Document:

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                                                                    EXHIBIT 10.3

                        BINDVIEW DEVELOPMENT CORPORATION

                  1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

                       (AS AMENDED THROUGH JUNE 30, 2000)

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                        BINDVIEW DEVELOPMENT CORPORATION

                  1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

                                TABLE OF CONTENTS

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1.  Purpose ...............................................................    1
2.  Effective Date of Plan ................................................    1
3.  Administration ........................................................    1
4.  Dedicated Shares ......................................................    1
5.  Grant of Options ......................................................    1
6.  Eligibility ...........................................................    1
7.  Option Grant Size and Grant Dates .....................................    2
8.  Option Price; Fair Market Value .......................................    2
9.  Duration of Options ...................................................    2
10. Amount Exercisable ....................................................    2
11. Exercise of Options ...................................................    4
12. Non-Transferability of Options ........................................    5
13. Termination of Directorship of Optionee ...............................    5
14. Requirements of Law ...................................................    5
15. No Rights as Stockholder ..............................................    6
16. No Obligation to Retain Optionee ......................................    6
17. Changes in the Company's Capital Structure ............................    6
18. Termination and Amendment of Plan .....................................    8
19. Written Agreement......................................................    9
20. Indemnification of Board ..............................................    9
21. Forfeitures ...........................................................    9
22. Gender ................................................................    9
23. Headings...............................................................    9
24. Governing Law .........................................................    9
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                        BINDVIEW DEVELOPMENT CORPORATION

                  1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         1. PURPOSE. The BindView Development Corporation 1998 Non-Employee
Director Stock Option Plan (the "Plan") of BindView Development Corporation (the
"Company") is for the benefit of members of the Board of Directors of the
Company who, at the time of their service, are not employees of the Company or
any of its affiliates, by providing them an opportunity to become owners of the
Common Stock, no par value, of the Company (the "Stock"), thereby advancing the
best interests of the Company by increasing their proprietary interest in the
success of the Company and encouraging them to continue in their present
capacity.

         2. EFFECTIVE DATE OF PLAN. The Plan is effective January 5, 1998, if
within one year of that date it shall have been approved by the holders of at
least a majority of the outstanding shares of voting stock of the Company voting
in person or by proxy at a duly held shareholders' meeting, or if the provisions
of the corporate charter, bylaws or applicable state law prescribes a greater
degree of shareholder approval for this action, the approval by the holders of
that percentage, at a duly held meeting of shareholders, or in either case by a
consent in lieu of a meeting if permitted by the corporate charter, bylaws and
applicable law.

         3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board"). Subject to the terms of the Plan, the
Board shall have the power to construe the provisions of the Plan, Options, and
Stock issued hereunder, to determine all questions arising hereunder, and to
adopt and amend such rules and regulations for administering the Plan as the
Board deems desirable.

         4. DEDICATED SHARES. The total number of shares of Stock with respect
to which initial grants (collectively, the "Options") may be granted under this
Plan shall not exceed, in the aggregate, 100,000 shares; provided, that the
class and aggregate number of shares of Stock which may be granted hereunder
shall be subject to adjustment in accordance with the provisions of Paragraph
17. The shares of Stock may be treasury shares or authorized but unissued shares
of Stock. In the event that any outstanding Option shall expire or is terminated
or canceled for any reason, the shares of Stock allocable to the unexercised
portion of that Option may again be subject to an Option or Options under the
Plan.

         5. GRANT OF OPTIONS. All Options granted under the Plan shall be
Nonqualified Options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended. No options shall
be granted under the Plan subsequent to January 4, 2008.

         6. ELIGIBILITY. The individuals who shall be eligible to receive
Options under the Plan shall be each member of the Board who is not an employee
of the Company or any affiliate of the Company ("Eligible Director").

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         7. OPTION GRANT SIZE AND GRANT DATES.

         On the day the Eligible Director is first elected or appointed to be a
director (whichever is applicable), the Eligible Director shall be granted an
Option to purchase 20,000 shares of stock on the terms and conditions set forth
herein. Notwithstanding the provisions of Section 17, the number of shares which
may subsequently be awarded pursuant to this Section 7 shall not increase but
may be decreased if appropriate under Section 17. If service of an Eligible
Director who previously received an initial grant terminates and the Director is
subsequently elected or appointed to the Board, that Director shall not be
eligible to receive a second grant.

         If the General Counsel of the Company determines, in his sole
discretion, that the Company is in possession of material, nonpublic information
about the Company or any of its subsidiaries, he may suspend granting of the
initial grant to each Eligible Director until the second trading day after
public dissemination of that information, and the determination by the General
Counsel that issuance of the Options is then appropriate.

         8. OPTION PRICE; FAIR MARKET VALUE. The price at which shares of Stock
may be purchased by each Eligible Director (the "Optionee") pursuant to his
initial grant, shall be 100% of the "Fair Market Value" of the shares of Stock
on the date of grant of the initial grant.

         For all purposes of this Plan, the "Fair Market Value" of the Stock as
of any date means (a) the average of the high and low sale prices of the Stock
on that date on the principal securities exchange on which the Stock is listed;
or (b) if the Stock is not listed on a securities exchange, the average of the
high and low sale prices of the Stock on that date as reported on the NASDAQ
National Market System; or (c) if the Stock is not listed on the NASDAQ National
Market System, the average of the high and low bid quotations for the Stock on
that date as reported by the National Quotation Bureau Incorporated; (d) for any
Options issued prior to the initial public offering of the Stock, the initial
public offering price; or (e) if none of the foregoing is applicable, the
average between the closing bid and ask prices per share of stock on the last
preceding date on which those prices were reported or that amount as determined
by the Board.

