstanding the foregoing, such adjustments shall be made only to the extent
that the Committee, based on advice of counsel for the Company, determines that
such adjustments will not constitute a change requiring shareholder approval
under Section 423(b)(2) of the Code.

      14. TERMINATING EVENTS

           14.1 Upon (a) the dissolution or liquidation of the Company, (b) a
merger or other reorganization of the Company with one or more corporations as a
result of which the Company will not be a surviving corporation, (c) the sale of
all or substantially all of the assets of the Company or a material division of
the Company, (d) a sale or other transfer, pursuant to a tender offer or
otherwise, of more than fifty percent (50%) of the then outstanding shares of
Common Stock of the Company, (e) an acquisition by the Company resulting in an
extraordinary expansion of the Company's business or the addition of a material
new line of business, or (f) any exchange that is subject to this Section 14 in
accordance with the provisions of Section 13 (any of such events is herein
referred to as a "Terminating Event"), the Committee may but shall not be
required to --

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           (a) make provision for the continuation of the Participants' rights
      under the Plan on such terms and conditions as the Committee determines to
      be appropriate and equitable, including where applicable, but not limited
      to, an arrangement for the substitution on an equitable basis, for each
      share of Common Stock that could otherwise be purchased at the end of the
      Offering Period in progress at the time of the Terminating Event, of any
      consideration payable with respect to each then outstanding share of
      Common Stock in connection with the Terminating Event; or

           (b) terminate all rights of Participants under the Plan for such
      Offering Period and --

                (i) return to the Participants all of their payroll deductions
           for such Offering Period; and

                (ii) for each share of Common Stock, if any, that otherwise
           could have been purchased under the Plan by a Participant at the end
           of such Offering Period (determined by assuming that payroll
           deductions at the rate elected by the Participant were continued to
           the end of the Payroll Period and used to purchase shares based on
           the Market Price of the Common Stock on the first Business Day of the
           Offering Period) and with respect to which (A) the Purchase Price at
           which such share could be purchased (determined with reference only
           to the Market Price of the Common Stock on the first Business Day of
           the Offering Period) is exceeded by (B) the Market Price on the date
           of the Terminating Event of a share of Common Stock, as determined by
           the Committee, pay to the Participant an amount equal to such excess.

           14.2 The Committee shall make all determinations necessary or
advisable in connection with Terminating Events, and its determinations shall,
in the absent of fraud or patent mistake, be conclusive and binding on all
persons with any interest in the Plan.

      15. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS. An Eligible Employee's
rights under the Plan are the Eligible Employee's alone and may not be
voluntarily or involuntarily transferred or assigned to, or availed of by, any
other person other than by will or the laws of descent and distribution. An
Eligible Employee's rights under the Plan are exercisable during his or her
lifetime by the Eligible Employee alone.

      16. TERMINATION OF EMPLOYEE'S RIGHTS

           16.1 Subject to Section 16.2, a Participant's rights under the Plan
will terminate if he or she for any reason (including death, disability or
voluntary or involuntary termination of employment) ceases to be an employee of
the Company or one of its subsidiaries.

           16.2 Notwithstanding the foregoing, effective for Offering Periods
beginning on or before July 15, 1999, if a Participant ceases to be an employee
of the Company or one of its subsidiaries, the termination of the Participant's
rights under the preceding paragraph shall not apply to any right the
Participant may have to purchase shares of Common Stock at the end of the
Offering Period in progress when the Participant ceases to be an employee. Such
purchases of shares of Common Stock shall, to the extent of payroll deductions
accumulated for the purchases

                                       -6-
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of shares of Common Stock shall, to the extent payroll deductions accumulated
for the Offering Period, occur automatically at the end of the Offering Period,
unless the Participant or his or her personal representative withdraws from the
Plan for the Offering Period in the manner described in Section 11. To the
extent that the rights of a Participant terminate in accordance with this
Section 16, any of the Participant's payroll deductions not used to purchase
shares of Common Stock will be promptly returned (without interest thereon) to
the Participant or his or her personal representative.

