Document:

EXHIBIT 10.2

                     FEE AGREEMENT FOR INTRODUCTION SERVICES

         This FEE  AGREEMENT FOR  INTRODUCTION  SERVICES  (the  "Agreement")  is
between The Hartcourt  Companies,  Inc., a Utah  corporation (the "Company") and
Thomas Kwok, an individual (the "Introducer").

         WHEREAS,   the  Company  acknowledges  that  Introducer's  talents  and
services are of a special,  unique, unusual and extraordinary  character and are
of particular and peculiar benefit and importance to the Company; and,

         WHEREAS,  Introducer has agreed to provide  services to he Company with
respect  to the  Company's  desire  to  identify  and  acquire  Internet-related
businesses; and,

         WHEREAS, this Agreement is made to set out the compensation, conditions
and guidelines that will govern the relationship between the parties.

         NOW,  THEREFORE,  in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is expressly acknowledged
by the parties hereto, the parties agree as follows:

The Services

                  Effective the date below,  and for the term of this Agreement,
                  Introducer  will use its best efforts to search for,  identify
                  and make known to the Company, Internet-related businesses and
                  Assets    ("Opportunities")   which   qualify   as   potential
                  acquisitions by the Company. In addition, Introducer will seek
                  out   sources  of  funding,   of  whatever   nature  type  and
                  description   as  shall  be  acceptable  to  the  Company  and
                  Intruducer will search for suitable  candidates for employment
                  by the  Company in its  Chinese  operations.  Such  efforts by
                  Introducer shall hereinafter be referred to as he "Services".

Term of Agreement

                  Unless otherwise terminated a provided hereunder, the Services
                  shall be provided to the Company from the  Effective  Date (as
                  defined below) through December 30, 2000.

Costs and Expenses

                  The Company  understands  that, in the course of  Introducer's
                  efforts to identify suitable acquisitions,  strategic partners
                  or assets for the Company to purchase, it may be necessary for
                  Introducer  to incur  certain  costs or expenses.  The Company
                  will reimburse  Introducer for its costs or expenses  actually
                  incurred and  reasonably  necessary for  Introducer to provide
                  the Services to the Company, as long as Introducer's costs and

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<PAGE>

                  expenses are reasonable and elated to evaluations  carried out
                  for the Company's exclusive use. Subject to the foregoing, and
                  he  Company's  prior  written   approval,   the  Company  will
                  reimburse  Introducer for reasonable travel expenses including
                  lodging  and the cost of a rental car,  copy and filing  fees,
                  and  retrieval  costs  incurred  in  researching   prospective
                  Opportunities.

Payment for Services/Stock Option

                  The Company  agrees to satisfy  Introducer's  time and expense
                  incurred,  up to and  including the first  acquisition  by the
                  Company of an Opportunity introduced or arranged by Introducer
                  (the "Initial Acquisition") by way of an Option Agreement. The
                  Company  hereby  grants to Introducer he option to purchase up
                  to One  Million  (1,000,000)  shares of the  Company's  no par
                  value common  stock (the  "Option  Shares") at a price of Five
                  Dollars Fifty Cents ($5.50) per share (the  "Exercise  Price")
                  pursuant to the Option Agreement,  a copy of which is attached
                  hereto as Exhibit "A." The Option is non-transferable and will
                  expire unless exercised on or before the third  anniversary of
                  the Effective Date hereof.  Introducer has not been engaged to
                  perform,  nor will Introducer agree to perform any services in
                  connection with capital raising  transactions.  It is mutually
                  understood  and agreed that any fees for services  provided by
                  Introducer  on behalf of or which  results in some benefit for
                  the Company in connection with a capital  raising  transaction
                  shall be negotiated separately from this Agreement and paid by
                  the Company separately.

Registration of the Company Shares

                  No later than ten (10) days  following  the date  hereof as to
                  the Company's shares  underlying the Option,  the Company will
                  cause such shares to be  registered  with the  Securities  and
                  Exchange  Commission  under  a Form  S-8 or  other  applicable
                  registration  statement,  and it shall cause such registration
                  statement to remain  effective  at all times while  Introducer
                  holds the Option. At Introducer's  election, the Option Shares
                  may be issued prior to  registration in reliance on exemptions
                  from  registration  provided by Section 4(2) of the Securities
                  Act  of  1933  (the  Securities  Act"),  Regulation  D of  the
                  Securities Act, and applicable state securities laws.