         9. DURATION OF OPTIONS. The term of each Option shall be ten years from
the date of grant. No Option shall be exercisable after the expiration of ten
years from the date the Option is granted.

         10. AMOUNT EXERCISABLE. Each Option hereunder shall become exercisable
on a cumulative basis in 20% increments on and after each annual anniversary of
the grant of the Option. However, upon a Change of Control, each Option shall
become immediately exercisable. For this purpose, a "Change in Control" shall
have occurred if, after the Effective Date of the Plan:

                  (i) a report on Schedule 13D or Schedule 14D-1 (or any
         successor schedule, form or report) shall be filed with the Commission
         pursuant to the Exchange Act and that report discloses that any person
         (within the meaning of Section 13(d) or Section 14(d)(2) of the
         Exchange Act), other than the Company (or one of its subsidiaries) or
         any employee benefit plan sponsored by the Company (or one of its
         subsidiaries), is the beneficial owner

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         (as that term is defined in Rule 13d-3 or any successor rule or
         regulation promulgated under the Exchange Act), directly or
         indirectly, of 20 percent or more of the outstanding Voting Stock;

                  (ii)  any person (within the meaning of Section 13(d) or
         Section 14(d)(2) of the Exchange Act), other than the Company (or one
         of its subsidiaries) or any employee benefit plan sponsored by the
         Company (or one of its subsidiaries), shall purchase securities
         pursuant to a tender offer or exchange offer to acquire any Voting
         Stock (or any securities convertible into Voting Stock) and,
         immediately after consummation of that purchase, that person is the
         beneficial owner (as that term is defined in Rule 13d-3 or any
         successor rule or regulation promulgated under the Exchange Act),
         directly or indirectly, of 20 percent or more of the outstanding Voting
         Stock (such person's beneficial ownership to be determined, in the case
         of rights to acquire Voting Stock, pursuant to paragraph (d) of Rule
         13d-3 or any successor rule or regulation promulgated under the
         Exchange Act);

                  (iii) the consummation of:

                                    (x) a merger, consolidation or
                           reorganization of the Company with or into any other
                           person if (a) the Company is not the surviving entity
                           or (b) as a result of such merger, consolidation or
                           reorganization, 50 percent or less of the combined
                           voting power of the then-outstanding securities of
                           such other person immediately after such merger,
                           consolidation or reorganization are held in the
                           aggregate by the holders of Voting Stock immediately
                           prior to such merger, consolidation or
                           reorganization;

                                    (y) any sale, lease, exchange or other
                           transfer of all or substantially all the assets of
                           the Company and its consolidated subsidiaries to any
                           other person if as a result of such sale, lease,
                           exchange or other transfer, 50 percent or less of the
                           combined voting power of the then-outstanding
                           securities of such other person immediately after
                           such sale, lease, exchange or other transfer are held
                           in the aggregate by the holders of Voting Stock
                           immediately prior to such sale, lease, exchange or
                           other transfer; or

                                    (z) a transaction immediately after the
                           consummation of which any person (within the meaning
                           of Section 13(d) or Section 14(d)(2) of the Exchange
                           Act) would be the beneficial owner (as that term is
                           defined in Rule 13d-3 or any successor rule or
                           regulation promulgated under the Exchange Act),
                           directly or indirectly, of more than 50 percent of
                           the outstanding Voting Stock;

                  (iv)  the stockholders of the Company approve the
         dissolution of the Company; or

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                  (v) during any period of 12 consecutive months, the
         individuals who at the beginning of that period constituted the Board
         of Directors shall cease to constitute a majority of the Board of
         Directors, unless the election, or the nomination for election by the
         Company's stockholders, of each director of the Company first elected
         during such period was approved by a vote of at least a two-thirds of
         the directors of the Company then still in office who were directors of
         the Company at the beginning of any such period.

                  "Voting Stock" means shares of the capital stock of the
Company the holders of which are entitled to vote for the election of directors,
but excluding shares entitled to so vote only upon the occurrence of a
contingency unless that contingency shall have occurred.

         11. EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery
of written notice to the Committee setting forth the number of shares of Stock
with respect to which the Option is to be exercised, together with: (a) cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company for an amount equal to the option price of the shares, (b)
Mature Shares at their Fair Market Value on the date of exercise, (c) payment to
the Company, through a broker-assisted exercise that is approved by the
Committee, for an amount equal to the option price of the shares, (d) any
combination of (a), (b), or (c), and/or (e) any other form of payment which is
acceptable to the Committee, and specifying the address to which the
certificates for the shares are to be mailed.

                  As promptly as practicable after receipt of written
notification and payment, the Company shall deliver to the Eligible Director
certificates for the number of shares with respect to which the Option has been
exercised, issued in the Eligible Director's name.

                  Whenever an Option is exercised by exchanging Mature Shares
owned by the Optionee, the Optionee shall deliver to the Company certificates
registered in the name of the Optionee representing a number of Mature Shares
legally and beneficially owned by the Optionee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates, (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The delivery
of certificates upon the exercise of Options is subject to the condition that
the person exercising the Option provide the Company with the information the
Company might reasonably request pertaining to exercise, sale or other
disposition.

                  If Mature Shares are used in payment, the aggregate Fair
Market Value of the Mature Shares tendered must be equal to or less than the
aggregate exercise price of the shares being purchased upon exercise of the
Option, and any difference must be paid by cash, certified check, bank draft, or
postal or express money order payable to the order of the Company. Delivery of
the shares shall be deemed effected for all purposes when a stock transfer agent
of the Company shall have deposited the certificates in the United States mail,
addressed to the Eligible Director, at the address specified by the Eligible
Director.

