Document:

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                                                                     Exhibit 4.1

                       1994 INCENTIVE STOCK OPTION PLAN

             A Restatement of the 1984 Incentive Stock Option Plan
                          effective October 28, 1993
                         (Amended as of November 1999)

1.   Purposes of the Plan.  The purposes of this Stock Option Plan are:
     --------------------

     to attract and retain the best available personnel for positions of
     substantial responsibility,

     to provide additional incentive to Employees and Consultants, and

     to promote the success of the Company's business.

     Options granted under the Plan may be Incentive Stock Options or
     Nonstatutory Stock Options, as determined by the Administrator at the time
     of grant.  Stock Purchase Rights may also be granted under the Plan.

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

     (a)  "Administrator" means the Board or any of its Committees as shall be
           -------------
          administering the Plan, in accordance with Section 4 of the Plan.

     (b)  "Applicable Laws" means the legal requirements relating to the
           ---------------
          administration of stock option plans under state corporate and
          securities laws and the Code.

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

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

     (e)  "Committee"  means a Committee appointed by the Board in accordance
           ---------
          with Section 4 of the Plan.

     (f)  "Common Stock" means the Common Stock of the Company.
           ------------

     (g)  "Company" means The Santa Cruz Operation, Inc., a California
           -------
          corporation.

     (h)  "Consultant" means any person, including an advisor, engaged by the
           ----------
          Company or a Parent or Subsidiary to render services and who is
          compensated for such services, provided that the term "Consultant"
          shall not include Directors who are paid only a director's fee by the
          Company or who are not compensated by the Company for their services
          as Directors.

     (i)  "Continuous Status as an Employee or Consultant" means that the
           ----------------------------------------------
          employment or consulting relationship is not interrupted or terminated
          by the Company, any Parent or Subsidiary.  Continuous Status as an
          Employee or Consultant shall not be considered interrupted in the case
          of:  (i) any leave of absence approved by the Company, including sick
          leave, military leave, or any other personal leave; provided, however,
          that for purposes of Incentive Stock Options, any such leave may not
          exceed ninety (90) days, unless reemployment upon the expiration of
          such leave is guaranteed by contract

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          (including certain Company policies) or statute or, if reemployment is
          not so guaranteed, Continuous Status as an Employee or Consultant
          shall not be considered interrupted, but the Incentive Stock Option
          shall automatically be converted into a Nonstatutory Stock Option on
          the ninety-first (91st) day of such leave; or (ii) transfers between
          locations of the Company or between the Company, its Parent, its
          Subsidiaries or its successor.

     (j)  "Director" means a member of the Board.
           --------

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

     (l)  "Employee" means any person, including Officers and Directors,
           --------
          employed by the Company or any Parent or Subsidiary of the Company.
          Neither service as a Director nor payment of a director's fee by the
          Company shall be sufficient to constitute "employment" by the Company.

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

     (n)  "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 National
          Market System of the National Association of Securities Dealers, Inc.
          Automated Quotation ("NASDAQ") System, the Fair Market Value of a
          Share of Common Stock shall be the closing sales price for such stock
          (or the closing bid, if no sales were reported) as quoted on such
          system or exchange (or the exchange with the greatest volume of
          trading in Common Stock) on the last market trading day prior to the
          day of determination, as reported in The Wall Street Journal or such
          other source as the Administrator deems reliable;

          (ii)  If the Common Stock is quoted on the NASDAQ System (but not on
          the National Market System thereof) or 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 on the last
          market trading day prior to the day of determination, as reported in
          The Wall Street Journal or such other source as the Administrator
          deems reliable;

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

     (o)  "Incentive Stock Option" means an Option intended to qualify as an
           ----------------------
          incentive stock option within the meaning of Section 422 of the Code
          and the regulations promulgated thereunder.

     (p)  "Nonstatutory Stock Option" means an Option not intended to qualify as
           -------------------------
          an Incentive Stock Option.

     (q)  "Notice of Grant" means a written notice evidencing certain terms and
           ---------------
          conditions of an individual Option or Stock Purchase Right grant.  The
          Notice of Grant is part of the Option Agreement.

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     (r)  "Officer" means a person who is an officer of the Company within the
           -------
          meaning of Section 16 of the Exchange Act and the rules and
          regulations promulgated thereunder.

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

     (t)  "Option Agreement" means a written agreement between the Company and
           ----------------
          an Optionee evidencing the terms and conditions of an individual
          Option grant.  The Option Agreement is subject to the terms and
          conditions of the Plan.

     (u)  "Option Exchange Program" means a program whereby outstanding options
           -----------------------
          are surrendered in exchange for options with a lower exercise price.

     (v)  "Optioned Stock" means the Common Stock subject to an Option or Stock
           --------------
          Purchase Right.

     (w)  "Optionee" means an Employee or Consultant who holds an outstanding
           --------
          Option or Stock Purchase Right.

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

     (y)  "Plan" means this 1994 Incentive Stock Option Plan.
           ----

     (z)  "Restricted Stock" means shares of Common Stock acquired pursuant to a
           ----------------
          grant of Stock Purchase Rights under Section 11 below.

          (aa) "Restricted Stock Purchase Agreement" means a written agreement
                -----------------------------------
          between the Company and the Optionee evidencing the terms and
          restrictions applying to stock purchased under a Stock Purchase Right.
          The Restricted Stock Purchase Agreement is subject to the terms and
          conditions of the Plan and the Notice of Grant.

          (bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
                ----------
          successor to Rule 16b-3, as in effect when discretion is being
          exercised with respect to the Plan.

          (cc) "Share" means a share of the Common Stock, as adjusted in
                -----
          accordance with Section 13 of the Plan.