           16.3 Effective for Offering Periods commencing after July 15, 1999,
if a Participant ceases to be an employee of the Company or one of its
subsidiaries, then as soon as practicable after such cessation, the
Participant's payroll deductions shall cease and any of the Participant's
accumulated payroll deductions shall be promptly returned (without interest
thereon) to the Participant or his or her personal representative.

      17. TERMINATION AND AMENDMENT OF PLAN

           17.1 The Plan shall terminate on December 31, 2007. The Plan may be
terminated at any earlier time by the Board, but, except as provided in Section
14, such termination shall not affect the rights of Participants under the Plan
for the Offering Period in progress at the time of termination. The Plan will
also terminate in any case when all or substantially all of the unissued shares
of Common Stock reserved for the purposes of the Plan have been purchased. If at
any time shares of Common Stock reserved for the purpose of the Plan remain
available for purchase but not in sufficient number to satisfy all then unfilled
purchase requirements, the available shares shall be apportioned among
Participants in proportion to the respective amounts of their accumulated
payroll deductions, and the Plan shall terminate. Upon such termination or any
other termination of the Plan, all payroll deductions not used to purchase
shares of Common Stock will be refunded to the Participants entitled thereto.

           17.2 The Committee or the Board may from time to time adopt
amendments to the Plan; PROVIDED, HOWEVER, that, without the approval of the
shareholders of the Company, no amendment may increase the number of shares that
may be issued under the Plan or make any other change for which shareholder
approval is required by Section 423 of the Code or the regulations thereunder.

      18. DISPOSITION OF SHARES. Subject to compliance with any applicable
federal and state securities and other laws and any policy of the Company in
effect from time to time with respect to trading in its shares, a Participant
may effect a disposition (as that term is defined in Section 424(c) of the Code)
of Common Stock purchased under the Plan at any time the Participant chooses;
PROVIDED, HOWEVER, each Participant agrees, by purchasing shares of Common Stock
under the Plan, that (a) the Company shall be entitled to withhold, from any
other amounts that may be payable to the Participant by the Company at or around
the time of such disposition, such federal, state, local and foreign income,
employment and other taxes as the Company may be required to withhold under
applicable law; and (b) in lieu of such withholding, the Participant will, upon
request of the Company, promptly remit such taxes to the Company. EACH EMPLOYEE
PURCHASING SHARES OF COMMON STOCK UNDER THE PLAN ASSUMES THE RISK OF ANY MARKET
FLUCTUATIONS IN THE PRICE THEREOF.

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      19. NO SHAREHOLDER RIGHTS; INFORMATION TO PARTICIPANTS. A Participant
shall not have any rights as a shareholder of the Company (other than the right
potentially to receive stock dividends under Section 13) on account of shares of
Common Stock that may be purchased under the Plan prior to the time such shares
are actually purchased by and issued to the Participant. Notwithstanding the
foregoing, the Company shall deliver to each Participant under the Plan who does
not otherwise receive such materials (a) a copy of the Company's annual
financial statements (which shall be delivered annually as promptly as practical
following each fiscal year of the Company and review or audit of such statements
by the Company's auditors), together with management's discussion and analysis
of financial condition and results of operations for the fiscal year, and (b) a
copy of all reports, proxy statements and other communications distributed to
the Company's security holders generally.

      20. USE OF PROCEEDS. The proceeds received by the Company from the sale of
shares of Common Stock under the Plan will be used for general corporate
purposes.

      21. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
shares of the Common Stock under the Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares, including the Securities and Exchange Commission, the
securities administrators of the states in which Participants reside, and the
Internal Revenue Service.

      22. MISCELLANEOUS PROVISIONS

           22.1 Nothing contained in the Plan shall obligate the Company or any
of its subsidiaries to employ a Participant for any period, nor shall the Plan
interfere in any way with the right of the Company or any of its subsidiaries to
reduce a Participant's compensation.

           22.2 The provisions of the Plan shall be binding upon each
Participant and, subject to the provisions of Section 15, the heirs, successors
and assigns of each Participant.

           22.3 Where the context so requires, references in the Plan to the
singular shall include the plural, and vice versa, and references to a
particular gender shall include either or both additional genders.