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                  Notwithstanding any other provision of the Plan, the Committee
shall have the authority to cause an Optionee to utilize a different method of
exercise if the method selected by the Optionee could result in adverse
accounting treatment for the Company.

                  "Mature Shares"means shares of Stock that have been legally
and beneficially owned by the Optionee for at least six months.

         12. NON-TRANSFERABILITY OF OPTIONS. Options shall not be transferable
by the Optionee other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Optionee's lifetime, only by
him. Notwithstanding any provision in this Plan to the contrary, an Eligible
Director may transfer an Option to an Immediate Family Member or an entity
controlled by an Eligible Director or an Immediate Family Member, provided,
however, no further transfer shall be made except by operation of law or a
transfer back to such Eligible Director or such other transfer which may be
approved by the Board. For this purpose "Immediate Family Member" means an
Eligible Director's children, grandchildren or spouse, or a trust for the
benefit of such Immediate Family Members.

         13. TERMINATION OF DIRECTORSHIP OF OPTIONEE. If, before the date of
expiration of the Option, the Optionee shall cease to be a director of the
Company, the Option shall terminate on the earlier of the date of expiration or
90 days after the date of ceasing to serve as a director. In this event, the
Optionee shall have the right, prior to the termination of the Option, to
exercise the Option if he was entitled to exercise immediately prior to ceasing
to serve as a director.

         Upon the death or disability of the Optionee while serving as a
director, his options shall become fully vested and, in the case of death his
executors, administrators, or any person or persons to whom his Option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to the earlier of the date of expiration of the Option
or 12 months following the date of his death, to exercise the Option, in whole
or in part.

         14. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Company has received evidence
satisfactory to it to the effect that the holder of that Option will not
transfer the Stock except in accordance with applicable law, including receipt
of an opinion of counsel satisfactory to the Company to the effect that any
proposed transfer complies with applicable law. The determination by the Company
on this matter shall be final, binding and conclusive. The Company may, but
shall in no event be obligated to, register any Stock covered by this Plan
pursuant to applicable securities laws of any country or any political
subdivision. In the event the Stock issuable on exercise of an Option is not
registered, the Company may imprint on the certificate evidencing the Stock any
legend that counsel for the Company considers necessary or advisable to comply
with applicable law. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option, or the issuance
of shares under it, to comply with any law or regulation of any governmental
authority.

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         15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by any Option until the date a stock
certificate is issued for the Stock, and, except as otherwise provided in
Paragraph 17 hereof, no adjustment for dividends, or otherwise, shall be made if
the record date thereof is prior to the date of issuance of such certificate.

         16. NO OBLIGATION TO RETAIN OPTIONEE. The granting of any Option shall
not impose upon the Company or its stockholders any obligation to retain or
continue to retain any Optionee or nominate any Optionee for election to
continue in his capacity as a director of the Company. The right of the Company,
the Board of Directors, and the Stockholders to terminate the service of any
Optionee as a director shall not be diminished or affected by reason of the fact
that one or more Options have been or would be granted to him.

         17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.

                  If the Company shall effect a subdivision or consolidation of
shares or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares he
would have received had he exercised his Option in full immediately prior to the
event requiring the adjustment; and (b) the number and class of shares of Stock
with respect to which Options may be granted under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then available
for grant, that number and class of shares of Stock that would have been
received by the owner of an equal number of outstanding shares of each class of
Stock as the result of the event requiring the adjustment.

                  If while unexercised Options remain outstanding under the Plan
(i) the Company shall not be the surviving entity in any merger, consolidation
or other reorganization (or survives only as a subsidiary of an entity other
than an entity that was wholly-owned by the Company immediately prior to such
merger, consolidation or other reorganization), (ii) the Company sells, leases
or exchanges or agrees to sell, lease or exchange all or substantially all of
its assets to any other person or entity (other than an entity wholly-owned by
the Company), (iii) the Company is to be dissolved, or (iv) the Company is a
party to any other corporate transaction (as defined under Section 424(a) of the
Code and applicable Treasury Regulations) that is not described in clauses (i),
(ii) or (iii) of this sentence (each such event is referred to herein as a
"Corporate Change"), then (x) except as otherwise provided in an Option
Agreement or as a result of the Board's effectuation of one or more of the
alternatives described below, there shall be no acceleration of the time at
which any Option

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then outstanding may be exercised, and (y) no later than ten (10) days after the
approval by the stockholders of the Company of such Corporate Change, the Board,
acting in its sole and absolute discretion without the consent or approval of
any Optionee, shall act to effect one or more of the following alternatives,
which may vary among individual Optionees and which may vary among Options held
by any individual Optionee:

                  (1) accelerate the time at which some or all of the Options
         then outstanding may be exercised so that such Options may be exercised
         in full for a limited period of time on or before a specified date
         (before or after such Corporate Change) fixed by the Board, after which
         specified date all such Options that remain unexercised and all rights
         of Optionees thereunder shall terminate,

                  (2) require the mandatory surrender to the Company by all or
         selected Optionees of some or all of the then outstanding Options held
         by such Optionees (irrespective of whether such Options are then
         exercisable under the provisions of this Plan or the Option Agreements
         evidencing such Options) as of a date, before or after such Corporate
         Change, specified by the Board, in which event the Board shall
         thereupon cancel such Options and the Company shall pay to each such
         Optionee an amount of cash per share equal to the excess, if any, of
         the per share price offered to stockholders of the Company in
         connection with such Corporate Change over the exercise price(s) under
         such Options for such shares,