          (dd) "Stock Purchase Right" means the right to purchase Common Stock
                --------------------
          pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

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

3.   Stock Subject to the Plan.  Subject to the provisions of Section 13 of the
     -------------------------
     Plan, the maximum aggregate number of Shares which may be optioned and sold
     under the Plan is 20,013,665 Shares.  The Shares may be authorized, but
     unissued, or reacquired Common Stock.  However, should the Company
     reacquire Shares which were issued pursuant to the exercise of an Option or
     Stock Purchase Right, such Shares shall not become available for future
     grant under the Plan.

     If an Option or Stock Purchase Right expires or becomes unexercisable
     without having been exercised in full, or is surrendered pursuant to an
     Option Exchange Program, the unpurchased

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     Shares which were subject thereto shall become available for future grant
     or sale under the Plan (unless the Plan has terminated); provided, however,
                                                              --------
     that Shares that have actually been issued under the Plan, whether upon
     exercise of an Option or Right, shall not be returned to the Plan and shall
     not become available for future distribution under the Plan, except that if
     Shares of Restricted Stock are repurchased by the Company at their original
     purchase price, and the original purchaser of such Shares did not receive
     any benefits of ownership of such Shares, such Shares shall become
     available for future grant under the Plan. For purposes of the preceding
     sentence, voting rights shall not be considered a benefit of Share
     ownership.

4.   Administration of the Plan.
     --------------------------

     (a)  Procedure.
          ---------

          (i)   Multiple Administrative Bodies.  If permitted by Rule 16b-3, the
                ------------------------------
          Plan may be administered by different bodies with respect to
          Directors, Officers who are not Directors, and Employees who are
          neither Directors nor Officers.

          (ii)  Administration With Respect to Directors and Officers Subject to
                ----------------------------------------------------------------
          Section 16(b).  With respect to Option or Stock Purchase Right grants
          -------------
          made to Employees who are also Officers or Directors subject to
          Section 16(b) of the Exchange Act, the Plan shall be administered by
          (A) the Board, if the Board may administer the Plan in compliance with
          the rules governing a plan intended to qualify as a discretionary plan
          under Rule 16b-3, or (B) a committee designated by the Board to
          administer the Plan, which committee shall be constituted to comply
          with the rules governing a plan intended to qualify as a discretionary
          plan under Rule 16b-3.  Once appointed, such Committee shall continue
          to serve in its designated capacity until otherwise directed by the
          Board.  From time to time the Board may increase the size of the
          Committee and appoint additional members, remove members (with or
          without cause) and substitute new members, fill vacancies (however
          caused), and remove all members of the Committee and thereafter
          directly administer the Plan, all to the extent permitted by the rules
          governing a plan intended to qualify as a discretionary plan under
          Rule 16b-3.

          (iii) Administration With Respect to Other Persons.  With respect to
                --------------------------------------------
          Option or Stock Purchase Right grants made to Employees or Consultants
          who are neither Directors nor Officers of the Company, the Plan shall
          be administered by (A) the Board or (B) a committee designated by the
          Board, which committee shall be constituted to satisfy Applicable
          Laws. Once appointed, such Committee shall serve in its designated
          capacity until otherwise directed by the Board. The Board may increase
          the size of the Committee and appoint additional members, remove
          members (with or without cause) and substitute new members, fill
          vacancies (however caused), and remove all members of the Committee
          and thereafter directly administer the Plan, all to the extent
          permitted by Applicable Laws.

     (b)  Powers of the Administrator.  Subject to the provisions of the Plan,
          ---------------------------
          and in the case of a Committee, subject to the specific duties
          delegated by the Board to such Committee, the Administrator shall have
          the authority, in its discretion:

          (i)    to determine the Fair Market Value of the Common Stock, in
          accordance with Section 2(n) of the Plan;

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          (ii)   to select the Consultants and Employees to whom Options and
          Stock Purchase Rights may be granted hereunder;

          (iii)  to determine whether and to what extent Options and Stock
          Purchase Rights or any combination thereof, are granted hereunder;

          (iv)   to determine the number of shares of Common Stock to be covered
          by each Option and Stock Purchase Right granted hereunder;

          (v)    to approve forms of agreement for use under the Plan;

          (vi)   to determine the terms and conditions, not inconsistent with
          the terms of the Plan, of any award granted hereunder. Such terms and
          conditions include, but are not limited to, the exercise price, the
          time or times when Options or Stock Purchase Rights may be exercised
          (which may be based on performance criteria), any vesting acceleration
          or waiver of forfeiture restrictions, and any restriction or
          limitation regarding any Option or Stock Purchase Right or the shares
          of Common Stock relating thereto, based in each case on such factors
          as the Administrator, in its sole discretion, shall determine;

          (vii)  to reduce the exercise price of any Option or Stock Purchase
          Right to the then current Fair Market Value if the Fair Market Value
          of the Common Stock covered by such Option or Stock Purchase Right
          shall have declined since the date the Option or Stock Purchase Right
          was granted;

          (viii) to construe and interpret the terms of the Plan and awards
          granted pursuant to the Plan;

          (ix)   to prescribe, amend and rescind rules and regulations relating
          to the Plan;

          (x)    to modify or amend each Option or Stock Purchase Right (subject
          to Section 15(c) of the Plan);

          (xi)   to authorize any person to execute on behalf of the Company any
          instrument required to effect the grant of an Option or Stock Purchase
          Right previously granted by the Administrator;

          (xii)  to institute an Option Exchange Program;

          (xiii) to determine the terms and restrictions applicable to Options
          and Stock Purchase Rights and any Restricted Stock; and

          (xiv)  to make all other determinations deemed necessary or advisable
          for administering the Plan.