           22.4 The Plan shall be construed, administered and enforced in
accordance with the laws of the United States, to the extent applicable thereto,
as well as the laws of the State of Washington.

      23. APPROVAL OF SHAREHOLDERS. The Plan shall be effective January 1,
1998, subject to approval by the shareholders of the Company in a manner that
complies with Section 423(b)(2) of the Code. If such approval does not occur
prior to January 1, 1998, the Plan shall be void and of no effect.

                                       -8-<PAGE>
                                                                    EXHIBIT 10.2

                               REALNETWORKS, INC.

                         2002 DIRECTOR STOCK OPTION PLAN

1. PURPOSES OF THE PLAN. The purposes of this 2002 Director Option Plan are to
attract and retain the best available personnel for service as Outside Directors
(as defined herein) of the Company, to provide additional incentive to the
Outside Directors of the Company to serve as Directors, and to encourage their
continued service on the Board.

        All options granted hereunder shall be nonstatutory stock options.

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

        (a) "Annual Meeting" means the Company's regularly scheduled annual
meeting of shareholders, as provided for in the Company's Bylaws.

        (b) "Approved Transaction" means (a) any merger, consolidation or
binding share exchange pursuant to which shares of Common Stock are changed or
converted into or exchanged for cash, securities or other property, other than
any such transaction in which the persons who hold Common Stock immediately
prior to the transaction have immediately following the transaction the same
proportionate ownership of the common stock of, and the same voting power with
respect to, the surviving corporation; (b) any merger, consolidation or binding
share exchange in which the persons who hold Common Stock immediately prior to
the transaction have immediately following the transaction less than a majority
of the combined voting power of the outstanding capital stock of the Company
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors; (c) any liquidation or
dissolution of the Company; and (d) any sale, lease, exchange or other transfer
not in the ordinary course of business (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company.

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

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

        (e) "Common Stock" means the common stock, par value $.001 per share, of
the Company.

        (f) "Company" means RealNetworks, Inc., a Washington corporation.

        (g) "Control Purchase" means any transaction (or series of related
transactions), consummated without the approval or recommendation of the Board,
in which (a) any person, corporation or other entity (including any "person" as
defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act, but excluding the
Company and any employee benefit plan sponsored by the Company) purchases any
Common Stock (or securities convertible into Common Stock) for cash, securities
or any other consideration pursuant to a tender offer or exchange offer; or (b)
any person, corporation or other entity (including any "person" as defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act, but excluding the Company
and any employee benefit plan sponsored by the Company) becomes the "beneficial
owner" (as that term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing fifty percent (50%) or
more of

                                       -1-
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the combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors (calculated as provided in Rule
13d-3(d) under the Exchange Act in the case of rights to acquire the Company's
securities).

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

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

        (j) "Effective Date" means the effective date of this Plan as determined
in accordance with Section 6.

        (k) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.

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

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

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

               (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the date of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable; or

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

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

        (o) "Optioned Stock" means the Common Stock subject to an Option.

        (p) "Optionee" means a Director who holds an Option.

        (q) "Outside Director" means a Director who is not an Employee.

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

        (s) "Plan" means this 2002 Director Option Plan.

                                       -2-
<PAGE>
        (t) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 10 of the Plan.

        (u) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Seven Hundred Fifty Thousand (750,000) Shares (the "Pool") of
Common Stock. The Shares may be authorized, but unissued, or reacquired Common
Stock.

        If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.

        (a) Administrator. Except as otherwise required herein, the Plan shall
be administered by the Board, or by a compensation committee (the "Committee")
appointed by the Board. No discretion concerning decisions regarding the Plan
shall be afforded to any person who is not a "non-employee director" (as defined
in Rule 16b-3 under the Exchange Act).

        (b) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:

               (i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options.

               (ii) Each Outside Director shall be automatically granted an
Option to purchase 30,000 Shares (which number shall be subject to adjustment in
the manner set forth in Section 10 hereof upon the occurrence of any event
described therein) upon the date on which such person first becomes a Director
(the "Initial Grant A"), whether through election by the shareholders of the
Company or by appointment by the Board to fill a vacancy.