                  (3) with respect to all or selected Optionees, have some or
         all of their then outstanding Options (whether vested or unvested)
         assumed or have a new Option substituted for some or all of their then
         outstanding Options (whether vested or unvested) by an entity which is
         a party to the transaction resulting in such Corporate Change and which
         is then employing him, or a parent or subsidiary of such entity,
         provided that (A) such assumption or substitution is on a basis where
         the excess of the aggregate fair market value of the shares subject to
         the Option immediately after the assumption or substitution over the
         aggregate exercise price of such shares is equal to the excess of the
         aggregate fair market value of all shares subject to the Option
         immediately before such assumption or substitution over the aggregate
         exercise price of such shares, and (B) the assumed rights under such
         existing Option or the substituted rights under such new Option as the
         case may be will have the same terms and conditions as the rights under
         the existing Option assumed or substituted for, as the case may be,

                  (4) provide that the number and class of shares of Stock
         covered by an Option (whether vested or unvested) theretofore granted
         shall be adjusted so that such Option when exercised shall thereafter
         cover the number and class of shares of stock or other securities or
         property (including, without limitation, cash) to which the Optionee
         would have been entitled pursuant to the terms of the agreement and/or
         plan relating to such Corporate Change if, immediately prior to such
         Corporate Change, the Optionee had been the holder of record of the
         number of shares of Stock then covered by such Option, or

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<PAGE>   10

                  (5) make such adjustments to Options then outstanding as the
         Board deems appropriate to reflect such Corporate Change (provided,
         however, that the Board may determine in its sole and absolute
         discretion that no such adjustment is necessary)."

                  In effecting one or more of alternatives (3), (4) or (5)
         above, and except as otherwise may be provided in an Option Agreement,
         the Board, in its sole and absolute discretion and without the consent
         or approval of any Optionee, may accelerate the time at which some or
         all Options then outstanding may be exercised.

                  In the event of changes in the outstanding Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Option and not otherwise provided for by this Section 4.5,
any outstanding Options and any agreements evidencing such Options shall be
subject to adjustment by the Board in its sole and absolute discretion as to the
number and price of shares of stock or other consideration subject to such
Options. In the event of any such change in the outstanding Stock, the aggregate
number of shares available under this Plan may be appropriately adjusted by the
Board, whose determination shall be conclusive.

                  The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.

         18. TERMINATION AND AMENDMENT OF PLAN. The Board of Directors of the
Company may amend, terminate or suspend the Plan at any time, in its sole and
absolute discretion; provided, however, to the extent required to qualify the
Plan under Rule 16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended, no amendment shall be made more than once every six
months that would change the amount, price or timing of the initial grants,
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder; and provided, further, to the extent
required to qualify the Plan under Rule 16b-3, no amendment that would (a)
materially increase the number of shares of the Stock that may be issued under
the Plan, (b) materially modify the requirements as to eligibility for
participation in the Plan, or (c) otherwise materially increase the benefits
accruing to participants under the Plan, shall be made without the approval of
the Company's stockholders.

         19. WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied
in a written agreement, which shall be subject to the terms and conditions of
this Plan and shall be signed by the Optionee and by the Chairman of the Board,
the Vice Chairman, the President or any Vice President of the Company for and in
the name and on behalf of the Company.

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         20. INDEMNIFICATION OF BOARD. With respect to administration of the
Plan, the Company shall indemnify each present and future member of the Board of
Directors against, and each member of the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Board of Directors, whether or not he
continues to be a member of the Board of Directors at the time of incurring the
expenses. However, this indemnity shall not include any expenses incurred by any
member of the Board of Directors (a) in respect of matters as to which he shall
be finally adjudged in any action, suit or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his duty as a
member of the Board of Directors, or (b) in respect of any matter in which any
settlement is effected, to an amount in excess of the amount approved by the
Company on the advice of its legal counsel. In addition, no right of
indemnification under this Plan shall be available to or enforceable by any
member of the Board of Directors unless, within 60 days after institution of any
action, suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend same at its own expense. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Board of Directors and shall be in addition
to all other rights to which a member of the Board of Directors may be entitled
as a matter of law, contract, or otherwise.

         21. FORFEITURES. Notwithstanding any other provision of this Plan, if,
before or after termination of the Optionee's capacity as a director of the
Company, there is an adjudication by a court of competent jurisdiction that the
Optionee committed fraud, embezzlement, theft, commission of felony, or proven
dishonesty in the course of his advisory relationship to the Company and its
affiliates which conduct materially damaged the Company or its affiliates, or
disclosed trade secrets of the Company or its affiliates, then any outstanding
options which have not been exercised by Optionee shall be forfeited. In order
to provide the Company with an opportunity to enforce this Section, an Option
may not be exercised if a lawsuit alleging that an action described in the
preceding sentence has taken place until a final resolution of the lawsuit
favorable to the Optionee.

         22. GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.

         23. HEADINGS. Headings are included for convenience of reference only
and do not constitute part of the Plan and shall not be used in construing the
terms of the Plan.

         24. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.

                                      -9-<PAGE>   1
                                                                    EXHIBIT 10.4

                                   NETECT LTD.