     (c)  Effect of Administrator's Decision.  The Administrator's decisions,
          ----------------------------------
          determinations and interpretations shall be final and binding on all
          Optionees and any other holders of Options or Stock Purchase Rights.

5.   Eligibility.  Nonstatutory Stock Options and Stock Purchase Rights may be
     -----------
     granted to Employees, Directors and Consultants.  Incentive Stock Options
     may be granted only to Employees.  If

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     otherwise eligible, an Employee or Consultant who has been granted an
     Option or Stock Purchase Right may be granted additional Options or Stock
     Purchase Rights.

6.   Limitations.
     -----------

     (a)  Each Option shall be designated in the Notice of Grant as either an
          Incentive Stock Option or a Nonstatutory Stock Option.  However,
          notwithstanding such designations, to the extent that the aggregate
          Fair Market Value:

          (i)  of Shares subject to an Optionee's incentive stock options
          granted by the Company, any Parent or Subsidiary, which (ii) become
          exercisable for the first time during any calendar year (under all
          plans of the Company or any Parent or Subsidiary)

          exceeds $100,000, such excess Options shall be treated as Nonstatutory
          Stock Options.  For purposes of this Section 6(a), incentive stock
          options shall be taken into account in the order in which they were
          granted, and the Fair Market Value of the Shares shall be determined
          as of the time of grant.

     (b)  Neither the Plan nor any Option or Stock Purchase Right shall confer
          upon an Optionee any right with respect to continuing the Optionee's
          employment or consulting relationship with the Company, nor shall they
          interfere in any way with the Optionee's right or the Company's right
          to terminate such employment or consulting relationship at any time,
          with or without cause.

     (c)  The following limitations shall apply to grants of Options and Stock
          Purchase Rights to Officers:

          (i)  no Officer shall be granted in any fiscal year of the Company,
          Options and Stock Purchase Rights to purchase more than the number of
          shares issuable under the Plan; and

          (ii) over the remaining term of the Plan, no Officer shall be granted
          Options and Stock Purchase Rights to purchase more than the number of
          shares issuable under the Plan.

          The foregoing limitations set forth in this Section 6(c) are intended
          to satisfy the requirements applicable to Options and Stock Purchase
          Rights intended to qualify as "performance-based compensation" (within
          the meaning of Section 162(m) of the Code).  In the event the
          Administrator determines that such limitations are not required to
          qualify Options and Stock Purchase Rights as performance-based
          compensation, the Administrator may modify or eliminate such
          limitations.

7.   Term of Plan.  Subject to Section 19 of the Plan, the Plan shall become
     ------------
     effective upon its adoption by the Board of Directors on October 28,1993,
     subject to its approval by the shareholders of the Company as described in
     Section 19 of the Plan.  It shall continue in effect for a term of ten (10)
     years unless terminated earlier under Section 15 of the Plan.

8.   Term of Option.  The term of each Option shall be stated in the Notice of
     --------------
     Grant; provided, however, that in the case of an Incentive Stock Option,
     the term shall be ten (10) years from the date of grant or such shorter
     term as may be provided in the Notice of Grant.  Moreover, in the case of
     an Incentive Stock Option granted to an Optionee who, at the time the
     Incentive Stock

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     Option is granted, owns stock representing more than ten percent (10%) of
     the voting power of all classes of stock of the Company or any Parent or
     Subsidiary, the term of the Incentive Stock Option shall be five (5) years
     from the date of grant or such shorter term as may be provided in the
     Notice of Grant.

9.   Option Exercise Price and Consideration.
     ---------------------------------------

     (a)  Exercise Price.  The per share exercise price for the Shares to be
          --------------
          issued pursuant to exercise of an Option shall be determined by the
          Administrator, subject to the following:

          (i)   In the case of an Incentive Stock Option

                (A) granted to an Employee who, at the time the Incentive Stock
                Option is granted, owns stock representing more than ten percent
                (10%) of the voting power of all classes of stock of the Company
                or any Parent or Subsidiary, the per Share exercise price shall
                be no less than 110% of the Fair Market Value per Share on the
                date of grant.

                (B) granted to any Employee, the per Share exercise price shall
                be no less than 100% of the Fair Market Value per Share on the
                date of grant.

          (ii)  In the case of a Nonstatutory Stock Option, the per Share
                exercise price shall be determined by the Administrator.

     (b)  Waiting Period and Exercise Dates.  At the time an Option is granted,
          ---------------------------------
          the Administrator shall fix the period within which the Option may be
          exercised and shall determine any conditions which must be satisfied
          before the Option may be exercised.  In so doing, the Administrator
          may specify that an Option may not be exercised until the completion
          of a service period.

     (c)  Form of Consideration.  The Administrator shall determine the
          ---------------------
          acceptable form of consideration for exercising an Option, including
          the method of payment.  In the case of an Incentive Stock Option, the
          Administrator shall determine the acceptable form of consideration at
          the time of grant.  Such consideration may consist entirely of:

          (i)   cash;

          (ii)  check;

          (iii) promissory note;

          (iv)  surrender of other Shares which (i) in the case of Shares
          acquired upon exercise of an option, have been owned by the Optionee
          for more than six (6) months on the date of surrender, and (ii) have a
          Fair Market Value on the date of surrender equal to the aggregate
          Exercise Price of the Exercised Shares; or

          (v)   delivery of Optionee's promissory note (the "Note") in the form
          attached hereto as Exhibit C, in the amount of the aggregate Exercise
          Price of the Exercised Shares together with the execution and delivery
          by the Optionee of the Security Agreement attached hereto as Exhibit
          B. The Note shall bear interest at a rate no less than the "applicable
          federal rate" prescribed under the Code and its regulations at time of
          purchase, and shall

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          be secured by a pledge of the Shares purchased by the Note pursuant to
          the Security Agreement.