               (iii) Each Outside Director shall be automatically granted an
Option to purchase 35,000 Shares (which number shall be subject to adjustment in
the manner set forth in Section 10 hereof upon the occurrence of any event
described therein) upon the date on which such person first becomes a Director
(the "Initial Grant B"), whether through election by the shareholders of the
Company or by appointment by the Board to fill a vacancy.

               (iv) On the third business day following the date of each Annual
Meeting during the term of this Plan, each Outside Director who has served as a
Director for at least the previous twelve (12) months shall be automatically
granted an Option to purchase 35,000 Shares (a "Subsequent Option"), which
number shall be subject to adjustment in the manner set forth in Section 10
hereof upon the occurrence of any event described therein.

               (v) Notwithstanding the provisions of subsections (ii), (iii) and
(iv) hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the

                                       -3-
<PAGE>
Plan in accordance with Section 16 hereof shall be conditioned upon obtaining
such shareholder approval of the Plan in accordance with Section 16 hereof.

               (vi) The terms of Initial Grant A granted hereunder shall be as
follows:

                      (A) the term of the Initial Grant A shall be ten (10)
years.

                      (B) Initial Grant A shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.

                      (C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Initial Grant A.

                      (D) subject to Section 10 hereof, Initial Grant A shall
become exercisable in three (3) successive equal annual installments on each of
the first three (3) anniversaries of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.

               (vii) The terms of Initial Grant B granted hereunder shall be as
follows:

                      (A) the term of the Initial Grant B shall be ten (10)
years.

                      (B) Initial Grant B shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.

                      (C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Initial Grant B.

                      (D) subject to Section 10 hereof, Initial Grant B shall
become exercisable as to 100% percent of the Shares subject thereto on the first
anniversary of its date of grant, provided that the Optionee continues to serve
as a Director on such date.

               (viii) The terms of a Subsequent Option granted hereunder shall
be as follows:

                      (A) the term of the Subsequent Option shall be ten (10)
years.

                      (B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.

                      (C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option.

                      (D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to 100% percent of the Shares subject to the
Subsequent Option on the first anniversary of its date of grant, provided that
the Optionee continues to serve as a Director on such date.

               (ix) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be

                                       -4-
<PAGE>
granted under Options to the Outside Directors on a pro rata basis. No further
grants shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the
shareholders to increase the number of Shares which may be issued under the Plan
or through cancellation or expiration of Options previously granted hereunder.

5. ELIGIBILITY. Options may be granted only to Outside Directors. All Options
shall be automatically granted in accordance with the terms set forth in Section
4 hereof. An Outside Director who has been granted an Option may, if he or she
is otherwise eligible, be granted an additional Option or Options in accordance
with such provisions.

        The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.

6. TERM OF PLAN. The Plan shall become effective upon the later to occur of its
adoption by the Board or its approval by the shareholders of the Company as
described in Section 16 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 12 of the Plan.

7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) promissory note, (iv) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan, or (v) any combination of the foregoing
methods of payment approved by the Administrator.

8. EXERCISE OF OPTION.

        (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

        An Option may not be exercised for a fraction of a Share.

        An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.

                                       -5-
<PAGE>
        Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

        (b) Rule 16b-3. Options granted to Outside Directors must comply with
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.

        (c) Termination of Status as a Director. Subject to Section 10 hereof,
in the event an Optionee's status as a Director terminates (other than upon the
Optionee's death or Disability), the Optionee may exercise his or her Option,
but only within three (3) months following the date of such termination, and
only to the extent that the Optionee was entitled to exercise it on the date of
such termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

        (d) Disability of Optionee. In the event Optionee's status as a Director
terminates as a result of Disability, the Optionee may exercise his or her
Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.