                     1998 INTERNATIONAL EMPLOYEE STOCK PLAN

                       (AS AMENDED THROUGH JUNE 30, 2000)

         1. PURPOSE. The purpose of the Netect Ltd. 1998 International Employee
Stock Plan (the "Plan") is to encourage key employees of all current and future
non-Israeli subsidiaries (herein collectively referred to as "Related
Corporations") of Netect Ltd., an Israeli corporation (the "Company") and other
non-Israeli individuals who render services to the Company or a Related
Corporation, by providing opportunities to participate in the ownership of the
Company and its future growth through (a) the grant of options which qualify as
"incentive stock options" ("ISOs") under Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code"); (b) the grant of options which do not
qualify as ISOs ("Non-Qualified Options"); (c) awards of stock in the Company
("Awards"); and (d) opportunities to make direct purchases of stock in the
Company ("Purchases"). Both ISOs and Non-Qualified Options are referred to
hereafter individually as an "Option" and collectively as "Options." Options,
Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.

         2. ADMINISTRATION OF THE PLAN.

                           A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall
                  be administered by the Board of Directors of the Company (the
                  "Board") or, subject to paragraph 2(D) (relating to compliance
                  with Section 162(m) of the Code), by a committee appointed by
                  the Board (the "Committee"). Hereinafter, all references in
                  this Plan to the "Committee" shall mean the Board if no
                  Committee has been appointed. Subject to ratification of the
                  grant or authorization of each Stock Right by the Board (if so
                  required by applicable state law), and subject to the terms of
                  the Plan, the Committee shall have the authority to (i)
                  determine to whom (from among the class of employees eligible
                  under paragraph 3 to receive ISOs) ISOs shall be granted, and
                  to whom (from among the class of individuals and entities
                  eligible under paragraph 3 to receive Non-Qualified Options
                  and Awards and to make Purchases) Non-Qualified Options,
                  Awards and authorizations to make Purchases may be granted;
                  (ii) determine the time or times at which Options or Awards
                  shall be granted or Purchases made; (iii) determine the
                  purchase price of shares subject to each Option or Purchase,
                  which prices shall not be less than the minimum price
                  specified in paragraph 6; (iv) determine whether each Option
                  granted shall be an ISO or a Non-Qualified Option; (v)
                  determine (subject to paragraph 7) the time or times when each
                  Option shall become exercisable and the duration of the
                  exercise period; (vi) extend the period during which
                  outstanding Options may be exercised; (vii) determine whether
                  restrictions such as repurchase

<PAGE>   2
                                       2

                  options are to be imposed on shares subject to Options, Awards
                  and Purchases and the nature of such restrictions, if any; and
                  (viii) interpret the Plan and prescribe and rescind rules and
                  regulations relating to it. If the Committee determines to
                  issue a Non-Qualified Option, it shall take whatever actions
                  it deems necessary, under Section 422 of the Code and the
                  regulations promulgated thereunder, to ensure that such Option
                  is not treated as an ISO. The interpretation and construction
                  by the Committee of any provisions of the Plan or of any Stock
                  Right granted under it shall be final unless otherwise
                  determined by the Board. The Committee may from time to time
                  adopt such rules and regulations for carrying out the Plan as
                  it may deem advisable. No member of the Board or the Committee
                  shall be liable for any action or determination made in good
                  faith with respect to the Plan or any Stock Right granted
                  under it.

                           B. COMMITTEE ACTIONS. The Committee may select one of
                  its members as its chairman, and shall hold meetings at such
                  time and place as it may determine. A majority of the
                  Committee shall constitute a quorum and acts of a majority of
                  the members of the Committee at a meeting at which a quorum is
                  present, or acts reduced to or approved in writing by all the
                  members of the Committee (if consistent with applicable state
                  law), shall be the valid acts of the Committee. From time to
                  time the Board may increase the size of the Committee and
                  appoint additional members thereof, remove members (with or
                  without cause) and appoint new members in substitution
                  therefor, fill vacancies however caused, or remove all members
                  of the Committee and thereafter directly administer the Plan.

C.       GRANT OF STOCK RIGHTS TO BOARD MEMBERS.

                  1)     Stock Rights may be granted to members of the Board.
                         All grants of Stock Rights to members of the Board
                         shall in all respects be made in accordance with the
                         provisions of this Plan applicable to other eligible
                         persons. Members of the Board who either (i) are
                         eligible to receive grants of Stock Rights pursuant to
                         the Plan or (ii) have been granted Stock Rights may
                         vote on any matters affecting the administration of the
                         Plan or the grant of any Stock Rights pursuant to the
                         Plan, except that no such member shall act upon the
                         granting to himself or herself of Stock Rights, but any
                         such member may be counted in determining the existence
                         of a quorum at any meeting of the Board during which
                         action is taken with respect to the granting to such
                         member of Stock Rights.

                  2)     No Options shall be awarded to directors or
                         shareholders or other interested parties, directly or
                         indirectly, other than: (i) an employee of the company
                         or subsidiary; (ii) members of Advisory Committee if
                         established, (iii) directors who do not hold equity or
                         rights convertible or exercisable into equity, except
                         by a unanimous vote of the Board of Directors.