          (iv) any combination of the foregoing methods of payment; or

          (v)  such other consideration and method of payment for the issuance
          of Shares to the extent permitted by Applicable Laws.

10.  Exercise of Option.
     ------------------

     (a)  Procedure for Exercise; Rights as a Shareholder.  Any Option granted
          -----------------------------------------------
          hereunder shall be exercisable according to the terms of the Plan and
          at such times and under such conditions as determined by the
          Administrator and set forth in the Option Agreement.

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

          An Option shall be deemed exercised when the Company receives: (i)
          written notice of exercise (in accordance with the Option Agreement)
          from the person entitled to exercise the Option, and (ii) full payment
          for the Shares with respect to which the Option is exercised. Full
          payment may consist of any consideration and method of payment
          authorized by the Administrator and permitted by the Option Agreement
          and the Plan. Shares issued upon exercise of an Option shall be issued
          in the name of the Optionee or, if requested by the Optionee, in the
          name of the Optionee and his or her spouse. Until the stock
          certificate evidencing such Shares is issued (as evidenced by the
          appropriate entry on the books of the Company or of a duly authorized
          transfer agent of the Company), 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. The
          Company shall issue (or cause to be issued) such stock certificate
          promptly after the Option is exercised. No adjustment will 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 13
          of the Plan.

          Exercising an Option in any manner shall decrease the number of Shares
          thereafter 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)  Termination of Employment or Consulting Relationship.  In the event
          ----------------------------------------------------
          that an Optionee's Continuous Status as an Employee or Consultant
          terminates (but not in the event of a change of status from Employee
          to Consultant (in which case an Employee's Incentive Stock Option
          shall automatically convert to a Nonstatutory Stock Option on the
          ninety-first (91st) day following such change of status) or from
          Consultant to Employee), other than upon the Optionee's death or
          Disability, the Optionee may exercise his or her Option, but only
          within such period of time as is determined by the Administrator, and
          only to the extent that the Optionee was entitled to exercise it at
          the date of termination (but in no event later than the expiration of
          the term of such Option as set forth in the Notice of Grant).  In the
          case of an Incentive Stock Option, the Administrator shall determine
          such period of time (in no event to exceed three (3) months from the
          date of termination) when the Option is granted.  If, at the date of
          termination, the Optionee is not entitled to exercise his or her
          entire Option, the Shares covered by the unexercisable portion of the
          Option shall revert to the Plan.  If, after termination, the Optionee
          does not exercise his or

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          her Option within the time specified by the Administrator, the Option
          shall terminate, and the Shares covered by such Option shall revert to
          the Plan.

     (c)  Disability of Optionee.  Notwithstanding the provisions of Section
          ----------------------
          10(b) above, in the event of termination of an Optionee's Continuous
          Status as an Employee or Consultant as a result of his total and
          permanent disability (as defined in Section 22(e)(3) of the Code),
          Optionee may, but only within such period of time as is determined by
          the Administrator, of at least six (6) months (with such period of
          time in the case of an Incentive Stock Option not exceeding twelve
          (12) months) from the date of such termination (but in no event later
          than the expiration date of the term of such Option as set forth in
          the Option Agreement), exercise the Option to the extent otherwise
          entitled to exercise it at the date of such termination.  To the
          extent that Optionee was not entitled to exercise the Option at the
          date of termination, or if Optionee does not exercise such Option to
          the extent so entitled within the time specified herein, the Option
          shall terminate.

     (d) Death of Optionee.  In the event of the death of an Optionee:
         -----------------

          (i)   during the term of the Option who is at the time of his or her
          death an Employee or Consultant of the Company and who shall have been
          in Continuous Status as an Employee or Consultant since the date of
          grant of the Option, the Option may be exercised by the Optionee's
          estate or by a person who acquired the right to exercise the Option by
          bequest or inheritance until the term of the option, or such shorter
          period as is set forth in the option agreement, expires, and the
          Option shall be treated for exercise purposes as if the Optionee had
          continued living and had remained in Continuous Status as an Employee
          or Consultant for six (6) months after the date of death; or

          (ii)  after the termination of an Optionee's Continuous Status as an
          Employee or Consultant, the Option may be exercised by the Optionee's
          estate or by a person who acquired the right to exercise the Option by
          bequest or inheritance until the term of the option, or such shorter
          period as is set forth in the option agreement, expires, and the
          Option shall be treated for exercise purposes as if the Optionee had
          continued living and had remained in Continuous Status as an Employee
          or Consultant through the date of Optionee's death; and

          (iii) if an Option is not exercised within the time specified herein,
          the Option shall terminate.

     (e)  Buyout Provisions.  The Administrator may at any time offer to buy out
          -----------------
          for a payment in cash or Shares, an Option previously granted, based
          on such terms and conditions as the Administrator shall establish and
          communicate to the Optionee at the time that such offer is made.

11.  Stock Purchase Rights.
     ---------------------

     (a)  Rights to Purchase.  Stock Purchase Rights may be issued either alone,
          ------------------
          in addition to, or in tandem with other awards granted under the Plan
          and/or cash awards made outside of the Plan.  After the Administrator
          determines that it will offer Stock Purchase Rights under the Plan, it
          shall advise the offeree in writing, by means of a Notice of Grant, of
          the terms, conditions and restrictions related to the offer, including
          the number of Shares that the offeree shall be entitled to purchase,
          the price to be paid, and the time within which the offeree must
          accept such offer, which shall in no event exceed six (6) months from
          the

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          date upon which the Administrator made the determination to grant the
          Stock Purchase Right. The offer shall be accepted by execution of a
          Restricted Stock Purchase Agreement in the form determined by the
          Administrator.