        (e) Death of Optionee. In the event of an Optionee's death, each of the
Optionee's outstanding Options shall accelerate and become immediately vested
and exercisable with respect to one hundred percent (100%) of the Shares then
subject to each such Option. Each such Option may be exercised by the Optionee's
designated beneficiary, provided such beneficiary has been designated prior to
Optionee's death in a form acceptable by the Board. If no such beneficiary has
been designated by the Optionee, then each such Option may be exercised by the
personal representative of the Optionee's estate or by the person or persons to
whom the Option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution. The Option may be exercised in whole
or in part by the Optionee's designated beneficiary, estate or the person or
persons who acquire the right to exercise the Option, but only within twelve
(12) months following the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent the Option is not exercised
within the time specified herein, the Option shall terminate.

9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

                                       -6-
<PAGE>
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION--APPROVED TRANSACTIONS--CONTROL
PURCHASE.

        (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares which have been authorized for
issuance under the Plan, including Shares as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, the number of Shares that may be added annually to the Shares
reserved under the Plan (pursuant to Section 3(i)), the number of Shares covered
by each outstanding Option, as well as the price per Share covered by each such
outstanding Option, and the number of Shares issuable pursuant to the automatic
grant provisions of Section 4 hereof shall be adjusted by the Administrator to
reflect any stock split, reverse stock split, spin-off, stock dividend,
combination or reclassification , or other change in the corporate structure
that affects the Common Stock, or any other increase or decrease in the number
of issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option.

        (b) Approved Transaction; Control Purchase. In the event of any Approved
Transaction or Control Purchase, each outstanding Option under the Plan shall
become exercisable in full in respect of the aggregate number of shares covered
thereby, notwithstanding any contrary vesting schedule in the Option Agreement
evidencing the Option (except to the extent the Option Agreement expressly
provides otherwise), effective upon the Control Purchase or immediately prior to
consummation of the Approved Transaction. In the case of an Approved
Transaction, the Company shall provide notice of the pendency of the Approved
Transaction, at least fifteen (15) days prior to the expected date of
consummation thereof, to each Optionee. Each Optionee shall thereupon be
entitled to exercise the Option at any time prior to consummation of the
Approved Transaction. Any such exercise as to any portion of the Option that
will only become vested immediately prior to the consummation of the Approved
Transaction in accordance with the foregoing acceleration provision shall be
contingent on such consummation. Any such exercise as to any other portion of
the Option will not be contingent on such consummation unless so elected by the
Optionee in a notice delivered to the Company simultaneously with the exercise.
Upon consummation of the Approved Transaction, all Options shall expire to the
extent such exercise has not occurred. Notwithstanding the foregoing, except to
the extent otherwise provided in one or more Option Agreements evidencing
Options, the Administrator may, in its discretion, determine that any or all
outstanding Options will not vest or become exercisable on an accelerated basis
in connection with an Approved Transaction and/or will not terminate if not
exercised prior to consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall take, or made
effective provision for the taking of, such action as in the opinion of the
Administrator is equitable and appropriate in order to substitute new Options
for such Options, or to assume such Options (which assumption may be effected by
any means determined by the Administrator, in its discretion, including, but not
limited to, by a cash payment to each Optionee, in cancellation of the Options
held by him or her, of such amount as the Administrator determines, in its sole
discretion, represents the then value of the Options) and in order to make such
new or assumed Options, as nearly as practicable, equivalent to the old Options
(before giving effect to any acceleration of the vesting or exercisability
thereof), taking into account, to the extent applicable, the kind and amount of
securities, cash or other assets into or for which the Common Stock may be
changed, converted or exchanged in connection with the Approved Transaction.

                                       -7-
<PAGE>
11. AMENDMENT AND TERMINATION OF THE PLAN.

        (a) Amendment and Termination. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable law, regulation
or stock exchange rule, the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.

        (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof.

13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

        As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

        Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

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

15. OPTION AGREEMENT. Options shall be evidenced by written option agreements in
such form as the Board shall approve.

16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.

17. GOVERNING LAW. The Plan shall be governed by, and construed in accordance
with, the laws of the State of Washington.

                                       -8-
<PAGE>
18. COMPANY'S RIGHTS. The grant of Options pursuant to the Plan shall not affect
in any way the right or power of the Company to make reclassifications,
reorganizations or other changes of or to its capital or business structure or
to merge, consolidate, liquidate, sell or otherwise dispose of all or any part
of its business or assets.

                                       -9-

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