Involvement of the Company

                  The Company  expects to be kept  informed  on the  progress of
                  Introducer's  services and, in this regard,  Introducer agrees
                  to keep the Company  apprised of all material  developments in
                  writing at least monthly.

Termination

                  Either party may  terminate  this  Agreement  upon thirty (30)
                  days notice by registered or certified  mail,  return  receipt
                  requested,  addressed to the other party. If this Agreement is
                  terminated by either  party,  the Company shall only be liable
                  for payment of fees earned by  Introducer  as a result of work
                  prior to the  effective  date of the  termination.  The thirty
                  (30) days notice shall be measured from the date the notice is
                  mailed.

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<PAGE>

Assignment

                  Notwithstanding  contained herein to the contrary,  the rights
                  to the shares  underlying  the Option,  and the  obligation to
                  provide  the  Services  set  forth in this  Agreement,  may be
                  assigned or  transferred  by  Introducer  to an  Affiliate  or
                  subsidiary,  or as the result of a corporate reorganization or
                  recapitalization of Introducer;  otherwise, this Agreement and
                  the rights and  obligations  hereunder  shall not be assigned.
                  For the purpose of this Agreement the term  "Affiliate"  shall
                  be  defined  as a  person  or  enterprise  that  directly,  or
                  indirectly, through one or more intermediaries, controls or is
                  controlled by, or is under common control with Introducer.

Counterparts

         A facsimile,  telecopy or other  reproduction of this instrument may be
         executed by one or more parties  hereto and such  executed  copy may be
         delivered by facsimile or similar instantaneous electronic transmission
         device  pursuant to which the  signature  of or on behalf of such party
         can be seen, and such execution and delivery shall be considered valid,
         binding and  effective  for all  purposes.  At the request of any party
         hereto,  all parties agree to execute an original of this instrument as
         well as any facsimile, telecopy or other reproduction hereof.

Further Documentation

         Each party hereto  agrees to execute such  additional  instruments  and
         take such action as may be  reasonably  requested by the other party to
         effect  the  transaction,  or  otherwise  to carry out the  intent  and
         purposes of this Agreement.

Notices

         All notices and other communications  hereunder shall be in writing and
         shall  be sent by  prepaid  first  class  mail  to the  parties  at the
         following  addresses,  as amended by the parties with written notice to
         the other:

         To Introducer:                     Thomas Kwok
                                            KDG International Limited.
                                            #3605 Central Plaza
                                            18 Harbour Road
                                            Wanchai, Hong Kong
                                            Telephone:   (852) 28772657

         To the Company:                    The Hartcourt Companies, Inc.
                                            9800 S. Sepulveda Blvd. Suite 818
                                            Los Angeles, California 90045
                                            Telephone:   (310) 410-7290
                                            Facsimile:   (310) 410-7297

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<PAGE>

         With copy to:                      Richard Weed
                                            4695 MacArthur Court, Suite 530
                                            Newport Beach, California 92660
                                            Telephone:   (949) 475-7739
                                            Facsimile:    (949) 475-9087

Counterparts

         This  Agreement  may  be  executed   simultaneously   in  two  or  more
         counterparts,  each of which  shall be deemed an  original,  but all of
         which together shall constitute one and the same instrument.

Governing Law

         This  Agreement  was  negotiated,  and shall be governed by the laws of
         Utah notwithstanding any conflict-of-law provision to the contrary.

Entire Agreement

         This Agreement sets forth the entire understanding  between the parties
         hereto and no other prior written or oral statement or agreement  shall
         be recognized or enforced.

Severability

         If a court of  competent  jurisdiction  determines  that any  clause or
         provision of this Agreement is invalid,  illegal or unenforceable,  the
         other  clauses and  provisions  of the  Agreement  shall remain in full
         force and effect and the clauses and provisions which are determined to
         be void,  illegal or unenforceable  shall be limited so that they shall
         remain in effect to the extent permissible by law.

Amendment  or Waiver

         Every right and remedy  provided  herein shall be cumulative with every
         other right and remedy, whether conferred herein, at law, or in equity,
         and may be enforced concurrently  herewith,  and no waiver by any party
         of the performance of any obligation by the other shall be construed as
         a  waiver  of the  same or any  other  default  then,  theretofore,  or
         thereafter occurring or existing. At any time prior to a closing of the
         Initial Acquisition,  this Agreement may be amended by a writing signed
         by all parties hereto.