     (b)  Repurchase Option.  Unless the Administrator determines otherwise, the
          -----------------
          Restricted Stock Purchase Agreement shall grant the Company a
          repurchase option exercisable upon the voluntary or involuntary
          termination of the purchaser's employment with the Company for any
          reason (including death or Disability). The purchase price for Shares
          repurchased pursuant to the Restricted Stock purchase agreement shall
          be the original price paid by the purchaser and may be paid by
          cancellation of any indebtedness of the purchaser to the Company. The
          repurchase option shall lapse at a rate determined by the
          Administrator.

     (c)  Other Provisions.  The Restricted Stock Purchase Agreement shall
          ----------------
          contain such other terms, provisions and conditions not inconsistent
          with the Plan as may be determined by the Administrator in its sole
          discretion. In addition, the provisions of Restricted Stock Purchase
          Agreements need not be the same with respect to each purchaser.

     (d)  Rights as a Shareholder.  Once the Stock Purchase Right is exercised,
          -----------------------
          the purchaser shall have the rights equivalent to those of a
          shareholder, and shall be a shareholder when his or her purchase is
          entered upon the records of the duly authorized transfer agent of the
          Company. No adjustment will be made for a dividend or other right for
          which the record date is prior to the date the Stock Purchase Right is
          exercised, except as provided in Section 13 of the Plan.

12.  Non-Transferability of Options and Stock Purchase Rights.  An Option or
     --------------------------------------------------------
     Stock Purchase Right 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.

13.  Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
     ---------------------------------------------------------------------------
     or Change of Control.
     --------------------

     (a)  Changes in Capitalization.  Subject to any required action by the
          -------------------------
          shareholders of the Company, the number of shares of Common Stock
          covered by each outstanding Option and Stock Purchase Right, and the
          number of shares of Common Stock which have been authorized for
          issuance under the Plan but as to which no Options or Stock Purchase
          Rights have yet been granted or which have been returned to the Plan
          upon cancellation or expiration of an Option or Stock Purchase Right,
          as well as the price per share of Common Stock covered by each such
          outstanding Option or Stock Purchase Right, shall be proportionately
          adjusted for any increase or decrease in the number of issued shares
          of Common Stock resulting from a stock split, reverse stock split,
          stock dividend, combination or reclassification of the Common Stock,
          or any other increase or decrease in the number of issued shares of
          Common Stock 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."  Such adjustment shall be made by the Board, whose
          determination in that respect shall be final, binding and conclusive.
          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

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          made with respect to, the number or price of shares of Common Stock
          subject to an Option or Stock Purchase Right.

     (b)  Dissolution or Liquidation.  In the event of the proposed dissolution
          --------------------------
          or liquidation of the Company, to the extent that an Option or Stock
          Purchase Right has not been previously exercised, it will terminate
          immediately prior to the consummation of such proposed action.  The
          Board may, in the exercise of its sole discretion in such instances,
          declare that any Option or Stock Purchase Right shall terminate as of
          a date fixed by the Board and give each Optionee the right to exercise
          his or her Option or Stock Purchase Right as to all or any part of the
          Optioned Stock, including Shares as to which the Option or Stock
          Purchase Right would not otherwise be exercisable.

     (c)  Merger or Asset Sale.  Subject to the provisions of paragraph (d)
          --------------------
          hereof, in the event of a merger of the Company with or into another
          corporation, or the sale of substantially all of the assets of the
          Company, each outstanding Option and Stock Purchase Right shall be
          assumed or an equivalent option or right shall be substituted by the
          successor corporation or a Parent or Subsidiary of the successor
          corporation. In the event that the successor corporation does not
          agree to assume the Option or Stock Purchase Right or to substitute an
          equivalent option or right, the Administrator shall, in lieu of such
          assumption or substitution, provide for the Optionee to have the right
          to exercise the Option or Stock Purchase Right as to all or a portion
          of the Optioned Stock, including Shares as to which it would not
          otherwise be exercisable. If the Administrator makes an Option or
          Stock Purchase Right exercisable in lieu of assumption or substitution
          in the event of a merger or sale of assets, the Administrator shall
          notify the Optionee that the Option or Stock Purchase Right shall be
          fully exercisable for a period of fifteen (15) days from the date of
          such notice, and the Option or Stock Purchase Right will terminate
          upon the expiration of such period. For the purposes of this
          paragraph, the Option or Stock Purchase Right shall be considered
          assumed if, following the merger or sale of assets, the option or
          right confers the right to purchase, for each Share of Optioned Stock
          subject to the Option or Stock Purchase Right immediately prior to the
          merger or sale of assets, the consideration (whether stock, cash, or
          other securities or property) received in the merger or sale of assets
          by holders of Common Stock for each Share held on the effective date
          of the transaction (and if holders were offered a choice of
          consideration, the type of consideration chosen by the holders of a
          majority of the outstanding Shares); provided, however, that if such
          consideration received in the merger or sale of assets was not solely
          common stock of the successor corporation or its Parent, the
          Administrator may, with the consent of the successor corporation,
          provide for the consideration to be received upon the exercise of the
          Option or Stock Purchase Right, for each Share of Optioned Stock
          subject to the Option or Stock Purchase Right, to be solely common
          stock of the successor corporation or its Parent equal in fair market
          value to the per share consideration received by holders of Common
          Stock in the merger or sale of assets.