<PAGE>   3
                                       3

                           D. PERFORMANCE-BASED COMPENSATION. The Board, in its
                  discretion, may take such action as may be necessary to ensure
                  that Stock Rights granted under the Plan qualify as "qualified
                  performance-based compensation" within the meaning of Section
                  162(m) of the Code and applicable regulations promulgated
                  thereunder ("Performance-Based Compensation"). Such action may
                  include, in the Board's discretion, some or all of the
                  following (i) if the Board determines that Stock Rights
                  granted under the Plan generally shall constitute
                  Performance-Based Compensation, the Plan shall be
                  administered, to the extent required for such Stock Rights to
                  constitute Performance-Based Compensation, by a Committee
                  consisting solely of two or more "outside directors" (as
                  defined in applicable regulations promulgated under Section
                  162(m) of the Code), (ii) if any Non-Qualified Options with an
                  exercise price less than the fair market value per Ordinary
                  Share are granted under the Plan and the Board determines that
                  such Options should constitute Performance-Based Compensation,
                  such options shall be made exercisable only upon the
                  attainment of a pre-established, objective performance goal
                  established by the Committee, and such grant shall be
                  submitted for, and shall be contingent upon shareholder
                  approval and (iii) Stock Rights granted under the Plan may be
                  subject to such other terms and conditions as are necessary
                  for compensation recognized in connection with the exercise or
                  disposition of such Stock Right or the disposition of Ordinary
                  Shares acquired pursuant to such Stock Right, to constitute
                  Performance-Based Compensation.

         3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.

         4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued Ordinary Shares of the Company, NIS .01 par value per share (the
"Ordinary Shares"). The aggregate number of shares which may be issued pursuant
to the Plan is 770,000, subject to adjustment as provided in paragraph 13. If
any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased Ordinary Shares subject to such
Option shall again be available for grants of Stock Rights under the Plan.

         No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more 364,000 Ordinary Shares under the
Plan during any fiscal year of the Company. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part, the shares
subject to such Option shall be included in the determination of the aggregate

<PAGE>   4
                                       4

number of Ordinary Shares deemed to have been granted to such employee under the
Plan.

         5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after February 19, 1998 and prior to February 18, 2008. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.

         6. MINIMUM OPTION PRICE; ISO LIMITATIONS.

                           A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND
                  PURCHASES. Subject to paragraph 2(D) (relating to compliance
                  with Section 162(m) of the Code), the exercise price per share
                  specified in the agreement relating to each Non-Qualified
                  Option granted, and the purchase price per share of stock
                  granted in any Award or authorized as a Purchase, under the
                  Plan may be less than the fair market value of an Ordinary
                  Share of the Company on the date of grant; provided that, in
                  no event shall such exercise price or such purchase price be
                  less than the minimum legal consideration required therefor
                  under the laws of any jurisdiction in which the Company or its
                  successors in interest may be organized.

                           B. PRICE FOR ISOS. The exercise price per share
                  specified in the agreement relating to each ISO granted under
                  the Plan shall not be less than the fair market value per
                  Ordinary Share on the date of such grant. In the case of an
                  ISO to be granted to an employee owning stock possessing more
                  than ten percent (10%) of the total combined voting power of
                  all classes of stock of the Company or any Related
                  Corporation, the price per share specified in the agreement
                  relating to such ISO shall not be less than one hundred ten
                  percent (110%) of the fair market value per Ordinary Share on
                  the date of grant. For purposes of determining stock ownership
                  under this paragraph, the rules of Section 424(d) of the Code
                  shall apply.

                           C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each
                  eligible employee may be granted Options treated as ISOs only
                  to the extent that, in the aggregate under this Plan and all
                  incentive stock option plans of the Company and any Related
                  Corporation, ISOs do not become exercisable for the first time
                  by such employee during any calendar year with respect to
                  stock having a fair market value (determined at the time the
                  ISOs were granted) in excess of $100,000. The Company intends
                  to designate any Options granted in excess of such limitation
                  as Non-Qualified Options, and the Company shall issue separate
                  certificates to the optionee with respect to Options that are
                  Non-Qualified Options and Options that are ISOs.

                           D. DETERMINATION OF FAIR MARKET VALUE. If, at the
                  time an Option is granted under the Plan, the Company's
                  Ordinary Shares are publicly traded, "fair market value" shall
                  be determined as of the date of grant or, if the prices or
                  quotes

<PAGE>   5
                                       5

                  discussed in this sentence are unavailable for such date, the
                  last business day for which such prices or quotes are
                  available prior to the date of grant and shall mean (i) the
                  average (on that date) of the high and low prices of an
                  Ordinary Share on the principal national securities exchange
                  on which the Ordinary Shares are traded, if the Ordinary
                  Shares are then traded on a national securities exchange; or
                  (ii) the last reported sale price (on that date) of an
                  Ordinary Share on the Nasdaq National Market, if the Ordinary
                  Shares are not then traded on a national securities exchange;
                  or (iii) the closing bid price (or average of bid prices) last
                  quoted (on that date) by an established quotation service for
                  over-the-counter securities, if the Ordinary Shares are not
                  reported on the Nasdaq National Market. If the Ordinary Shares
                  are not publicly traded at the time an Option is granted under
                  the Plan, "fair market value" shall mean the fair value of an
                  Ordinary Share as determined by the Committee after taking
                  into consideration all factors which it deems appropriate,
                  including, without limitation, recent sale and offer prices of
                  an Ordinary Share in private transactions negotiated at arm's
                  length.

         7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.

         8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:

                           A. VESTING. The Option shall either be fully
                  exercisable on the date of grant or shall become exercisable
                  thereafter in such installments as the Committee may specify.

                           B. FULL VESTING OF INSTALLMENTS. Once an installment
                  becomes exercisable, it shall remain exercisable until
                  expiration or termination of the Option, unless otherwise
                  specified by the Committee.

                           C. PARTIAL EXERCISE. Each Option or installment may
                  be exercised at any time or from time to time, in whole or in
                  part, for up to the total number of shares with respect to
                  which it is then exercisable, provided, however, that each
                  installment (other than the final exercise for shares subject
                  to the Option) may be exercised only in lots of five (5)
                  shares.