Headings

         The section and subsection  headings in this Agreement are inserted for
         convenience  only  and  shall  not  affect  in any way the  meaning  or
         interpretation of this Agreement.

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<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement the latter
         of the dates written below.

                                        The "Company"
                                        The Hartcourt Companies, Inc.

         Dated:   April  19, 2000       By:
                                        ---------------------------------------
                                        Name:     Alan V. Phan
                                        Title:    Chairman

                                        "Introducer"
                                        Thomas Kwok

         Dated:   April 19, 2000
                                        ---------------------------------------
                                        Thomas Kwok

                                       33

<PAGE>

                       OPTION AGREEMENT WITH THOMAS KWOK

         THIS OPTION AGREEMENT  ("Agreement") is entered into effective the 19th
day of April 2000, by and between Thomas Kwok, an individual  ("Kwok"),  and the
Hartcourt Companies Inc., a Utah corporation (the "Company").

         WHEREAS,  the  Company  proposes  to issue to Kwok  options to purchase
shares of its common stock (the "Common Stock") in connection with the Company's
engagement of Kwok  pursuant to the Advisory  Agreement of even date between the
Company and Kwok,  incorporated by reference herein (the "Advisory  Agreement");
and,

         WHEREAS,  to induce Kwok to execute the First Amendment to the Advisory
Agreement  the Company  hereby  grants Kwok an option to purchase  shares of the
Company's Common Stock subject to the terms and conditions set forth below.

         NOW, THEREFORE, for and in consideration of the mutual promises herein,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, and subject to the terms and conditions set forth
below, Kwok and the Company agree as follows:

1.       The Option

         The Company  hereby grants Kwok  (hereinafter  "Holder") an option (the
         "Option") to acquire Two Million  (2,000,000)  shares of the  Company's
         Common  Stock,  subject to adjustment as set forth herein (such shares,
         as adjusted,  are hereinafter  referred to as the AOption Shares"),  at
         the closing  market price of Friday,  April 14th,  2000,  which is Five
         Dollars and Fifty Cents ($5.50) per share (AOption Price").

2.       Term and Exercise of Option

         A.       Term of Option. Subject to the terms of this Agreement, Holder
                  shall  have the right to  exercise  the  Option in whole or in
                  part, commencing the date hereof through the close of business
                  on December 1, 2002.

         B.       Exercise  of the  Option.  The  Option may be  exercised  upon
                  written notice to the Company at its principal  office setting
                  out the number of Option Shares to be purchased, together with
                  payment of the Option Price.

         C.       Issuance of Option  Shares.  Upon such notice of exercise  and
                  payment of the Option Price, the Company shall issue and cause
                  to be delivered  within five (5) business  days  following the
                  written  order of Holder,  or its  successor  as provided  for
                  herein, and in such name or names as the Holder may designate,
                  a certificate or certificates  for the number of Option Shares
                  to be  purchased.  The rights of purchase  represented  by the

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<PAGE>

                  Option  shall be  exercisable,  at the  election of the Holder
                  thereof,  either in full or from time to time in part,  and in
                  the event the Option is  exercised in respect of less than all
                  of the Option Shares  purchasable on such exercise at any time
                  prior to the date of expiration  hereof,  the remaining Option
                  Shares shall continue to be subject to adjustment as set forth
                  in  paragraph  4 hereof.  The  Company  irrevocably  agrees to
                  reconstitute the Option Shares as provided herein.

 3.      Reservation of Option Shares

         The Company shall at all times keep reserved and available,  out of its
         authorized Common Stock, such number of shares of Common Stock as shall
         be sufficient to provide for the exercise of the rights  represented by
         this  Agreement.  The  transfer  agent  for the  Common  Stock  and any
         successor  transfer agent for any shares of the Company's capital stock
         issuable  upon the exercise of any of such rights of purchase,  will be
         irrevocably authorized and directed at all times to reserve such number
         of shares as shall be  requisite  for such  purpose.  The Company  will
         cause a copy of this  Agreement  to be kept on file  with the  transfer
         agent or its successors.