     (d)  Change in Control.  In the event of a "Change in Control" of the
          -----------------
          Company, as defined in paragraph (e) below, then the following
          acceleration and valuation provisions shall apply:

          (i)  Except as otherwise determined by the Administrator, in its
          discretion, prior to or after the occurrence of a Change in Control,
          any Options and Stock Purchase Rights outstanding on the date such
          Change in Control is determined to have occurred that are not yet
          exercisable and vested on such date shall become fully exercisable and
          vested;

                                    Page 11
<PAGE>

          (ii)  Except as otherwise determined by the Administrator, in its
          discretion, prior to or after the occurrence of a Change in Control,
          all outstanding Options and Stock Purchase Rights, to the extent they
          are exercisable and vested (including Options and Stock Purchase
          Rights that shall become exercisable and vested pursuant to
          subparagraph (i) above), shall be terminated in exchange for a cash
          payment equal to the Change in Control Price, (reduced by the exercise
          price applicable to such Options or Stock Purchase Rights).  These
          cash proceeds shall be paid to the Optionee or, in the event of death
          of an Optionee prior to payment, to the estate of the Optionee or to a
          person who acquired the right to exercise the Option or Stock Purchase
          Right by bequest or inheritance.

     (e)  Definition of "Change in Control".  For purposes of this Section 13, a
          ---------------------------------
          "Change in Control" means the happening of any of the following:

          (i)   When any "person," as such term is used in Sections 13(d) and
          14(d) of the Exchange Act (other than the Company, a Subsidiary or a
          Company employee benefit plan, including any trustee of such plan
          acting as trustee) is or becomes the "beneficial owner" (as defined in
          Rule 13d-3 under the Exchange Act), directly or indirectly, of
          securities of the Company representing more than twenty-five percent
          (25%) of the combined voting power of the Company's then outstanding
          securities entitled to vote generally in the election of directors; or

          (ii)  A merger or consolidation of the Company with any other
          corporation, other than a merger or consolidation which would result
          in the voting securities of the Company outstanding immediately prior
          thereto continuing to represent (either by remaining outstanding or by
          being converted into voting securities of the surviving entity) at
          least seventy-five percent (75%) of the total voting power represented
          by the voting securities of the Company or such surviving entity
          outstanding immediately after such merger or consolidation, or the
          stockholders of the Company approve an agreement for the sale or
          disposition by the Company of all or substantially all the Company's
          assets; or

          (iii) A change in the composition of the Board of Directors of the
          Company occurring within a two-year period, as a result of which fewer
          than a majority of the directors are Incumbent Directors.  "Incumbent
          Directors" shall mean directors who either (A) are directors of the
          Company as of the date the Plan is approved by the stockholders, or
          (B) are elected, or nominated for election, to the Board of Directors
          of the Company with the affirmative votes of at least a majority of
          the Incumbent Directors at the time of such election or nomination
          (but shall not include an individual whose election or nomination is
          in connection with an actual or threatened proxy contest relating to
          the election of directors to the Company).

     (f)  Change in Control Price.  For purposes of this Section 13, "Change in
          -----------------------
          Control Price" shall be, as determined by the Board, (i) the highest
          Fair Market Value of a Share within the 60 day period immediately
          preceding the date of determination of the Change in Control Price by
          the Board (the "60-Day Period"), or (ii) the highest price paid or
          offered per Share, as determined by the Board, in any bona fide
          transaction or bona fide offer related to the Change in Control of the
          Company, at any time within the 60-Day Period, or (iii) some lower
          price as the Board, in its discretion, determines to be a reasonable
          estimate of the fair market value of a Share.

                                    Page 12
<PAGE>

14.  Date of Grant.  The date of grant of an Option or Stock Purchase Right
     -------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator.  Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.

15.  Amendment and Termination of the Plan.
     -------------------------------------

     (a)  Amendment and Termination.  The Board may at any time amend, alter,
          -------------------------
          suspend or terminate the Plan.

     (b)  Shareholder Approval.  The Company shall obtain shareholder approval
          --------------------
          of any Plan amendment to the extent necessary and desirable to comply
          with Rule 16b-3 or with Section 422 of the Code (or any successor rule
          or statute or other applicable law, rule or regulation, including the
          requirements of any exchange or quotation system on which the Common
          Stock is listed or quoted).  Such shareholder approval, if required,
          shall be obtained in such a manner and to such a degree as is required
          by the applicable law, rule or regulation.

     (c)  Effect of Amendment or Termination.  No amendment, alteration,
          ----------------------------------
          suspension or termination of the Plan shall impair the rights of any
          Optionee, unless mutually agreed otherwise between the Optionee and
          the Administrator, which agreement must be in writing and signed by
          the Optionee and the Company.

16.  Conditions Upon Issuance of Shares.
     ----------------------------------

     (a)  Legal Compliance.  Shares shall not be issued pursuant to the exercise
          ----------------
          of an Option or Stock Purchase Right unless the exercise of such
          Option or Stock Purchase Right and the issuance and delivery of such
          Shares 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,
          Applicable Laws, and the requirements of any stock exchange or
          quotation system upon which the Shares may then be listed or quoted,
          and shall be further subject to the approval of counsel for the
          Company with respect to such compliance.

     (b)  Investment Representations.  As a condition to the exercise of an
          --------------------------
          Option or Stock Purchase Right, the Company may require the person
          exercising such Option or Stock Purchase Right 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.

17.  Liability of Company.
     --------------------

     (a)  Inability to Obtain Authority.  The 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.

     (b)  Grants Exceeding Allotted Shares.  If the Optioned Stock covered by an
          --------------------------------
          Option or Stock Purchase Right exceeds, as of the date of grant, the
          number of Shares which may be

                                    Page 13
<PAGE>

          issued under the Plan without additional shareholder approval, such
          Option or Stock Purchase Right shall be void with respect to such
          excess Optioned Stock, unless shareholder approval of an amendment
          sufficiently increasing the number of Shares subject to the Plan is
          timely obtained in accordance with Section 15(b) of the Plan.

