Document:

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                                                                     EXHIBIT 4.7

                         DIRECTOR STOCK OPTION AGREEMENT

     THIS AGREEMENT, dated ___________________, is made by and between
PacifiCare Health Systems, Inc., a Delaware corporation (the "Company"), and
_______________________ (the "Optionee"):

     WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its Common Stock;

     WHEREAS, the Optionee is a non-officer director of the Company; and

     WHEREAS, the Company has determined that it would be to the advantage and
best interest of the Company and its stockholders that the Optionee receive the
Stock Options provided for herein as an incentive for the Optionee to continue
to work for the best interests of the Company and its stockholders and has
instructed the undersigned officers to issue said Option;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

     Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary.

Section 1.1 -- Board

     "Board" shall mean the Company's Board of Directors.

Section 1.2 -- Chief Financial Officer

     "Chief Financial Officer" shall mean the Chief Financial Officer of the
Company.

Section 1.3 -- Committee

     "Committee" shall mean a committee of the Board of Directors authorized to
administer the Company's stock option plans.

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Section 1.4 -- Common Stock

     "Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.

Section 1.5 -- Exchange Act

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

Section 1.6- Option

     "Option" shall mean the Stock Option to purchase shares of the Common Stock
granted under this Agreement.

Section 1.7 -- Pronouns

     The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

Section 1.8 -- Secretary

     "Secretary" shall mean the Secretary of the Company.

Section 1.9 -- Subsidiary

     "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

Section 1.10 -- Termination of Directorship

     "Termination of Directorship" shall mean eight months from the time the
Optionee voluntarily or involuntarily ceases to serve as a director of the
Company, unless Optionee ceases to be a director as a result of his/her death or
disability.

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                                   ARTICLE II
                                 GRANT OF OPTION

Section 2.1 -- Grant of Option

     In consideration of the Optionee's agreement to render services to the
Company and for other good and valuable consideration, the Company irrevocably
grants to the Optionee the option to purchase any part or all of an aggregate of
______ shares of its Common Stock upon the terms and conditions set forth in
this Agreement. The date of grant of this Option is ____________.

Section 2.2 -- Purchase Price

     The purchase price of the shares of stock covered by the Option shall be
$_____ per share without commission or other charge.

Section 2.3 -- Consideration to Company

     This Option is being granted in consideration of the Optionee's agreement
to render services to the Company as a member of the Company's board of
directors.

Section 2.4 -- Adjustments in Option

     (a) In the event that the outstanding shares of the Common Stock subject
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company or of another corporation by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock split, stock dividend or combination of shares, or in the event of
extraordinary cash or non-cash dividends being declared with respect to
outstanding shares of Common Stock or similar transactions, proportionate
adjustments shall be made by the Committee in the number and kind of shares as
to which the Option, or portions thereof then unexercised, shall be exercisable,
to the end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the Option
shall be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the exercise price per share. Any such adjustment
made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.

     (b) In the event that the outstanding shares of Common Stock of the Company
are hereafter changed into or exchanged for a different number or kind of shares
or other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, stock dividend or combination of shares, or in the event of extraordinary
cash or non-cash dividends being declared with respect

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to the outstanding shares of Common Stock or other similar transactions, the
Committee shall make proportionate adjustments in the number and kind of shares
as to which the Option, or portions thereof then unexercised, shall be
exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustments shall be consistent with comparable adjustments made pursuant to the
corresponding provision in the Employee Plan. Such adjustment in the Option
shall be made without change in the total price applicable to the Option or the
unexercised portion thereof (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the exercise price per share. Any such
adjustment made by the Committee shall be final and binding upon the Optionees,
the Company and all other interested persons.

                                   ARTICLE III
                            PERIOD OF EXERCISABILITY

Section 3.1 -- Commencement of Exercisability

     a. Subject to Sections 3.3, and 3.4, the Option shall be fully vested and
exercisable on the date the Option is granted; provided, however, that the
underlying shares of Common Stock may not be sold within the first six (6)
months of the date the Option is granted.