4.       Adjustment of Option Shares

         The number of Option  Shares  purchasable  pursuant  to this  Agreement
         shall be subject to adjustment  from time to time upon the happening of
         certain events, as follows:

          A.   Adjustment for Recapitalization.  Subject to paragraph 4.B below,
               in the event the  Company  shall (a)  subdivide  its  outstanding
               shares  of  Common   Stock,   or  (b)  issue  or   convert  by  a
               reclassification  or  recapitalization  of its  shares  of Common
               Stock into, for, or with other securities (a ARecapitalization"),
               the number of Option  Shares  purchasable  hereunder  immediately
               following  such  Recapitalization  shall be  adjusted so that the
               Holder shall be entitled to receive the kind and number of Option
               Shares  or  other   securities  of  the  Company  measured  as  a
               percentage  of the total  issued  and  outstanding  shares of the
               Company's  Common  Stock as of the  hereof  which  it would  have
               entitled to receive immediately preceding such  Recapitalization,
               had such Option been exercised immediately prior to the happening
               of such  event  or any  record  date  with  respect  thereto.  An
               adjustment  made pursuant to this  paragraph  shall be calculated
               and  effected  taking  into  account  the  formula  set  forth in
               paragraph 4.B. below and shall become effective immediately after
               the  effective  date of such event  retroactive  to the effective
               date.

          B.   Adjustment of the Exercise Price and Number of Option Shares.  In
               the event of any change in the  Company's  Common Stock by reason
               of a reverse stock split, neither the number nor the Option Price
               of the  shares  subject  to this  Option  shall be  changed or be
               adjusted.

          C.   Preservation of Purchase Rights Under  Consolidation.  Subject to
               paragraph 4.B above, in case of any Recapitalization or any other
               consolidation  of the Company  with or merger of the Company into
               another  corporation,  or in case of any  sale or  conveyance  to

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<PAGE>

               another corporation of the property of the Company as an entirety
               or substantially  as an entirety,  the Company shall prior to the
               closing of such  transaction,  cause such successor or purchasing
               corporation,  as the  case  may be,  to  acknowledge  and  accept
               responsibility  for the  Company's  obligations  hereunder and to
               grant the Holder the right  thereafter upon payment of the Option
               Price to  purchase  the kind  and  amount  of  shares  and  other
               securities  and  property  which he would have owned or have been
               entitled to receive  after the  happening of such  consolidation,
               merger,  sale or  conveyance.  The  provisions of this  paragraph
               shall  similarly  apply to  successive  consolidations,  mergers,
               sales or conveyances.

          D.   Notice of  Adjustment.  Whenever  the  number  of  Option  Shares
               purchasable  hereunder  is  Adjusted,  as  herein  provided,  the
               Company shall mail by first class mail,  postage prepaid,  to the
               Holder  notice  of such  adjustment  or  adjustments,  and  shall
               deliver to Holder  setting  forth the  adjusted  number of Option
               Shares  purchasable  and a brief statement of the facts requiring
               such adjustment, including h such adjustments was made.

5.        Failure to Deliver Option Shares  Constitutes  Breach  Under  Advisory
          Agreement

          Failure by the Company,  for any reason,  to deliver the  certificates
          representing any shares  purchased  Pursuant to this Option within the
          five (5) business  day period set forth in  paragraph 2 above,  or the
          placement of a Stop Transfer order by the Company on any Option Shares
          once issued,  shall constitute a ABreach" under the Advisory Agreement
          and, for the purpose of determining the terms of this Agreement, shall
          automatically  toll the  expiration of this  Agreement for a period of
          time equal to the delay in  delivering  the subject  shares or term of
          the Stop Transfer order.

6.        Assignment

          The Option  represented  by this  Agreement  may only be  assigned  or
          transferred by Kwok to an Affiliate or subsidiary, or as the result of
          a corporate  reorganization  or  recapitalization.  For the purpose of
          this  Option  the term  AAffiliate"  shall be  defined  as a person or
          enterprise   that  directly,   or  indirectly   through  one  or  more
          intermediaries,  controls,  or is  controlled  by, or is under  common
          control  with the Company  otherwise,  this  Agreement  and the rights
          hereunder shall not be assigned by either party hereto.