18.  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.

19.  Shareholder Approval.  Continuance of the Plan shall be subject to approval
     --------------------
     by the shareholders of the Company within twelve (12) months before or
     after the date the Plan is adopted.  Such shareholder approval shall be
     obtained in the manner and to the degree required under applicable federal
     and state law.

                                    Page 14<PAGE>

                                                                     Exhibit 4.2

                        THE SANTA CRUZ OPERATION, INC.

                           1993 Director Option Plan
                          (as amended November 1999)

1.   Purposes of the Director Plan.  The purposes of this 1993 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 "non-statutory stock options."

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

     (a)  "Board" shall mean the Board of Directors of the Company.
           -----

     (b)  "Code" shall mean the Internal Revenue Code of 1986, as amended.
           ----

     (c)  "Common Stock" shall mean the Common Stock of the Company.
           ------------

     (d)  "Company" shall mean The Santa Cruz Operation, Inc., a California
           -------
corporation.

     (e)  "Continuous Status as a Director" shall mean the absence of any
           -------------------------------
interruption or termination of service as a Director.

     (f)  "Director" shall mean a member of the Board.
           --------

     (g)  "Director Plan" shall mean this 1993 Director Option Plan.
           -------------

     (h)  "Employee" shall mean 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.

     (i)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
           ------------
amended.

     (j)  "Fair Market Value" shall mean, 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 National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;

                                    Page 1
<PAGE>

          (ii)  If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on 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.

     (k)  "Option" shall mean a stock option granted pursuant to the Director
           ------
Plan.

     (l)  "Optioned Stock" shall mean the Common Stock subject to an Option.
           --------------

     (m)  "Optionee" shall mean an Outside Director who receives an Option.
           --------

     (n)  "Outside Director" shall mean a Director who is not an Employee.
           ----------------

     (o)  "Parent" shall mean a "parent corporation," whether now or hereafter
           ------
existing, as defined in Section 424(e) of the Code.

     (p)  "Share" shall mean a share of the Common Stock, as adjusted in
           -----
accordance with Section 10 of the Director Plan.

     (q)  "Subsidiary" shall mean 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 Director Plan. Subject to the provisions of Section 10
     ----------------------------------
of the Director Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Director Plan is 1,400,000 Shares (the "Pool") of
Common Stock.  The Shares may be authorized but unissued, or reacquired Common
Stock.

     If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Director Plan shall have been terminated, become available for
future grant under the Director Plan.

4.   Administration of and Grants of Options under the Director Plan.
     ---------------------------------------------------------------

     (a)  Administrator.  Except as otherwise required herein, the Director Plan
          -------------
shall be administered by the Board.

     (b)  Procedure for Grants.  To the extent required to comply with Rule 16b-
          --------------------
3(c) (ii) promulgated under the Exchange Act, the provisions set forth in this
Section 4(b) shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.  To such extent, all grants of
Options to Outside Directors under this Director Plan shall be automatic and
non-discretionary and shall be made strictly in accordance with the following
provisions:

                                    Page 2
<PAGE>

           (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 granted to Outside Directors.

           (ii)  Each new Outside Director who first becomes and Outside
Director on or after June 1, 1994 (other than an Outside Director who was
previously a Director) shall automatically be granted an Option to purchase
forty thousand (40,000) Shares upon the date on which such person first becomes
and Outside Director, whether through election by the shareholders of the
Company or appointment by the Board to fill a vacancy (the "Initial Grant").
Each Outside Director who first became an Outside Director prior to June 1,
1994, shall be granted and Option to purchase twenty thousand (20,000) Shares on
June 1, 1994 (the "Supplemental Grant").

           (iii) Each Outside Director who remains in Continuous Status as an
Outside Director shall on the first day of each fiscal year of the Company
automatically be granted an Option to purchase six thousand (6,000) Shares (the
"Annual Grant").

           (iv)  Each Outside Director who is serving as an Outside Director on
June 1, 1994, shall be granted on such date an Option (the Prorated Annual
Grant") to purchase two thousand (2,000) Shares.  The Prorated Annual Grant
shall be exercisable in full on October 1, 1994.

           (v)   An Outside Director may elect to receive cash compensation in
lieu of the Annual Grant or the Prorated Annual Grant. Each Outside Director who
makes such an election shall receive cash compensation per Board meeting payable
at a rate determined by the Board.

           (iv)  The terms of each Option granted hereunder shall be as follows:

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

                 (B)  Except as the Board otherwise determines and except as set
forth in Section 8 hereof, the Option shall be exercisable only while the
Outside Director remains a Director.

                 (C)  The June 1, 1994, amendments to this Section 4(b) shall be
subject to shareholder approval to the extent required by Section 11(a) below,
and no such portion of any Option shall be exercisable prior to such shareholder
approval.

                 (D)  The Initial Grant and the Supplemental Grant shall become
exercisable in installments cumulatively with respect to one-twentieth (1/20th)
of the Optioned Stock every three months after the date of grant, so that one
hundred percent (100%) of the Optioned Stock shall be exercisable five years
after the date of grant.

                 (F)  The per Share exercise price for Optioned Stock shall be
100% of the Fair Market Value on the date of grant.

           (vii) In the event that any Option granted under the Director Plan
would cause

                                    Page 3
<PAGE>

the number of Shares subject to outstanding Options plus the number of Shares
previously purchased under Options to exceed the Pool, then such Option shall be
granted only to the extent of the available Shares. No further grants shall be
made until such time, if any, as additional Shares become available for grant
under the Director Plan through action of the shareholders to increase the
number of Shares which may be issued under the Director Plan or through
cancellation or expiration of Options previously granted hereunder.