Section 3.2 -- Duration of Exercisability

     The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until such installment becomes unexercisable under Section 3.3.

Section 3.3 -- Expiration of Option

     The Option may not be exercised to any extent by anyone after the first to
occur of the following events:

     a. The expiration of 10 years from the date the Option was granted;

     b. Optionee's Termination of Directorship, unless such Termination of
Directorship results from his death or his disability;

     c. The expiration of one year from the date of the Optionee's Termination
of Employment by reason of his disability; or

     d. The expiration of one year from the date of the Optionee's death.

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     For purposes of this Section 3.3, "disability" shall mean a medically
determinable physical or mental impairment which has lasted or can be expected
to last for a continuous period of not less than 12 months and which renders the
Optionee substantially unable to function as a director of the Company. Nothing
contained herein shall be construed to confer on any Optionee any right to
continue as a director of the Company.

Section 3.4 -- Acceleration of Exercisability

     a. Notwithstanding anything to the contrary in Section 3.3 hereof, this
Option, if held for at least six months, shall be exercisable as to all the
shares covered hereby immediately upon the effective date of a "Change of
Control" notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1(a); provided, however, that the acceleration of
exercisability shall not take place if this Option becomes unexercisable under
Section 3.3 prior to said effective date.

     b. For purposes of this Section 3.4, the term "Change of Control" shall
mean the occurrence of any of the following: (i) a business combination
effectuated through the merger or consolidation of the Company with or into
another entity where the Company is not the Surviving Organization; (ii) any
business combination effectuated through the merger or consolidation of the
Company with or into another entity where the Company is the Surviving
Organization and such business combination occurred with an entity whose market
capitalization prior to the transaction was greater than 50 percent of the
Company's market capitalization prior to the transaction; (iii) the sale in a
transaction or series of transactions of all or substantially all of the
Company's assets; (iv) any "person" or "group" (within the meaning of Sections
13(d)and 14(d) of the Exchange Act) other than UniHealth Foundation, a
California non-profit public benefit corporation ("UniHealth"), acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act),
directly or indirectly, of 20 percent or more of the voting common stock of the
Company and the beneficial ownership of the voting common stock of the Company
owned by UniHealth at that date is less than or equal to the beneficial
ownership interest of voting securities attributable to such other person or
group; (v) a dissolution or liquidation of the Company; or (vi) the Company
ceases to be subject to the reporting requirements of the Exchange Act as a
result of a "going private transaction" (within the meaning of the Exchange
Act). For purposes hereof, "Surviving Organization" shall mean any entity where
the majority of the members of such entity's board of directors are persons who
were members of the Company's board of directors prior to the merger,
consolidation or other business combination and the senior management of the
surviving entity includes all of the individuals who were the Company's
executive management (the chief executive officer and those individuals who
report directly to the Company's chief executive officer) prior to the merger,
consolidation or other business combination and such individuals are in at least
comparable positions with such entity. Optionee shall receive at least 10 days
notice prior to the effective date of the Change of Control that the Option will
be exercisable upon the effective date of the Change of Control.

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     c. By a resolution adopted after this Option is granted the Committee may
in its absolute discretion, on such terms and conditions as it may determine to
be appropriate and subject to Sections 3.1, 3.2 and 3.3 accelerate the time at
which such Option or any portion thereof may be exercised.

     d. The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with a Change in Control and acceleration of exercisability, including, without
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction. All such determinations by the Committee shall be
conclusive.

                                   ARTICLE IV
                               EXERCISE OF OPTIONS

Section 4.1 -- Person Eligible to Exercise

     During the lifetime of the Optionee, only he, his guardian or legal
representative may exercise the Option or any portion thereof. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Article III, be exercised by his
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.

Section 4.2 -- Partial Exercise

     Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Article III;
provided, however, that each partial exercise shall be for not less than 100
shares (or the minimum installment set forth in Section 3.1, if a smaller number
of shares) and shall be for whole shares only.