7.        Counterparts

          A facsimile,  telecopy or other reproduction of this instrument may be
          executed by one or more parties  hereto and such  executed copy may be
          delivered   by   facsimile   or   similar   instantaneous   electronic
          transmission device pursuant to which the signature of or on behalf of
          such  party can be seen,  and such  execution  and  delivery  shall be
          considered  valid,  binding and  effective  for all  purposes.  At the
          request of any party hereto,  all parties agree to execute an original
          of this  instrument  as  well  as any  facsimile,  telecopy  or  other
          reproduction hereof.

                                       36

<PAGE>

8.        Further Documentation

          Each party hereto agrees to execute such  additional  instruments  and
          take such action as may be reasonably  requested by the other party to
          effect  the  transaction,  or  otherwise  to carry out the  intent and
          purposes of this Agreement.

9.        Notices

          All notices and other communications hereunder shall be in writing and
          shall  be sent by  prepaid  first  class  mail to the  parties  at the
          following addresses,  as amended by the parties with written notice to
          the other:

          To Company       The Hartcourt Companies, Inc.
                           9800 S. Sepulveda Blvd., Suite #818
                           Los Angeles, CA 90045
                           Telephone:       (310) 410-7290
                           Facsimile:       (310)410-7297

          To Kwok:         Thomas Kwok
                           KDG International Limited
                           #3605 Central Plaza
                           18 Harbour Road
                           Wanchai, Hong Kong
                           Telephone:       (852) 28772657

          With copy to:    Archer & Weed
                           4695 MacArthur Court, Suite 530
                           Newport Beach, California 92660
                           Telephone:       (949) 475-7739
                           Facsimile:       (949) 475-9087

7.        Counterparts

          This  Agreement  may  be  executed   simultaneously  in  two  or  more
          counterparts,  each of which shall be deemed an  original,  but all of
          which together shall constitute one and the same instrument.

                                       37

<PAGE>

8.        Governing Law

          This  Agreement was  negotiated,  and shall be governed by the laws of
          Utah notwithstanding any conflict-of-law provision to the contrary.

9.        Entire Agreement

          This Agreement sets forth the entire understanding between the parties
          hereto and no other prior written or oral statement or agreement shall
          be recognized or enforced.

10.       Severability

          If a court of  competent  jurisdiction  determines  that any clause or
          provision of this Agreement is invalid, illegal or unenforceable,  the
          other clauses and  provisions  of the  Agreement  shall remain in full
          force and effect and the clauses and  provisions  which are determined
          to be void,  illegal  or  unenforceable  shall be limited so that they
          shall remain in effect to the extent permissible by law.

11.       Amendment or Waiver

          Every right and remedy  provided herein shall be cumulative with every
          other  right and  remedy,  whether  conferred  herein,  at law,  or in
          equity, and may be enforced  concurrently  herewith,  and no waiver by
          any party of the  performance  of any obligation by the other shall be
          construed  as a  waiver  of  the  same  or  any  other  default  then,
          theretofore, or thereafter occurring or existing. At any time prior to
          Closing,  this  Agreement  may be amended  by a writing  signed by all
          parties hereto.

12.       Headings

          The section and subsection headings in this Agreement are inserted for
          convenience  only and  shall  not  affect  in any way the  meaning  or
          interpretation of this Agreement.

          IN WITNESS  WHEREOF,  the parties have executed this Agreement the day
          and year first written above.

                                        "Kwok"
                                         Thomas  Kwok, an individual

                                        ---------------------------------------
                                        Thomas Kwok

                                       39

<PAGE>

                                        The "Company"
                                        The Hartcourt Companies, Inc.

                                        By:
                                             ----------------------------------
                                             Name:     Alan V. Phan
                                             Title:    Chairman

                                       39<PAGE>

                                                                    Exhibit 10.1

                INNOVATIVE SOLUTIONS AND SUPPORT, INCORPORATED
                       1988 INCENTIVE STOCK OPTION PLAN

         1. PURPOSE. Innovative Solutions and Support, Incorporated, a
Pennsylvania corporation (the "Company"), hereby adopts the Innovative Solutions
and Support, Incorporated 1988 Incentive Stock Option Plan effective August 4,
1988 (the "Plan"). The Plan is intended as an additional incentive to
individuals to enter into or remain in the employ of the Company or any
Affiliate (as defined below) and to devote themselves to the Company's success
by providing them with an opportunity to acquire or increase their proprietary
interest in the Company through receipt of rights (the "Options") to acquire the
Company's Common Stock, par value $0.001 (the "Common Stock"). Each Option
granted under the Plan is intended to be an incentive stock option ("ISO")
within the meaning of Section 422A(b) of the Internal Revenue Code of 1986 (the
"Code") for federal income tax purposes. For purposes of the Plan, the term
"Affiliate" shall mean a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of section
425(e) or (f) of the Code.