<PAGE>   6
                                       6

                           D. ACCELERATION OF VESTING. The Committee shall have
                  the right to accelerate the date that any installment of any
                  Option becomes exercisable. In the event of merger or
                  consolidation which results in a change in more than 50% of
                  the members of the Board (a "Change in Control"), any
                  unexercised Options granted under the plan to an Officer of
                  the Company (an employee whose title is vice president or
                  above), shall have vesting accelerated by 1 year upon the
                  effective date of the Change in Control. However, if any
                  Officer is terminated for any reason other than for cause
                  within six months of such Change in Control, any unvested
                  Options granted to such Officer shall immediately vest on the
                  date of termination. As used herein, "cause" shall mean
                  conduct involving one or more of the following: (i) the
                  substantial and continuing failure of the Employee, after
                  notice thereof, to render services to the Company or Related
                  Corporation in accordance with the terms or requirements of
                  his or her employment; (ii) disloyalty, gross negligence,
                  willful misconduct, dishonesty or breach of fiduciary duty to
                  the Company or Related Corporation; (iii) the commission of an
                  act of embezzlement or fraud; (iv) deliberate disregard of the
                  rules or policies of the Company or Related Corporation which
                  results in direct or indirect loss, damage or injury to the
                  Company or Related Corporation; (v) the unauthorized
                  disclosure of any trade secret or confidential information of
                  the Company or Related Corporation; or (vi) the commission of
                  an act which constitutes unfair competition with the Company
                  or Related Corporation or which induces any customer or
                  supplier to breach a contract with the Company or Related
                  Corporation. Notwithstanding the foregoing, the Committee
                  shall not, without the consent of an optionee, accelerate the
                  permitted exercise date of any installment of any Option
                  granted to any employee as an ISO (and not previously
                  converted into a Non-Qualified Option pursuant to paragraph
                  16) if such acceleration would violate the annual vesting
                  limitation contained in Section 422(d) of the Code, as
                  described in paragraph 6(C).

         9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan

<PAGE>   7
                                       7

shall not be affected by any change of employment within or among the Company
and Related Corporations, so long as the optionee continues to be an employee of
the Company or any Related Corporation. Nothing in the Plan shall be deemed to
give any grantee of any Stock Right the right to be retained in employment or
other service by the Company or any Related Corporation for any period of time.

         10.      DEATH; DISABILITY.

                           A. DEATH. If an ISO optionee ceases to be employed by
                  the Company and all Related Corporations by reason of his or
                  her death, any ISO owned by such optionee may be exercised, to
                  the extent otherwise exercisable on the date of death, by the
                  estate, personal representative or beneficiary who has
                  acquired the ISO by will or by the laws of descent and
                  distribution, until the earlier of (i) the specified
                  expiration date of the ISO or (ii) six months from the date of
                  the optionee's death.

                           B. DISABILITY. If an ISO optionee ceases to be
                  employed by the Company and all Related Corporations by reason
                  of his or her disability, such optionee shall have the right
                  to exercise any ISO held by him or her on the date of
                  termination of employment, for the number of shares for which
                  he or she could have exercised it on that date, until the
                  earlier of (i) the specified expiration date of the ISO or
                  (ii) six months from the date of the termination of the
                  optionee's employment. For the purposes of the Plan, the term
                  "disability" shall mean "permanent and total disability" as
                  defined in Section 22(e)(3) of the Code or any successor
                  statute.

         11. ASSIGNABILITY. No Stock Right shall be assignable or transferable
by the optionee except by will or by the laws of descent and distribution, and
during the lifetime of the optionee shall be exercisable only by such optionee.
Except as set forth in the previous sentence, during the lifetime of a grantee
each Stock Right shall be exercisable only by such grantee.

         12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to Ordinary Shares issuable
upon exercise of Options. The Committee may specify that any Non-Qualified
Option shall be subject to the restrictions set forth herein with respect to
ISOs, or to such other termination and cancellation provisions as the Committee
may determine. The Committee may from time to time confer authority and
responsibility on one or more of its own members and/or one or more officers of
the Company to execute and deliver such instruments. The proper officers of the
Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.

<PAGE>   8
                                       8

         13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:

                           A. STOCK DIVIDENDS AND STOCK SPLITS. If the Ordinary
                  Shares shall be subdivided or combined into a greater of
                  smaller number of shares or if the Company shall issue any
                  Ordinary Shares as a stock dividend on its outstanding
                  Ordinary Shares, the number of Ordinary Shares deliverable
                  upon the exercise of Options shall be appropriately increased
                  or decreased proportionately, and appropriate adjustments
                  shall be made in the purchase price per share to reflect such
                  subdivision, combination or stock dividend.

                           B. CONSOLIDATIONS OR MERGERS. If the Company is to be
                  consolidated with or acquired by another entity in a merger or
                  other reorganization in which the holders of the outstanding
                  voting stock of the Company immediately preceding the
                  consummation of such event, shall, immediately following such
                  event, hold, as a group, less than a majority of the voting
                  securities of the surviving or successor entity, or in the
                  event of a sale of all or substantially all of the Company's
                  assets or otherwise (each, an "Acquisition"), the Committee or
                  the board of directors of any entity assuming the obligations
                  of the Company hereunder (the "Successor Board"), shall, as to
                  outstanding Options, either (i) make appropriate provision for
                  the continuation of such Options by substituting on an
                  equitable basis for the shares then subject to such Options
                  either (a) the consideration payable with respect to the
                  outstanding Ordinary Shares in connection with the
                  Acquisition, (b) shares of stock of the surviving or successor
                  corporation or (c) such other securities as the Successor
                  Board deems appropriate, the fair market value of which shall
                  not materially exceed the fair market value of Ordinary Shares
                  subject to such Options immediately preceding the Acquisition;
                  or (ii) upon written notice to the optionees, provide that all
                  Options must be exercised, to the extent then exercisable or
                  to be exercisable as a result of the Acquisition, within a
                  specified number of days of the date of such notice, at the
                  end of which period the Options shall terminate; or (iii)
                  terminate all Options in exchange for a cash payment equal to
                  the excess of the fair market value of the shares subject to
                  such Options (to the extent then exercisable or to be
                  exercisable as a result of the Acquisition) over the exercise
                  price thereof.