Section 4.3 -- Manner of Exercise

     The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or Chief Financial Officer or their respective offices
of all of the following prior to the time when the Option or such portion
becomes unexercisable under Section 3.3:

     a. Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or portion
is thereby exercised, such notice complying with all applicable rules
established by the Committee;

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     b.   (i) Full payment (in cash or by check) for the shares with respect to
which such Option or portion is exercised;

          (ii) With the consent of the Committee, shares of any class of the
     Company's stock owned by the Optionee duly endorsed for transfer to the
     Company with a Fair Market Value (as determinable by the Committee) on the
     date of delivery equal to the aggregate Option price of the shares with
     respect to which such Option or portion is exercised (which shares shall be
     owned by the Optionee for more than six months at the time they are
     delivered);

          (iii) With the consent of the Committee and provided the use of the
     following procedure by an Optionee would not violate Rule 16(b) under the
     Exchange Act delivery to the Company of (x) irrevocable instructions to
     deliver the stock certificates representing the shares for which the Option
     is being exercised directly to a broker, and (y) instructions to the broker
     to sell such shares and promptly deliver to the Company the portion of the
     sale proceeds equal to the aggregate Option exercise price;

          (iv) With the consent of the Committee, any other form of cashless
     exercise permitted under Section 4.4 hereof; or

          (v) Any combination of the consideration provided in the foregoing
     subparagraphs (i), (ii), (iii) and (iv);

     c. A bona fide written representation and agreement, in a form satisfactory
to the Committee, signed by the Optionee or other person then entitled to
exercise such Option or portion, stating that the shares of stock are being
acquired for his own account, for investment and without any present intention
of distributing or reselling said shares or any of them except as may be
permitted under the Securities Act of 1933, as amended (the "Act"), and then
applicable rules and regulations thereunder, and that the Optionee or other
person then entitled to exercise such Option or portion will indemnify the
Company against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the shares by
such person is contrary to the representation and agreement referred to above.
The Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate to insure the observance and performance of such
representation and agreement and to effect compliance with the Act and any other
federal or state securities laws or regulations. Without limiting the generality
of the foregoing, the Committee may require an opinion of counsel acceptable to
it to the effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued

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pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares;

     d. Full payment to the Company of all amounts which, under federal, state
or local law, it is required to withhold upon exercise of the Option; and

     e. In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.

     The date of exercise of the Option shall be deemed to be the date all of
the foregoing conditions are met.

Section 4.4 -- Cashless Exercise Procedures

     The Company, in its sole discretion, may establish procedures whereby the
Optionee, subject to the requirements of Rule 16b-3 under the Exchange Act,
Regulation T issued by the Board of Governors of the Federal Reserve System
pursuant to the Exchange Act, federal income tax laws, and other federal, state
and local tax and securities laws, can exercise the Option or a portion thereof
without making a direct payment of the Option price to the Company. If the
Company so elects to establish a cashless exercise program, the Company shall
determine, in its sole discretion and from time to time, such administrative
procedures and policies as it deems appropriate and such procedures and policies
shall be binding on the Optionee should he elect to utilize the cashless
exercise program.

Section 4.5 -- Conditions to Issuance of Stock Certificates

     The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares of
Common Stock or issued shares of Common Stock which have then been reacquired by
the Company. Such shares shall be fully paid and nonassessable. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of the Option or portion thereof
prior to fulfillment of all of the following conditions:

     a. The admission of such shares of Common Stock to listing on all stock
exchanges which such class of stock is then listed;

     b. The completion of any registration or other qualification of such shares
under any state or federal law or under rulings or regulations of the Securities
and Exchange Commission or of any other governmental regulatory body, which the
Committee shall, in its absolute discretion, deem necessary or advisable;

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     c. The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;

     d. The payment to the Company of all amounts which, under federal, state or
local law, it is required to withhold upon exercise of the Option; and

     e. The lapse of such reasonable period of time following the exercise of
the Option as the Committee may from time to time establish for reasons of
administrative convenience.