         2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company; however, subject to compliance with any applicable
by-law or agreement binding upon the Company, the Board of Directors may
designate a committee composed of two or more of its members to operate and
administer the Plan in its stead. The committee or the Board of Directors
<PAGE>

in its administrative capacity with respect to the Plan is referred to as the
"Committee".

                  (a) MEETINGS. The Committee shall hold meetings at such times
and places as it may determine. Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by the unanimous consent of
the members of the Committee shall be the valid acts of the Committee.

                  (b) GRANTS. The Committee shall from time to time at its
discretion direct the Company to grant Options pursuant to the terms of the
Plan. The Committee shall have plenary authority to determine the employees to
whom and the times at which Options shall be granted, the number of Option
Shares (as defined in Section 4) to be granted and the price and other terms and
conditions thereof, subject, however, to the express provisions of the Plan. In
making such determinations the Committee may take into account the nature of the
employee's services and responsibilities, the employee's present and potential
contribution to the Company's success and such other factors as it may deem
relevant. The interpretation and construction by the Committee of any provision
of the Plan or of any Option granted under it shall be final, binding and
conclusive.

                  (c) EXCULPATION. No member of the Board of Directors or of the
Committee shall be personally liable for monetary damages as such for any action
taken or any failure to take any action in connection with the administration of
the Plan

                                       -2-
<PAGE>

or the granting of Options under it unless (i) the director or member of the
Committee has breached or failed to perform the duties of his office under
Section 8363 of the Pennsylvania Directors' Liability Act (relating to standard
of care and justifiable reliance), and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this subsection 2(c) shall not apply to the
responsibility or liability of a director or a member of the Committee pursuant
to any criminal statute or to the liability of a director or a member of the
Committee for the payment of taxes pursuant to local, state or federal law.

                  (d) INDEMNIFICATION. Each member of the Board of Directors or
of the Committee shall be entitled without further act on his part to indemnity
from the Company to the fullest extent provided by applicable law and the
Company's Articles of Incorporation and/or by-laws in connection with or arising
out of any action, suit or proceeding with respect to the administration of the
Plan or the granting of Options under it in which he may be involved by reason
of his being or having been a member of the Board of Directors or the Committee,
whether or not he continues to be such member of the Board or the Committee at
the time of the action, suit or proceeding.

         3. ELIGIBILITY. All employees of the Company or its Affiliates (who may
also be directors of the Company or its Affiliates) shall be eligible to receive
Options hereunder. An employee who receives an Option is referred to as an
"Optionee."

                                       -3-
<PAGE>

The Committee, in its sole discretion, shall determine whether an individual
qualifies as an employee. An employee may receive more than one Option, but only
on the terms and subject to the restrictions of the Plan.

         4. OPTION SHARES. The aggregate maximum number of shares of the Common
Stock for which Options may be issued under the Plan is 45,000 shares, adjusted
as provided in Section 8 (the "Option Shares"). Option Shares shall be issued
from authorized and unissued Common Stock or Common Stock held in or hereafter
acquired for the treasury of the Company. If any outstanding Option granted
under the Plan expires, lapses or is terminated for any reason, the Option
Shares allocable to the unexercised portion of such Option may again be the
subject of an Option granted pursuant to the Plan.

         5. TERM OF PLAN. The Plan is effective as of August 4, 1988, the date
on which it was adopted by the Board of Directors. If the Plan is not approved
by vote of a majority of the outstanding voting stock of the Company on or
before August 4, 1989, no Option granted pursuant to the Plan shall be an ISO
and all Options granted under the Plan shall remain outstanding but shall not be
treated as ISOs. No Option may be granted under the Plan after August 4, 1998.

         6. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the
Plan shall be evidenced by written documents (the "Option Documents") in such
form as the Committee shall from time to time approve, which Option Documents
shall comply with and be

                                       -4-
<PAGE>

subject to the following terms and conditions and such other terms and
conditions which the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.

                  (a) NUMBER OF OPTION SHARES. Each Option Document shall state
the number of Option Shares to which it pertains.