                           C. RECAPITALIZATION OR REORGANIZATION. In the event
                  of a recapitalization or reorganization of the Company (other
                  than a transaction described in subparagraph B above) pursuant
                  to which securities of the Company or of another corporation
                  are issued with respect to the outstanding Ordinary Shares, an
                  optionee upon exercising an Option shall be entitled to
                  receive for the purchase price paid upon such exercise the
                  securities he or she would have received if he or she had
                  exercised such Option prior to such recapitalization or
                  reorganization.

<PAGE>   9
                                       9

                           D. MODIFICATION OF ISOS. Notwithstanding the
                  foregoing, any adjustments made pursuant to subparagraphs A, B
                  or C with respect to ISOs shall be made only after the
                  Committee, after consulting with counsel for the Company,
                  determines whether such adjustments would constitute a
                  "modification" of such ISOs (as that term is defined in
                  Section 424 of the Code) or would cause any adverse tax
                  consequences for the holders of such ISOs. If the Committee
                  determines that such adjustments made with respect to ISOs
                  would constitute a modification of such ISOs or would cause
                  adverse tax consequences to the holders, it may refrain from
                  making such adjustments.

                           E. DISSOLUTION OR LIQUIDATION. In the event of the
                  proposed dissolution or liquidation of the Company, each
                  Option will terminate immediately prior to the consummation of
                  such proposed action or at such other time and subject to such
                  other conditions as shall be determined by the Committee.

                           F. ISSUANCES OF SECURITIES. Except as expressly
                  provided herein, no issuance by the Company of shares of stock
                  of any class, or securities convertible into shares of stock
                  of any class, shall affect, and no adjustment by reason
                  thereof shall be made with respect to, the number or price of
                  shares subject to Options. No adjustments shall be made for
                  dividends paid in cash or in property other than securities of
                  the Company.

                           G. FRACTIONAL SHARES. No fractional shares shall be
                  issued under the Plan and the optionee shall receive from the
                  Company cash in lieu of such fractional shares.

                           H. ADJUSTMENTS. Upon the happening of any of the
                  events described in subparagraphs A, B or C above, the class
                  and aggregate number of shares set forth in paragraph 4 hereof
                  that are subject to Stock Rights which previously have been or
                  subsequently may be granted under the Plan shall also be
                  appropriately adjusted to reflect the events described in such
                  subparagraphs. The Committee or the Successor Board shall
                  determine the specific adjustments to be made under this
                  paragraph 13 and, subject to paragraph 2, its determination
                  shall be conclusive.

         14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in cash or by check, (b) at
the discretion of the Committee, through delivery of Ordinary Shares having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Option, (c) at the discretion of the Committee, by delivery of the
grantee's personal recourse note bearing interest payable not

<PAGE>   10
                                       10

less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Code, (d) at the discretion of the
Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Ordinary Shares acquired upon exercise of the Option and an authorization
to the broker or selling agent to pay that amount to the Company, which sale
shall be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.

         If Ordinary Shares are used in payment of the purchase price, such
Ordinary Shares must have been legally and beneficially owned by the optionee
for at least six months.

         15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
February 19, 1998, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to February 19, 1999, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on February 18, 2008 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may any
action of the Board or stockholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.

         16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of

<PAGE>   11
                                       11

conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the optionee is an employee of the Company or a
Related Corporation at the time of such conversion. Such actions may include,
but shall not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such ISOs. At the time of such
conversion, the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Committee takes
appropriate action. Upon the taking of such action, the Company shall issue
separate certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.

         17. APPLICATION OF FUNDS.  The proceeds received by the Company from
the sale of shares pursuant to Options granted and Purchases authorized under
the Plan shall be used for general corporate purposes.

         18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.

         19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Ordinary Shares for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 18), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Ordinary Shares for less than its fair market value, or (v) the
vesting or transferability of restricted stock or securities acquired by
exercising an Option, on the grantee's making satisfactory arrangement for such
withholding. Such arrangement may include payment by the grantee in cash or by
check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held Ordinary Shares or the
withholding from the Ordinary Shares otherwise deliverable upon exercise of any
Option having an aggregate fair market value equal to the amount of such
withholding taxes.

         20. GOVERNMENTAL  REGULATION.  The Company's obligation to sell and
deliver the Ordinary Shares under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.

<PAGE>   12
                                       12

         Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.

         21. GOVERNING LAW. With respect to each grantee of a Stock Right, the
validity and construction of the Plan and the instruments evidencing Options
shall be governed by the laws of the jurisdiction whose laws govern the terms of
employment of said grantee.

Amendments

1) 100 for 1 stock split 6/25/98

2) re granting of options to directors 7/19/98 shareholders meeting

3) increase in option pool 10/15/98

4) only shares held for 6 months may be used in payment

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