Section 4.6 -- Rights as Stockholder

     The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares of Common
Stock receivable upon the exercise of any part of the Option unless and until
certificates representing such shares of Common Stock shall have been issued by
the Company to such holder.

                                    ARTICLE V
                                  MISCELLANEOUS

Section 5.1 -- Administration

     The Committee shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Optionee, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Option.

Section 5.2 -- Options Not Transferable

     Neither the Option nor any interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

Section 5.3 -- Shares to Be Reserved

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     The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.

Section 5.4 -- Withholding

     (a) The Optionee granted hereunder may elect to deliver shares to the
Company or have the Company withhold shares otherwise issuable upon the exercise
of an Option in order to satisfy federal and state withholding tax liability (a
"share withholding election"), provided: (i) the Board or, if so designated, the
Committee, shall not have revoked its advance approval of the holder's share
withholding election; and (ii) the share withholding election is made on or
prior to the date on which the amount of withholding tax liability is determined
(the "Tax Date").

     (b) A share withholding election shall be deemed made when written notice
of such election, signed by Optionee, has been delivered or transmitted by
registered or certified mail to the Secretary or Chief Financial Officer of the
Company at its then principal office. Delivery of said notice shall constitute
an irrevocable election to have shares withheld.

     (c) Upon exercise of an Option by the Optionee, the Company shall transfer
the total number of shares of Common Stock of the Company subject to the Option
to the holder on the date of exercise, less any shares the holder elects to
withhold.

Section 5.5 -- Notices

     Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary or Chief Financial
Officer and any notice to be given to the Optionee shall be addressed to him at
the address given beneath his signature hereto. By a notice given pursuant to
this Section 5.5, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be given to the
Optionee shall, if the Optionee is then deceased, be given to the Optionee's
personal representative if such representative has previously informed the
Company of his status and address by written notice under this Section 5.5. Any
notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.

Section 5.6 -- Titles

     Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

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Section 5.7 -- Choice of Law

     This Agreement shall be construed and enforced in accordance with the laws
of the State of California.

     IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

                                        PACIFICARE HEALTH SYSTEMS, INC.

                                        By:
                                            ------------------------------------

-------------------------------------
Optionee

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

-------------------------------------
Address

Social Security Number:

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                                                                     EXHIBIT 4.4
                                 SONOMA SYSTEMS
                             1996 STOCK OPTION PLAN

        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 the Employees and Consultants
of the Company and to promote the success of the Company's business.

               Options granted hereunder may be either Incentive Stock Options
or Nonstatutory Stock Options, at the discretion of the Board and as reflected
in the terms of the written option agreement.

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

               (a) "Administrator" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

               (b) "Applicable Laws" shall have the meaning set forth in Section
4(a) below.

               (c) "Board" shall mean the Board of Directors of the Company.

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

               (e) "Committee" shall mean the Committee appointed by the Board
of Directors in accordance with Section 4(a) of the Plan, if one is appointed.

               (f) "Common Stock" shall mean the Common Stock of the Company.

               (g) "Company" shall mean Sonoma Systems, a California
corporation.

               (h) "Consultant" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not; provided that the term Consultant
shall not include directors who are not compensated for their services or are
paid only a director's fee by the Company.

               (i) "Continuous Status as an Employee or Consultant" shall mean
the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.

               (j) "Employee" shall mean any person, including officers,
directors and Named Executives, 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 to constitute "employment" by the Company.
<PAGE>   2

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

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

                       (i)   If the Common Stock is listed on a national stock
exchange or the Nasdaq National Market, its Fair Market Value shall be the
average of the closing sales prices for such stock as quoted on such exchange or
market for the last five trading days before the date of determination (if for a
given day no sales were reported, the closing bid on that day shall be used), as
such prices are reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

                      (ii)   If the Common Stock is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System (but not on
the Nasdaq National Market) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
average of the mean between the bid and asked prices for the Common Stock for
the last five days before the date of determination; 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 Administrator.