                  (b) OPTION PRICE. Each Option Document shall state the price
at which Option Shares may be purchased (the "Option Price"), which shall be at
least 100% of the fair market value of the Common Stock on the date the Option
is granted as determined by the Committee; provided, however, that if an Option
is granted to an Optionee who then owns, directly or by attribution under
section 425(d) of the Code, shares possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or an Affiliate,
then the Option Price shall be at least 110% of the fair market value of the
Option Shares on the date the Option is granted. If the Common Stock is traded
in a public market, then the fair market value per share shall be the mean
between the closing "bid" and "asked" prices thereof or the mean between the
highest and lowest quoted selling prices thereof, as applicable and as the
Committee determines, on the day the Option is grated as reported in customary
financial reporting services.

                  (c) MEDIUM OF PAYMENT. An Optionee shall pay for Option Shares
(i) in cash, (ii) by certified check payable to the order of the Company, or
(iii) by such other mode of payment as the Committee may approve. Furthermore,
the Committee may

                                       -5-
<PAGE>

provide in an Option Document that payment may be made all or in part in shares
of the Common Stock held by the Optionee for more than one year. If payment is
made in whole or in part in shares of the Common Stock, then the Optionee shall
deliver to the Company certificates registered in the name of such Optionee
representing shares of Common Stock owned by such Optionee, free of all liens,
claims and encumbrances of every kind and having an aggregate fair market value
on the date of delivery that is not greater than the Option Price of the Option
Shares with respect to which such Option is to be exercised, accompanied by
stock powers duly endorsed in blank by the Optionee. Notwithstanding the
foregoing, the Committee, in its sole discretion, may refuse to accept shares of
Common Stock in payment of the Option Price. In that event, any certificates
representing shares of Common Stock which were delivered to the Company shall be
returned to the Optionee with notice of the refusal of the Committee to accept
such shares in payment of the Option Price. The Committee may impose from time
to time such limitations and prohibitions on the use of shares of the Common
Stock to exercise an Option as it deems appropriate.

                  (d) TERMINATION OF OPTIONS. No Option shall be exercisable
after the first to occur of the following:

                           (i)   Expiration of the Option term specified in the
Option Document, which shall not exceed (A) ten years from the date of grant, or
(B) five years from the date of grant if the Optionee on the date of grant owns,
directly or by

                                       -6-
<PAGE>

attribution under section 425(d) of the Code, shares possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or of an Affiliate;

                           (ii)  Expiration of three months from the date of
Optionee's employment with the Company or its Affiliates terminates for any
reason other than disability (within the meaning of section 22(e)(3) of the
Code), death or as specified in subsection 6(d)(iv) or (v), below;

                           (iii) Expiration of one year from the date the
Optionee's employment with the Company or its Affiliates terminates due to the
Optionee's disability (within the meaning of section 22(e)(3) of the Code) or
death;

                           (iv)  The date set by the Committee to be an
accelerated expiration date in the event of the occurrence of a transaction or
series of related transactions in which (A) the Company is dissolved or
liquidated or sells substantially all of its operating assets, (B) the Company
is not the surviving or acquiring entity or (C) the Company becomes an 80% or
more owned subsidiary of another company, in which case the Committee may take
whatever other action with respect to the Option, including acceleration of any
exercise provisions, it deems necessary or desirable; or

                           (v)   A finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the Optionee has breached his employment contract with the
Company or an Affiliate, or has been

                                       -7-
<PAGE>

engaged in any sort of disloyalty to the Company or an Affiliate, including,
without limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his employment or service or has disclosed trade
secrets or confidential information of the Company or an Affiliate. In such
event, in addition to immediate termination of the Option, the Optionee, upon a
determination by the Committee, shall automatically forfeit all Option Shares
for which the Company has not yet delivered the share certificates upon refund
by the Company of the Option Price. Notwithstanding anything herein to the
contrary, the Company may withhold delivery of share certificates pending the
resolution of any inquiry that could lead to a finding resulting in a
forfeiture.

                  (e) TRANSFERS. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution. During
the lifetime of the person to whom an Option is granted, such Option may be
exercised only by him or his legal representative in the event of his
incompetence.

                  (f) OTHER PROVISIONS. The Option Documents shall contain such
other provisions including, without limitation, additional restrictions upon the
exercise of the Option, additional limitations upon the term of the Option,
restrictions on the transfer of Option Shares and conditions of forfeiture
applicable to Option Shares, as the Committee shall deem advisable.