     (c)  Powers of the Board.  Subject to the provisions and restrictions of
          -------------------
the Director Plan, the Board shall have the authority, in its discretion:  (i)
to determine, upon review of relevant information and in accordance with Section
2(j) of the Director Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Director Plan; (iii) to prescribe, amend and rescind rules and
regulations relating to the Director Plan; (iv) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted hereunder; and (v) to make all other
determinations deemed necessary or advisable for the administration of the
Director Plan.

     (d)  Effect of Board's Decision.  All decisions, determinations and
           --------------------------
interprretations of the Board shall be final.

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(b) hereof.

     The Director 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 his or her directorship at any time.

6.   Term of Director Plan.  The Director Plan shall become effective upon the
     ---------------------
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 16 of the Director Plan.  It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 11 of the Director 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 be
determined by the Board and may consist entirely of (i) cash, (ii) check, (iii)
promissory note, (iv) other shares which (x) in the case of Share acquired upon
exercise of an Option, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (y) have a Fair Market Value on the date of
surrender not greater than the aggregate exercise price of the Shares as to
which said Option shall be exercised, (v) delivery of a properly executed
exercise notice together with such other documentation as the Board and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (vi) any combination of the foregoing methods of payment, or
(vii) such other consideration and method of payment for the issuance of Shares
to the extent permitted under applicable law.

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(b)
hereof; provided,

                                    Page 4
<PAGE>

however, that no Options shall be exercisable until shareholder approval of the
Director 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(b) of the Director 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 will 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 Director Plan.

     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
Director 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 Director Plan transactions.

     (c)  Termination of Continuous Status as a Director.
          ----------------------------------------------
               (i)  With respect to Options granted prior to June 1, 1994, such
Options shall be exercisable following the termination of an Optionee's
Continuous Status as a Director as follows:

                    (A)  Termination of Optionee. In the event an Optionee's
                         -----------------------
Continuous Status as a Director terminates (other than upon the Optionee's death
or total and permanent disability, as defined in Section 22(e) (3) of the Code),
the Optionee may exercise his or her Option, but only within three (3) months
from the date of such termination, and only to the extent that the Optionee was
entitled to exercise it at 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 at 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.

                    (B)  Disability of Optionee. In the event Optionee's
                         ----------------------
Continuous Status as a Director terminates as a result of total and permanent
disability (as defined in Section 22(e) (3) of the Code), the Optionee may
exercise his or her Option, but only within twelve (12) months from the date of
such termination, and only to the extent that the Optionee was entitled to
exercise it at 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

                                    Page 5
<PAGE>

an Option at 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.

                    (C)  Death of Optionee. In the event of an Optionee's death,
                         -----------------
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it at the date of death (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 at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

               (ii) With respect to Options granted on or after June 1, 1994,
such Options shall be exercisable following the termination of an Optionee's
Continuous Status as a Director as follows: In the event an Optionee's
Continuous Status as a Director terminates for any reason (including the
Optionee's death or disability) the Optionee may exercise his or her Option, but
only within twelve (12) months from the date of such termination, and only to
the extent that the Optionee was entitled to exercise it at 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 at
the date of such termination, and to the extent that the Optionee (or the
Optionee's estate or a person who acquired the right to exercise such Option, as
applicable) does not exercise such Option (to the extent otherwise so entitled)
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.

10.  Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
     ---------------------------------------------------------------------------
or Change of Control.
--------------------

     (a)   Changes in Capitalization.  Subject to any required action by the
           -------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Director Plan but as to which no Options
have yet been granted or which have been returned to the Director Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock 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 considerate."  Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
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 of Common Stock subject to an

                                    Page 6
<PAGE>

Option.

     (b)  Dissolution or Liquidation.  In the event of the proposed dissolution
          --------------------------
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it will terminate immediately prior to the consummation of
such proposed action.  The Board may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date fixed by
the Board and give each Optionee the right to exercise his or her Option as to
all or any part of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable.

     (c)  Change in Control.  In the event of a "Change in Control" of the
          -----------------
Company, as defined in paragraph (d) below, then the following acceleration and
valuation provisions shall apply:

          (i)  Immediately prior to the occurrence of a Change in Control, any
Options outstanding on the date such Change in Control is determined to have
occurred that are not yet exercisable and vested on such date shall become fully
exercisable and vested;

     (d)  Definition of "Change in Control".  For purposes of this Section 10, a
          ---------------------------------
"Change in Control" means the occurrence of any of the following:

          (i)  When any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, a Subsidiary or a Company
employee benefit plan, including any trustee of such plan acting as trustee)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting

                                    Page 7
<PAGE>

power of the Company's then outstanding securities entitled to vote generally in
the election of directors; or

          (ii)  The merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or

          (iii) The sale or disposition by the Company of all or substantially
all the Company's assets; or

          (iv)  A Change in the composition of the Board of Directors of the
Company, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date the Plan is approved by the
shareholders, or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).

11.  Amendment and Termination of the Director Plan.
     ----------------------------------------------

     (a)  Amendment and Termination.  Except as set forth in Section 4, the
          -------------------------
Board may at any time amend, alter, suspend, or discontinue the Director 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 Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Director 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 Director Plan shall not affect Options already granted and such Options
shall remain in full force and effect as if this Director 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(b) hereof.  Notice
of the determination shall be given to each Outside Director to whom an Option
is so granted within a reasonable time after the date of such grant.

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.

                                    Page 8
<PAGE>

     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 provision 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 Director Plan,
     ---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Director Plan.

15.  Option Agreement.  Options shall be evidenced by written option agreements
     ----------------
in such form as the Board shall approve.

16.  Shareholder Approval.  Continuance of the Director Plan shall be subject to
     --------------------
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.

                                    Page 9

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