               (m) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

               (n) "Named Executive" shall mean any individual who, on the last
day of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four highest compensated officers
of the Company (other than the Chief Executive Officer). Such officer status
shall be determined pursuant to the executive compensation disclosure rules
under the Exchange Act.

               (o) "Nonstatutory Stock Option" shall mean an Option not intended
to qualify as an Incentive Stock Option.

               (p) "Option" shall mean a stock option granted pursuant to the
Plan.

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

               (r) "Optionee" shall mean an Employee or Consultant who receives
an Option.

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

               (t) "Plan" shall mean this 1996 Stock Option Plan.

               (u) "Share" shall mean a share of the Common Stock, as adjusted
in accordance with Section 11 of the Plan.
<PAGE>   3

               (v) "Subsidiary" shall mean 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 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 6,500,000 shares 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 Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.

        4. ADMINISTRATION OF THE PLAN.

               (a) COMPOSITION OF ADMINISTRATOR.

                      (i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3 promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the Plan
("Rule 16b-3"), and by the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different administrative 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. With respect to grants of Options to Employees or Consultants who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule 16b-3 as
it applies to a plan intended to qualify thereunder as a discretionary plan and
Section 162(m) of the Code as it applies so as to qualify grants of Options to
Named Executives as performance-based compensation, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted (I) in such a manner as to permit the Plan to comply with Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan,
(II) in such a manner as to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and (III) in
such a manner as to satisfy the Applicable Laws.

                      (iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With
respect to grants of Options 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 in such a manner as to satisfy the Applicable Laws.

                      (iv) GENERAL. Once a Committee has been appointed pursuant
to subsection (ii) or (iii) of this Section 4(a), 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 any Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies (however
<PAGE>   4

caused) and remove all members of a Committee and thereafter directly administer
the Plan, all to the extent permitted by the Applicable Laws and, in the case of
a Committee appointed under subsection (ii), to the extent permitted by Rule
16b-3 as it applies to a plan intended to qualify thereunder as a discretionary
plan, and to the extent required under Section 162(m) of the Code to qualify
grants of Options to Named Executives as performance-based compensation.

               (b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, 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(l) of the Plan;

                      (ii) to select the Employees and Consultants to whom
Options may from time to time be granted hereunder;

                      (iii) to determine whether and to what extent Options are
granted hereunder;

                      (iv) to determine the number of shares of Common Stock to
be covered by each such award 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
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in its sole
discretion);

                      (vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and

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

               (c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

        5. ELIGIBILITY.

               (a) Nonstatutory Stock Options may be granted only to Employees
and Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or
<PAGE>   5

Consultant who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options.

               (b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Stock Options that are exercisable for the first time by an
Optionee 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.

               (c) For purposes of Section 5(b), 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 the Option with
respect to such Shares is granted.

               (d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

        6. TERM OF PLAN. The 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 17 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 14 of the Plan.

        7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
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 Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.

        8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
in this Plan, the maximum number of shares which may be granted under Options to
any employee under this Plan for any fiscal year of the Company shall be
500,000.

        9. OPTION EXERCISE PRICE AND CONSIDERATION.

               (a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

                      (i) In the case of an Incentive Stock Option

                             (A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting
<PAGE>   6

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

                             (A) granted to a person who, at the time of the
grant of such Option, 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 the grant.

                             (B) granted to a person who, at the time of grant
of such Option, is a Named Executive of the Company, the per share Exercise
Price shall be no less than 100% of the Fair Market Value on the date of grant;

                             (C) granted to any person other than a Named
Executive, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.

                      (iii) In the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.

               (b) 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 Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(6) delivery of an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (7)
any combination of the foregoing methods of payment, or (8) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.

        10. EXERCISE OF OPTION.

               (a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the
<PAGE>   7

Administrator, including performance criteria with respect to the Company and/or
the Optionee, and as shall be permissible under the terms of the Plan.