                                       -8-
<PAGE>

                  (g) ADDITIONAL BENEFITS. An Option Document may grant the
Optionee the right to receive additional compensation, in cash or other
property, from the Company at the time of exercise of the Option provided such
additional compensation is includible in income under the provisions of sections
61 and 83 of the Code. The additional compensation may be determined in any
manner specified by the Committee in the Option Document.

                  (h) AMENDMENT. The Committee shall have the right to amend
Option Documents issued to an Optionee subject to his consent, except that the
consent of the Optionee shall not be required for any amendment made under
subsection 6(d)(iv).

         7. EXERCISE. No Option shall be deemed to have been exercised prior to
the receipt by the Company of written notice of such exercise and of payment in
full of the Option Price for the Option Shares to be purchased. Each such notice
shall specify the number of Option Shares to be purchased and shall (unless the
Option Shares are covered by a then current registration statement or a
Notification under Regulation A under the Securities Act of 1933, as amended
(the "Act")), contain the Optionee's acknowledgment in form and substance
satisfactory to the Company that (a) such Option Shares are being purchased for
investment and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (b) the Optionee has
been advised and understands that (i) the Option Shares have not been

                                       -9-
<PAGE>

registered under the Act and are "restricted securities" within the meaning of
Rule 144 under the Act and are subject to restrictions on transfer and (ii) the
Company is under no obligation to register the Option Shares under the Act or to
take any action which would make available to the Optionee any exemption from
such registration, (c) such Option Shares may not be transferred without
compliance with all applicable federal and state securities laws, and (d) an
appropriate legend referring to the foregoing restrictions on transfer and any
other restrictions imposed under the Option Documents may be endorsed on the
certificates. Notwithstanding the above, should the Company be advised by
counsel that issuance of shares should be delayed pending (A) registration under
federal or state securities laws or (B) the receipt of an opinion that an
appropriate exemption therefrom is available, the Company may defer exercise of
any Option granted hereunder until either such event in (A) or (B) has occurred.

         8. ADJUSTMENTS ON CHANGES IN CAPITALIZATION. The aggregate number of
shares and class of shares as to which Options may be granted hereunder, the
number of shares covered by each outstanding Option and the Option Price thereof
shall be appropriately adjusted in the event of a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Common Stock and/or other outstanding equity security or a
recapitalization or other

                                      -10-
<PAGE>

capital adjustment (not including the issuance of Common Stock on the conversion
of other securities of the Company which are convertible into Common Stock)
affecting the Common Stock which is effected without receipt of consideration by
the Company. The Committee shall have authority to determine the adjustments to
be made under this Section and any such determination by the Committee shall be
final, binding and conclusive; provided, however, that no adjustment shall be
made which will cause an Option to lose its status as an ISO without the consent
of the Optionee.

         9. AMENDMENT OF THE PLAN. The Board of Directors of the Company may
amend the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not, without obtaining
approval by vote of a majority of the outstanding voting stock of the Company,
within twelve months before or after such action, change the class of
individuals eligible to receive an Option, extend the expiration date of the
Plan, decrease the minimum Option Price of an Option or increase the maximum
number of shares as to which Options may be granted, except as provided in
Section 8 hereof. No amendment to the Plan shall adversely affect any
outstanding Option, however, without the consent of the Optionee.

         10. NO CONTINUED EMPLOYMENT. The grant of an Option pursuant to the
Plan shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company of any Affiliate to retain the
Optionee in

                                      -11-
<PAGE>

the employ of the Company or an Affiliate or in any other capacity.

         11. WITHHOLDING OF TAXES. Whenever the Company proposes or is required
to deliver or transfer Option Shares, property or cash in connection with the
exercise of an Option, the Company shall have the right to (a) require the
recipient to remit or otherwise make available to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate or
certificates for such Option Shares, property or cash or (b) take whatever
action it deems necessary to protect its interests with respect to tax
liabilities, including, without limitation, withholding a portion of any Option
Shares, property or cash otherwise deliverable pursuant to the Plan. The
Company's obligation to make any delivery or transfer of Option Shares, property
or cash shall be conditioned on the Optionee's compliance with any withholding
requirement to the Company's satisfaction.

                                      -12-

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