                      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, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 9(b)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon 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 12 of the 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 Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

               (b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (as the case may be), such Optionee may, but only within three (3)
months (or such other period of time, not exceeding three (3) months in the case
of an Incentive Stock Option or six (6) months in the case of a Nonstatutory
Stock Option, as is determined by the Administrator, with such determination in
the case of an Incentive Stock Option being made at the time of grant of the
Option) after the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or if the
Optionee does not exercise such Option (which the Optionee was entitled to
exercise) within the time specified herein, the Option shall terminate.

               (c) DISABILITY OF OPTIONEE.

                      (i) 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 or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within six (6)
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.
<PAGE>   8

                    (ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) 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. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. 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 six
months (6) from the date of termination, 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, at any time within six (6) months
(or such other period of time, not exceeding six months, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) following the date of death (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or Consultant
twelve (12) months (or such other period of time not exceeding twelve (12)
months as is determined in the case of an Incentive Stock Option at the time of
grant of the Option) after the date of death, subject to the limitation set
forth in Section 5(b); or

                      (ii) within three (3) months (or such other period of time
not exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee
or Consultant, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.

               (e) EXTENSION OF EXERCISE PERIOD. Notwithstanding the limitations
set forth in Sections 10(b), (c) and (d) above, the Administrator has full power
and authority to extend the period of time for which any Option granted under
the Plan is to remain exercisable following termination of an Optionee's
Continuous Status as an Employee or Consultant from the limited period set forth
above or in the written option agreement to such greater period of time as the
Administrator shall deem appropriate; provided, however, that in no event shall
such Option be exercisable after the specified expiration date of the Option
term.
<PAGE>   9

               (f) RULE 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

        11. 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. The designation of a beneficiary
by an Optionee does not constitute a transfer. An Option may be exercised,
during the lifetime of the Optionee, only by the Optionee or a transferee
permitted by this Section 11.

        12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. 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 Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, the maximum number of Shares of
Common Stock for which Options may be granted to any Employee under Section 8 of
the Plan, and 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 consideration."
Such adjustment shall be made by the Administrator, 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 Option.

               In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Administrator. The
Administrator may, in the exercise of its sole discretion in such instances,
declare that any Option shall terminate as of a date fixed by the Administrator
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. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Administrator determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, that the Optionee shall have the right to exercise the Option as
to some or all of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable. If the Administrator makes an Option
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
shall be exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
<PAGE>   10

        13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.

        14. AMENDMENT AND TERMINATION OF THE PLAN.

               (a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 18 of the
Plan:

                      (i) any increase in the number of Shares subject to the
Plan, other than in connection with an adjustment under Section 12 of the Plan;

                      (ii) any change in the designation of the class of persons
eligible to be granted Options;

                      (iii) any change in the limitation on grants to Employees
as described in Section 8 of the Plan or other changes which would require
shareholder approval to qualify Options granted hereunder as performance-based
compensation under Section 162(m) of the Code; or

                      (iv) if the Company has a class of equity securities
registered under Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to participants under
the Plan.

               (b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 14(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 18 of the Plan.

               (c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

        15. 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, 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>   11

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

        16. 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.

               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.

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

        18. SHAREHOLDER APPROVAL.

               (a) 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.

               (b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.

               (c) If any required approval by the shareholders of the Plan
itself or of any amendment thereto is solicited at any time otherwise than in
the manner described in Section 18(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:

                      (i) furnish in writing to the holders entitled to vote for
the Plan or amendment substantially the same information which would be required
(if proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and

                      (ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.

               (d) The Company's failure to comply with subsection (c) above
shall not affect the validity of any options properly granted under the Plan;
provided, however, that any
<PAGE>   12

Optionee subject to Section 16 of the Exchange Act shall comply with any
limitations imposed by the Exchange Act with respect to the exercise of the
Option and transfer or other disposition of the Optioned Stock.

        19. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports which are provided to all shareholders
of the Company. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.

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